The Near Future of the Dollar, Gold, and Silver

Gold vs. paperSince 2001, the dollar has lost 81% of its value compared to gold.

With the Federal Reserve now printing an average of $85 billion per month, the dollar is being watered down even further compared to the value of gold. As Moneyball author Michael Lewis wrote in his book Liar’s Poker, “If the United States runs a persistent trade deficit, the dollar will eventually plummet.” 

Between the country’s decades of trade deficits and the Federal Reserve’s “QE-infinity” program of diluting the dollar like a garden hose in a grape juice bottle, you can see why many experts, including Peter Schiff and Ron Paul, have predicted that the price of gold may soon skyrocket.

The dollar has been the world’s currency of choice for decades, but its dominance is already ending. Brazil, Russia, India, and China are among the leading economies no longer trading in U.S. dollars. For years, China has been turning their dollars into tons of gold, and with the threat of a gold-backed Yuan looming, global central bankers have also been buying gold at record volumes because physical gold and silver will retain their value while fiat currencies like the dollar are crashing. Silver, in particular may offer the best long-term value for your savings.

Since 2001, silver has returned an average annual return of 20% every year, the highest return of any commodity. Gold was second with a 16.8% average annual return. Silver is the 2nd most consumed commodity on the planet, second only to crude oil. It’s in just about all electronics, and it’s being used at a record pace, while silver ore grades have collapsed 95% over the past 75 years according to the United States Geological Survey.

Chinese coins, silver and goldYou must also consider the historical ratio of the value of gold to silver, 15:1. This is almost the same rate of occurrence of these metals naturally in the earth.

Today, gold trades at a 65:1 ratio to silver. While silver is in greater industrial demand, there is less silver than gold above ground, and the supply is rapidly diminishing. So what accounts for the today’s imbalance in the value of the two metals?

In April 2010, Andrew Maguire, a former Goldman Sachs trader, went public with assertions that J. P. Morgan Chase and HSBC manipulate the market to hold down the price of gold and silver. The banks are likely illegally short-selling gold and silver in order to drive the price down.

However, no amount of fraud can hide the reality of supply and demand for precious metals for long. While today’s “paper price” of gold is $1470 an ounce in the United States, people in China are already paying $2000 for a physical ounce of gold. In China, ten thousand people lined up at the recent Dragon Boat Festival to buy gold.

As Former New Mexico Governor Gary Johnson recently said, “The most important issue is that we are printing money to pay for things we cannot afford. At some point, this will bring about a monetary collapse.” By owning precious metals, people can protect their savings.  While media members and central bankers have publicly decried the role and value of gold, when you see that central banks are buying gold at a record rate, it is clear what the bankers really think of precious metals.

Even more alarming than the possibility of depressed fiat currency is the possibility of a Cyprus-style bail-in, where bank customers’ deposits are treated like creditors in a bankruptcy, and given junior status to “senior creditors” like Central Banks. With the recently proposed “Bail-in” of The Cooperative Bank in the UK, these “bail-ins” may soon be moving west, and scalping the savings of anyone holding paper money in public banks.

Personally, I have been urging friends and family to buy physical gold and silver since 2008, when the price of gold was $800 an ounce. A year later gold was over $1600 an ounce. Unlike the Dollar, gold is not a bubble, and the current dip of gold to under $1500 an ounce is a gift to those who can see what’s coming. A few months ago, I was again urging friends and family to buy gold and silver when someone said “Why don’t you sell gold?”

A week later, Providence brought me to the office of the Bullion Advisory Group, LLC. The company not only helps people hedge their core savings with gold and silver bullion that will retain its value while the dollars continues to collapse, but primarily manages client accounts with the knowledge of when to enter and exit market positions.

While gold and silver should be looked at as not as an investment, but as the primary means for families to be protect their savings and future purchasing power, the explosive rallies and massive dives of the precious metals market can be a dramatic ride.

The Bullion Advisory Group not only gives people the peace of mind in knowing their precious metal is being professionally managed, but has a track record of profiting from the wild swings in the market. For more information, visit bullionadvisorygroup.com or email me personally at andrew [at] bullionadvisorygroup.com.

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