Gold is down $24.60 per ounce today, to $1,107.30, a five-year low, and silver is down $.03, to $14.84, a six-year low. SLL has long advised readers to have a store of precious metals. Come hell, high water, inflation, deflation, nuclear war, earthquakes, forty-day floods, an electromagnetic pulse that fries the world’s electronics, or anything else, gold and silver should have value as a medium of exchange. SLL could be wrong (it wouldn’t be a first), but today’s trade smells like capitulation. Sentiment couldn’t be more negative, and The Wall Street Journal had a disparaging article, “Let’s Get Real About Gold: It’s a Pet Rock,” on the front page of its Business & Finance section this weekend. Generally, when the mainstream press gets around to writing about a financial trend, that trend is just about over. SLL reposted a Zero Hedge article, “Which Is A Bigger “Act Of Faith”—Owning Gold Or Stocks?” that thoroughly vents that site’s umbrage at the WSJ article. For the record, SLL—at today’s market valuations for gold and stocks—agrees with Zero Hedge that gold represents a better bet.
SLL likes buying low and Mr. Market has put gold and silver in the bargain bin. There’s no guarantee that they won’t go lower, but over the long-term, the lower the price you pay for an asset, the better the chance you have of making money. For those who have not put away any physical gold or silver, it would be a good idea to start now, while they are on sale. This is not a trading call, nor a recommendation to buy gold and silver company stocks, gold and silver ETFs, or gold and silver derivatives. It is simply a reiteration of a long-standing SLL recommendation to own some physical gold and silver, and to note that gold and silver have not been cheaper in five and six years, respectively.
We’ll close with a quote from the only well-written, compulsively readable family saga and historical novel we know of set in the exciting but overlooked Industrial Revolution that has the word “gold” embedded in the title: The Golden Pinnacle.
Daniel took out a double-eagle—a twenty-dollar gold piece—and a twenty-dollar bill and laid them side by side on the table before him. He held up the gleaming coin. “For centuries gold has served as a store of value and a medium of exchange. An ounce of gold bought a man’s suit in 1500, 1600, 1700, 1800, and now, in 1913. It takes real resources to find, mine, smelter, and mint gold. It’s divisible, portable, storable, assayable, indestructible, and, I might add, beautiful.” Daniel put the coin down and picked up the bill. “This is a twenty-dollar bill. It can be torn to shreds and thrown to the wind. Its cost of production is virtually nothing. It depends for its value not on any intrinsic quality, but on the willingness of people to accept it as payment and the promise of politicians not to print too many of them. That promise has been broken every time it’s been made. Mr. Talbott, the law says they must be regarded as equivalent. I’ll offer you a choice. Which would you prefer?”