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Friday, September 24, 2010

New Highs For Precious Metals

Precious metals.  Hype or harbinger?

Personally, I think the recent price spikes are just the early stages of a more sustained and steep price rise. 

Why?  At the very basic levels, when your fiat currency (the dollar, yen, pound, euro) is worth-less or worthless, OR when it is likely to become debased (by inflation driven by sovereign debt and impending taxation), people move to what has been recognized as "real money" for thousands of years
Silver climbed to the highest price since 1980 in New York and London as investors sought a protection of wealth in the metal that may also benefit from economic growth. Gold advanced to a record, with futures rising above $1,300 an ounce.

Silver has advanced 27 percent this year, outperforming gold, global equities, Treasuries and most industrial metals. Batteries and other industrial uses account for about half of silver demand, according to researcher GFMS Ltd. Gold, which usually moves inversely to the dollar, reached an all-time high for the fourth day this week as the dollar slid on concern the Federal Reserve is moving closer to boosting debt purchases.
With any commodity, there is the risk of a "bubble" or "herd mentality".  You don't want to be caught as the, "last guy in" when everyone else is getting out!

I don't think that's going to happen for a very long time - if ever.  I don't think people are buying PMs so much as a bet, but as a store of wealth.  The fundamental structure of our economy has been undercut.  You don't need to be an economist or government wonk to realize you can't continue to spend and borrow with there being no consequences.

I think people have realized - on a WIDE scale - that the bill is finally coming due, and the price will be the (further) debasement of the dollar.

This weekend, I'm going to try and do a post on the benefits of gold vs silver.  Each has its own strengths and weaknesses.

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Copyright 2010 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.


David Wozney said...

Re: “... when your fiat currency (the dollar, yen, pound, euro) is worth-less or worthless, OR when it is likely to become debased ...

If the stated value, of “Federal” Reserve notes, declines enough with respect to copper and nickel, the 1946-2010 U.S. Mint nickels, composed of cupronickel alloy, could become somewhat rare in mass circulation.

The September 20th metal value of these nickels is “$0.0581418” or 116.28% of face value, according to the “United States Circulating Coinage Intrinsic Value Table” at

Chief Instructor said...

I've got a buddy right now that saves every single nickel he gets because of the melt value. As you noted, you "make" 16% on every nickel you get!

Anonymous said...

I've been buying junk silver, but at a couple hundred face value the bulk of it is the main problem. Probably will start with 1/10 oz gold coins soon.

Chief Instructor said...

Suburban - I love 90% silver and silver rounds. They're the best bang for the buck. I keep mine in ammo cans!

Most of my gold is in one ouncer's, but I've been getting more of the fractional gold lately. The premiums are STEEP!

Still, I don't have confidence that the congress will repeal the insane 1099 law by 2012, and we're all going to be reported to the government for selling money.

It hurts my head.

Joseph said...

It would be nice if someone knew a tax attorney to get a legal opinion on this but speaking completely hypothetically here isn't it possible to 'purchase' under the exemptions of the bill?

"Companies will be required to issue 1099 forms to any vendor of services or rental property to which the business has paid more than $600. Form 1099 is also sent to the IRS. Under the existing law, businesses issued the Form 1099 only to individuals who provided services or property to a business. The healthcare law included the same form be issued to corporations as well, and that the form be issued to individuals and corporations that provide property to the business. Only business related payments are reportable, personal payments not. There are a number of exceptions, for example: payments for merchandise, telephone, freight, storage, payments of rent to real estate agents are excepted. The health care bill mandate aims to collect lost revenue from companies that under-report on their tax returns. The provision is expected to raise $17 billion over 10 years. The amendments made by this section of the bill (SEC. 9006) shall apply to payments made after December 31, 2011."
source: Patient Protection and Affordable Care Act


Someone could set up a non-profit and then they would be exempt correct?