I have heard, seen and read many accounts that make a mockery of the “to da’ moon” gold and silver pundits. In some cases it is well warranted. For example, anyone who promotes gold or silver to “get obscenely rich” is simply wrong. They say that gold and silver are “going to da’ moon” which in my opinion is highly likely in dollar terms but in reality they are completely wrong. An ounce of gold and silver will always “just be” an ounce of gold or silver, what will have changed is the value of the dollar or any other currency that you are using as a measurement. Actually, even that statement needs to be corrected because it is in fact gold and silver that do the “measuring.” The “to da’ mooners” are wrong because what will happen is that the dollar will plummet in value to the nether regions of hell which means even a simple cup of coffee is going to the moon.
There is however another scenario where the carnival barkers could be correct and we would still have a modest dose of “currency crisis” involved. Gold and silver could go “no offer.” No offer” meaning there is none available for purchase. Impossible you say? If you go back to May of 2011 and April/May of 2013, silver became very difficult to buy. If you go back to 2008, silver spent nearly 2 weeks in nearly “no offer” status.
What happened in 2008 is that silver went very quickly from well over $20 to under $9. The physical buyers came out of the woodwork and cleaned up the shelves much like shoppers before a hurricane do. There was NO silver available at the “market price” of $9. Dealers were paying huge premiums to coax silver back into their coffers and basically under $15 there was none to be had. I am pointing this out because we have already seen either “no offer” or very close to it on several occasions in just the last 6 years.
The spammers will be out in full force saying that there is plenty of silver and gold around and that I am just doing a little “barking” myself. To this I would say yes, there is plenty of gold and silver and there could even be a surplus or an actual glut …at the right price, but, not even close to the current prices. You see, if gold was trading at $5,000 an ounce or silver at $200, some, maybe even many would be enticed to “sell” some or all of their stacks. A higher price in effect would create a greater supply while a price that is too low creates a shortage.
There is also another twist to this equation and it’s called human emotion. Booms and busts seem to be a part and parcel of how the human brain is wired. We have seen them throughout history and more so with recent history because we have the Fed and other central banks that continually promote booms. The current “boom” is based on and the fire fanned by money that is freely printed. Once the bust arrives, the “flight” mechanism of capital will take over and take on a life of its own. THIS will be the cause, the result will be the ultimate “no offer” in gold and silver.
What I can see happening is a cascade of failures which engulfs all derivatives, debt and currencies. This will create a panicked flight of capital into the safety of gold and silver which will create shortages. But, this will not even be a small fraction of the whole story. The real story is that the alleged gold and silver “out there” that is currently setting the prices does not even exist. Taking just one step back for a moment, I believe that a good figure to use is that only 1 or 2 out of 100 Americans own either gold or silver as “investment.” I also believe (because Jeff Christian spilled the beans and told us our math was correct) that there are 100 ounces of “paper gold” for every 1 real ounce in existence. (Digressing a bit and doing the math we come up with a number that only 1 person in 5,000 or 10,000 really have physical gold or silver!).
OK, so where am I going with this? Knowing the above math and in the panic situation that mathematically is inevitably coming, how could gold and silver NOT go “no offer?” Follow this through. A panic begins somewhere and starts to spread rapidly and widely. Stocks, bonds, currencies and of course derivatives are all involved. This happens during a big gold or silver delivery month on the COMEX for either gold or silver and the longs can’t be “bought off” with any fiat bribes of premium. Inventory gets drawn down, maybe even depleted and a stampede into metal begins. But, before capital can arrive for the purchase of gold or silver …suddenly “offers” start to be withdrawn.
Let me explain the “suddenly offers start to be withdrawn” part. Thinking about this from YOUR OWN point of view, what would you do? If you saw the paper markets and the banks in turmoil, and the prices of gold and silver jumping wildly for several days in a row would you be itching to sell? Even if you were fully invested in gold and silver, human emotion says that in this scenario even those fully invested would want “more.” You see, fear is a greater, far greater emotion than greed. It will be “fear” that causes many potential sellers to withdraw their offers. Fear of what you say? Fear that whatever you trade your metal for will become worthless…and I must say that in today’s world this is a very valid fear.
Before finishing I would like to talk about “fear.” There all kinds of different “fears.” Fears of loss, fears of being “left behind,” fear of failure, even fear of success. I believe that before this is all over, the “98 or 99 out of 100” who currently “think” that they own gold and silver but instead only own paper receipts to nonexistent gold and silver will experience a different sort of fear. These people will experience the fear of loss, being left behind and failure all at the same time. This group by the way will be another source of demand that currently doesn’t exist or was thought to have already been satisfied.
