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“Gold and Silver will never go up.”  I have read this phrase in the comments sections of many blogs and articles over the last few weeks.  The phrase itself speaks to how poor and washed out the sentiment has become in silver and gold.  Gold bashers, blog shills and trolls have been out in full force to add salt to the wounds of anyone bullish the metals.  Sentiment has been absolutely destroyed and the “tone” can only be described as despair.

I wrote a 3 part series last week of the “how’s and why’s” of metals and markets manipulation.  If by now you do not or cannot see the manipulation for what it is and what they are trying to accomplish, you may never… The phrase itself is actually wrong, it should be “Gold and silver ‘CAN’ never go up,” there is a difference, let me explain.

Gold and silver are physical metals which have been used as monies throughout much of history.  An ounce of gold (disregarding fineness) that was minted 20 years ago, 200 years ago or even 2,000 is still…just an ounce of gold today.  Yes the “value” does vary versus other goods like oil, housing, food or even a cup of coffee but generally speaking gold has at least kept up over the long term in terms of purchasing power.  A house is still a house, a gallon of gas is still a gallon of gas and a cup of coffee is still a cup of coffee …but they all cost more “dollars” than they did a few years ago and especially versus many years ago.  Stuff “went up” so to speak in terms of dollars so in essence everything costs more today.  But is this really true?

The answer of course is no, nothing “went up,” what happened is the purchasing power or “value” of dollars has gone down.  This simply means it takes more dollars today to purchase the exact same good versus years ago as a result of inflation.  Nothing “goes up or down” versus the dollar, it is the dollar that fluctuates and in the long term the “fluctuation” has been decidedly down for the dollar.  It is also very easy to why this is from the following chart of the U.S. monetary base.

FRED Chart BH

You will notice that up until 2008, the money supply was steadily rising (inflating) until something happened …the crash of the credit markets.  Since then money supply has simply exploded.  (The proper term for what you see on the chart is “hyperinflated” by the way).  This is merely a chart showing you the creation of new dollars.

OK, so let’s use a little common sense and the laws of supply and demand.  The phrase “gold and silver ‘will’ never go up” is an emotional one which is just plain wrong.  First and as I explained above, it is what happens with the dollar that “prices” itself in gold or anything else for that matter.  It is more than obvious that a whole bunch of new dollars have been created since 2008, trillions of $ upon trillions of $ in fact… (And this does not even include the fractional reserve aspect where one new dollar is levered into many more).  This was done to “save” the system when in fact if you think about it, the “over creation” of dollars will ultimately destroy the dollar itself and thus the financial system.

Ask yourself this question, “will the dollar be worth more or less a year from now?”  You could even stretch the question out and ask the same thing of 5 years, 10 years or even 50 years.  Of course another question you might ask is whether or not the dollar will even be in existence in any of these time frames.  My point is this, you could ask the question of whether the dollar will be worth more or less in the future to anyone and I bet you’d get an answer of “less” 98% or more of the time.  Everyone knows the answer and everyone knows there is inflation embedded into the system.  This is a no brainer right? …

… If this is such a “no brainer” then why would anyone in their right mind think that gold or silver could “go down” over the long term?  How could anyone think or say “gold and silver will never go up again?”  How is it possible (in dollar terms) for gold and silver NOT to “go up?”  Do you see the circle we just went in but doesn’t quite connect?  The dollar will always go down but gold and silver will never go up?  It doesn’t make any sense or any logic whatsoever does it?

Another way to look at this is from the supply standpoint.  The “supply” of dollars has increased more than 5 fold since 2008, at best the supply of total gold has increased a shade over 10% since then.  One could possibly say gold was grossly overvalued in 2008 at around $900 per ounce, others could disagree.  What cannot be argued is the fact that the amount of dollars outstanding today versus the amount of gold in existence (above ground and deliverable) simply dwarfs the ratio it stood at in 2008.  Actually, I think an argument can be made for the above chart representing the price of gold.  Gold’s dollar price should be a clone of this chart …especially if gold holdings have not increased by the U.S.

Something very serious did happen in 2008, we had to hyperinflate in order to stop a deflation of credit.  The only way to have done this and to retain credibility was to falsify the price of gold.  This was and is being done.  The important thing for you as an individual to understand is that you have an opportunity to exchange dollars which have been grossly overprinted for gold which cannot be “printed.”  Here is the catch, gold and silver have been “overprinted” via derivatives.  The “supply” has been diluted by paper contracts which promise to deliver metal.  Since the supply of dollars has been flooded, the “supply” of gold and silver also had to be deluged.  The only way to have done this was to offer “promises” because the real deal does not exist to deliver in anything close to the quantities necessary.

Gold and silver if you’ll notice ARE the promise.  They can’t “go up” and they cannot “go down,” all they can be is a “weight” of metal.  This game of promising more and more metal will come to an end when some amount of “weight” cannot be delivered.  THEN we will really find out just how many dollars are required to procure something that does not exist.  As horrific as the living conditions will be, it will be fun in a perverse way to watch the scramble for something which not only doesn’t exist but was portrayed to be common.