For those of you who think I only see the dark side of life, I’ve got news for you. I enjoy every minute of every day and take nothing for granted. Susan and I shake our heads in amazement, every day, and marvel at how blessed we are. Life was not always easy. In the fall of 1983 we were on the verge of bankruptcy, as we both suddenly found ourselves unemployed at the same time, during the steep recession of 1982/83. Then something unlikely happened – I stumbled into the precious metals industry and took to it like a duck to water. Although a bit early, I found myself in the right place to navigate the treacherous waters of the very difficult 21st Century. My GIVE BACK is to drag along as many of you as I possibly can (a trait I share with Andy Hoffman). We both really are sincere in this quest.
For at least a brief moment, I want to share something beautiful with all of my friends out there – life is special (and more-so if you take the financial steps that are NECESSARY to build and hold onto your wealth). Please, please click on this link (courtesy of my long-time friend, Peter Fruling.
Since September 5th, gold has gone from a high close of $1,900 to a low of $1,598, a spread of just over $300. Gold closed on Friday at $1,743.40. Gold is just a few dollars from recovering HALF of the recent drop. This is often a critical point, the halfway point. Gold will either fall back from here, the rally complete, or it will break through the halfway point at $1,751 and power its way up from there. Guess what – you will find out on Monday or Tuesday so there’s not long to wait. If UP is the result, it won’t be long before $1,800 is, once again, in the rear-view mirror. I am hopefully bullish for the rest of this year and would be disappointed if we do not surpass the previous high of $1,900 and $2,000. If we do, it would make me very happy. Even if it takes till next March to arrive.
BIG GOLD editor, Jeff Clark, pointed out that at the height of the gold mania in 1981, that percentage of gold ownership was 26%. At the height of the depression, it was 20%. Currently, gold accounts for just 1% of the total. We’ve got a long way to go before this bull market in gold breathes its last.
If investors have only 10% of their net worth in gold, and if gold falls from $1600 to $800, investors would lose 5% of their current net worth. But that will mean that the economy is well on the way to recovery. Under such a scenario it is likely that the 90% of one’s wealth not invested in gold would appreciate by at least 25% from today’s levels. That would result in a net portfolio gain of 20%, despite gold’s 50% drop. This is exactly the kind of insurance that gold offers, a balanced portfolio.
Chart of the week
How much gold and silver is available?
The annual gold market is only about 75 million ounces of new production. Americans buy about 1 million Gold Eagles per year and probably another 1 million ounces in other forms. Americans are spending only $3 billion a year on gold. If Americans put only 1% of their cash into gold to protect themselves from inflation, which is $180 billion, I’d estimate that the gold price would at least triple, to $5000/oz.
The annual new silver production is only around 700 million ounces. If only 1% of money, $180 billion, were spent on silver, the implied price would be $257/oz., but there would be none left for industry, which vitally needs silver in at least 10,000 different applications, so you can imagine how high silver could rise.
Heads Up
Just a reminder – I will not be writing for the rest of the week. Andy Hoffman takes over the chores for the next four days, but I will be back next Monday.