The “no offer” scenario in my opinion has a very high probability of happening. Owners of gold and silver “own” the metals for a reason. They want something that is real and I would suggest that this group by and large will not part with it unless they know that they will get something real in return. What I am saying is that gold could go to $5,000 per ounce and once the “traders” get cleaned out, there just won’t be any for sale because “fear” will send many holders into hiding. I believe that once the panic begins, many holders of gold will not part with any metal at ANY price until they have confidence that what they are trading for “really” has value. In other words, some sort of “confidence” in the currency (or a new currency) is a MUST before metal will be offered again for sale. This is what is meant whenever you hear the theory that gold and silver will “go into hiding.”
As for the “to da’ mooners,” in my opinion they will end up being correct but maybe for incorrect reasons.
This “fear” phase is what has me the most perplexed and worried, as what will be the method of exchange at that point? USDs will go Weimar. And PM holders will be wary of bringing their metal to the light of day, as it might be downright dangerous even to bring a silver dime into a supermarket to buy the groceries, for fear of being followed home. I know we will eventually find stability, but in the interim, PMs going into hiding may actually be due more to fear of being killed for them than fear of getting the right “price” for them. People will just be trying to survive.
I’m with you on this, Chris. I love my stack, but when Weimar days arrive, to simply wield such potency will be telegraphing one’s advantage.
Transacting at such times will be a cagey process. Each of us hedgers will have to steer very carefully to exchange goods and service.
At the point you are talking about, what exactly will PM be worth? If the government says an ounce of gold is worth a certain amount, will it stabilize at that worth or fluctuate?
Or do we go back to the one ounce of gold will buy you a new suit no matter what the valuation one ounce is given?
whatever it trades for on the street.
Hey Bill, there has been something that has been on my mind for a while. In regards to Jeffrey Christian stating that paper silver was leveraged to physical, 100 to 1 several years ago. Well, with the hammerings becoming more blatant daily, since June 2013, theoretically there is no limit to the current leverage ratio, as long as comex can deliver, or more likely,Comex gets people to settle for fiat, plus premium. Once this confidence breaks, i believe 100 to 1 will be a joke. Could be 1000 to 1 now, for all we know. thanks Jeff
yes I agree, the leverage must be far higher than it was 4 years ago when Christian ‘fessed up.
Makes sense to me, but I can’t help but think that if people panic into PMs, that its rise in dollar price will more than compensate for the loss of the dollar’s purchasing power. Having debt is good for PM owners so they can cash in some PMs at high prices and use the proceeds to pay down the dollar denominated debt.
please don’t mistake this piece, I do believe that gold and silver will go much higher in real terms also but not “to da’ moon”.
My fear is that when it inevitably gets worse, the gubbermints will outlaw any trading in metals and also make it illegal to take any out of the country.
They will put in wage and price controls domestically while trying to figure out if they can get away with an outright confiscation of gold & silver bullion (probably jewelry, siverware, and objet d’art will be safe).
They will put in rationing for food, fuel, meds and medical care and anybody who attempts to trade freely will get labeled a “traitor” or “economic terrorist”. this will not work in some parts of the country very well, but in the mega cities they will put anybody thought to be in violation of the new decrees into fema camps.
They will say these things are temporary (Nixon said closing of the gold window was “temporary and because of “speculators” back in 1971) and will start a propaganda campaign to the frightened general public that they have to keep going through this because of the evil “hoarders” & “speculators” who are keeping food from their chidren’s mouths (they already did it during WWII). they will institute a “turn in a goldbud/silverbug/prepper” for a reward program and many will do it for extra food or a pat on the head.
Businesses will be started in smuggling americans with real assets out of concentration camp U.S.A. Some of these will be scams and they will actually just shoot you and take your assets if you aren’t armed and careful.
could be which is why some metal should already be out of the country.
Holding gold and silver is for wealth depreciation protection against holding your wealth in dollars. When the stuff hits the fan and society and the financial system breaks down, there is not a person alive today who can state what life in this country will look like. Therefore, there are other measures that will need to to be taken beforehand also ie. food, guns, location, like minded people, spiritual relationship to the Lord, etc. All areas of life have to be addressed and financial wealth preservation is one but only one.
Very well stated ,and I agree with the total picture .But wealth preservation is an important tool until things go off the rails completely.
and when they go off the rails completely you must transport your wealth from this system to the next one.
Thanks Bill, always enjoy your writing. As a stacker, imo, its not about trading our PM’s when the ‘price’ is right. It’s wrong thinking to keep thinking of a dollar value that we might receive for our PM’s. Instead, just think of spending them. If, when the time comes one must convert some PM’s into some currency to buy something, so be it. I’m never trading any metal for paper, but will ‘spend’ it on things I want and need. We stackers don’t have to do much besides be patient to realize value from the metals we accumulate – our wonderful ‘leaders’ and ‘lawmakers’ are doing a most magnificent job of destroying the purchasing power of our currency. With ‘QE’ lunacy creating billions of dollars a year from nothing to give to banks along with the Ultimate Ponzi of banks creating all currency from nothing and charging the world ‘interest’ on every cent ‘created’, how can anyone have any confidence in these fake scraps of paper and digital credits in a bank’s computer system?
