silverstockreport.com / by Jason Hommel / June 30, 2012
JH MINT, Inc., has over $1 million of silver and gold to sell. Visit us at www.jhmint.com
Why hold bonds that pay 3% or less, when gold, on average, has been up an average of 18% per year since the year 2000? And silver has done better!
Silver and gold will continue to rise for years to come because the government continues to spend money it does not have.
If you invested $10,000 into bonds paying 3% in the year 2000, you would now have $14,258.
Had you put $10,000 into gold in the year 2000, you would now have $72,876 worth of gold.
Whoever said that “gold does not pay interest” gave “epic fail” investment advice, and got the concept completely wrong. It’s not the interest, it’s the capital appreciation that counts!
Gold is at all time highs, but we are nowhere near an ultimate market high yet, as gold is only $1600/oz. The prior high in 1980 was $850/oz., which would be $8,500 if you adjusted for inflation of the monetary base, which has increased ten times, from $1.8 trillion to about $18 trillion. In 1975, gas prices increased beyond $.50/gallon. Today, gas is nearing $5/gallon, nearly ten times as much.
In the year 2000, oil was $10/barrel. It recently went over $100. If gold had merely kept pace with oil, gold would be $2500/oz. or more. But gold will outpace oil, because gold is money, and oil is not. Oil is too bulky and costly for most people to store, but people will buy gold.
In 1980, they stopped the runaway bull market in gold prices, that threatened to destroy paper money, in two ways.
First, the Federal Reserve let interest rates rise to over 20%. Interest rates are low now. If they let rates rise, most businesses on Wall Street that are in debt will go bankrupt, and the stock market and bond market will both crash, and the government, too, would be paying $3 trillion per year in interest alone on the $15 trillion national debt. As it is, the government spends $3 trillion now, and only collects $1.5 trillion; hence the problem and impossibility of letting interest rates rise to let paper money compete with the returns of gold. The 20% interest rate alone would cause extraordinarily high inflation.
Second, in 1975, they introduced the futures market in gold, so that gold buyers could buy gold using paper leverage, and invest the difference into bonds. This diverted investment demand away from real gold, and back into paper money. These days, far too much silver and gold have been sold on paper that the paper metals markets are likely to become completely discredited before this gold bull market is over.
So, the two mechanisms used to reign in the gold price are not likely to be available this next time around. Thus, it is safe to buy gold for years to come.