AlohaJim – I appreciate your thoughts, but good luck on trying to buy that qt of ice cream with a 1 oz Gold Buffalo.
Bob, I appreciate your thoughts too but …good luck trying to buy anything after TSHTF with dollars …and, good luck trying to get change back if you are using gold to buy anything.
How about stock certificates or Entries in a computer about your 401K statement. So Mercury Dimes are what you would use for barter if you have a real plan ,not 1 Oz. Buffalo or AGE coins.
“bullets” are an even smaller denomination than silver dimes.
I think the gov’t will go after bank accounts, taxes before they attempt PM confiscation. I mean if they knock on my door (won’t), sorry, I’ve sold it all. Most people did not turn in their gold back in the 30s, even though the penalty was prison.
What Doug said.
If metal goes to the moon I agree coffee will go with it.
But my mortgage might not.
If I get a chance to get out from under my mortgage by selling a few hundred ounces of silver, I might do so.
Which in the UK will mean a serious capital gains tax bill.
But not if the silver is all legal tender.
I’m sure the State will kill the exemption at some point, and capital gains tax on metal will rise, and/or mortgage debt might be redenominated, but there might be a short window if you act fast?
If you pay off in Silver Britannias (CGT exempt), you’d avoid this, wouldn’t you?
I can imagine a $USD 100,000,000 NOTE that will get you a loaf of bread a la Zimbabwe.
Its all about confidence in $USD or any other legal tender notes from other countries. The way banks are going nowadays it could be just a lack of confidence in digits on your plastic card and/ or computer screen.
I agree with Bill Holter. It is ( almost) inevitable that Gold will go “no offer” unless TPTB see the folly of their ways and back $$$$ with Gold.
NO OFFER is a disastrous situation.
Think about it…there will be no food on the shelves in a very short time because there will be no trade. Would not like to be living in a major city in the good old $USA when that happens.
distribution will break down.
“The sky is falling! The sky is falling!!”
I guess I’m the only one that wishes he had still his “fiat” $150,000 instead of a safe full of nearly half price of what I paid for it – ‘scuze me while I laugh (or puke) “wealth protection” silver.
And yeah yeah I know… I’ll be SOOO glad I have it when the SHTF and the sky falls and the dollar dies and the stock market crashes and Bruce Willis can’t blow up the asteroid…. blah blah more blah. I can’t believe I fell for this BULLSH*T three years ago! Hey Bill “Full of BS” Holter, if you even need a job (which I know you won’t because you are in the business of selling “wealth protection” gold & silver) BUT if you ever do I think you would fit perfectly in with King “THE END IS NEAR, BUY FROM ALL OF OUR SPONSORS THAT SELL PM’s OR PM NEWSLETTERS” World News.
If you truly believe this then you should sell everything Monday morning. I began telling people to purchase gold and silver since 1997 and have never waivered in my message. Any and every ounce purchased since then and no matter at what price has been purchased at less than the real “underivatived” value. You either believe that the government and the financial systems are broke or you don’t, it’s your decision. I hope you decide wisely.
I think the bods on KWN generally have it right about PM’s but they believe that things are manipulated and there are shortages of PM’s. Their timing is lousy as well.
Every time TURK has said” buy” I have gone naked short silver and enjoyed the rewards.
At this point in time I think a low is in for gold but silver is still in a downtrend.
There is nothing wrong with buying gold as an asset. All assets are subject to rises and falls in price.I recall people in London had houses that were worth less than their mortgages but you can still live in them.
Put it this way. Say you buy a car for $20,000. As soon as you drive it out the showroom its worth a lot less ,say $16000 and in 3 years $10000 plus all the $$$ spent maintaining etc etc
There is ZERO potential for your car to be worth more.
Everyone should just see gold as an essential part of an overall portfolio. I do not see silver as being essential.
Tony, the goal is to have it , not BUY HIGH and SELL LOW. Why did you wait til the Stock market crashed to buy Silver?
Hi Bill, I independently came to the realization that insurance (ala PM’s) was required about 2 years ago….then started following the various blogs on financial affairs. I found your insights to be particularly well balanced and cut-to-the-chase specific. This ‘No Offer’ aspect has bothered me for some time ….i’m thinking there needs to be some other form of ‘barter’ value that can be used rather than PM’s …somewhat like cigarettes were often used during WWII. Thoughts?
A metal seller saying metals will rise.
What a surprise.
Paper will become more valuable the more paper there is?