Guest Post: Gold And Silver: We Were Right – They Were Wrong

Tyler Durden's picture

Submitted by Brandon Smith of Alt Market

Gold And Silver: We Were Right – They Were Wrong

Only now, after three years of roller coaster markets, epic debates, and gnashing of teeth, are mainstream financial pundits finally starting to get it. At least some of them, anyway. Precious metals have continued to perform relentlessly since 2008, crushing all naysayer predictions and defying all the musings of so called “experts”, while at the same time maintaining and protecting the investment savings of those people smart enough to jump on the train while prices were at historic lows (historic as in ‘the past 5000 years’).

Alternative analysts have pleaded with the public to take measures to secure their hard earned wealth by apportioning at least a small amount into physical gold and silver. Some economists, though, were silly enough to overlook this obvious strategy. Who can forget, for instance, Paul Krugman’s hilarious assertion back in 2009 that gold values reflect nothing of the overall market, and that rising gold prices were caused in large part by the devious plans of Glen Beck, and not legitimate demand resulting from oncoming economic collapse:

To this day, with gold at $1600 an ounce, Krugman refuses to apologize for his nonsense. To be fair to Krugman, though, his lack of insight on precious metals markets is most likely deliberate, and not due to stupidity, being that he has long been a lapdog of central banks and a rabid supporter of the great Keynesian con. Some MSM economists are simply ignorant, while others are quite aware of the battle between fiat and gold, and have chosen to support the banking elites in their endeavors to dissuade the masses from ever seeking out an alternative to their fraudulent paper. The establishment controlled Washington Post made this clear with its vapid insinuation in 2010 that Ron Paul’s support of a new gold standard is purely motivated by his desire to increase the value of his personal gold holdings, and not because of his concern over the Federal Reserve’s destructive devaluing of the dollar!

So, if a public figure owns gold and supports the adaptation of precious metals to stave off dollar implosion, he is just trying to “artificially drive up his own profits”. If he supports precious metals but doesn’t own any, then he is “afraid to put his money where his mouth is”. The argument is an erroneous trap, not to mention, completely illogical.

Numerous MSM pundits have continued to call a top for gold and silver markets only to be jolted over and over by further rapid spikes. Frankly, it’s getting a little embarrassing for them. All analysts are wrong sometimes, but these analysts are wrong ALL the time. And, Americans are starting to notice. Who beyond a thin readership of mindless yuppies actually takes Krugman seriously anymore? It’s getting harder and harder to find fans of his brand of snake oil.

Those who instead listened to the alternative media from 2007 on have now tripled the value of their investments, and are likely to double them yet again in the coming months as PM’s and other commodities continue to outperform paper securities and stocks. After enduring so much hardship, criticism, and grief over our positions on gold and silver, it’s about time for us to say “we told you so”. Not to gloat (ok, maybe a little), but to solidify the necessity of metals investment for every American today. Yes, we were right, the skeptics were wrong, and they continue to be wrong. Even now, with gold surpassing the $1600 an ounce mark, and silver edging back towards its $50 per ounce highs, there is still time for those who missed the boat to shield their nest eggs from expanding economic insanity. The fact is, precious metals values are nowhere near their peak. Here are some reasons why…

Debt Ceiling Debate A Final Warning Sign

If average Americans weren’t feeling the heat at the beginning of this year in terms of the economy, they certainly are now. Not long ago, the very idea of a U.S. debt default or credit downgrade was considered by many to be absurd. Today, every financial radio and television show in the country is obsessed with the possibility. Not surprisingly, unprepared subsections of the public (even conservatives) are crying out for a debt ceiling increase, while simultaneously turning up their noses at tax increases, hoping that we can kick the can just a little further down the road of fiscal Armageddon. The delusion that we can coast through this crisis unscathed is still pervasive.

Some common phrases I’ve heard lately: “I just don’t get it! They’re crazy for not compromising! Their political games are going to ruin the country! Why not just raise the ceiling?!”

What these people are lacking is a basic understanding of the bigger picture. Ultimately, this debate is not about raising or freezing the debt ceiling. This debate is not about saving our economy or our global credit standing. This debate is about choosing our method of poison, and nothing more. That is to say, the outcome of the current “political clash” is irrelevant. Our economy was set on the final leg of total destabilization back in 2008, and no amount of spending reform, higher taxes, or austerity measures, are going to change that eventuality.

We have two paths left as far as the mainstream economy is concerned; default leading to dollar devaluation, or, dollar devaluation leading to default. That’s it folks! Smoke em’ if you got em’! This train went careening off a cliff a long time ago.

If the U.S. defaults after August 2nd, a couple of things will happen. First, our Treasury Bonds will immediately come into question. We may, like Greece, drag out the situation and fool some international investors into thinking the risk will lead to a considerable payout when “everything goes back to normal”. However, those who continued to hold Greek bonds up until that country’s official announcement of default know that holding the debt of a country with disintegrating credit standing is for suckers. Private creditors in Greek debt stand to lose at minimum 21% of their original holdings because of default. What some of us call a “21% haircut”:

With the pervasiveness of U.S. bonds around the globe, a similar default deal could lead to trillions of dollars in losses for holders. This threat will result in the immediate push towards an international treasury dump.

Next, austerity measures WILL be instituted, while taxes WILL be raised considerably, and quickly. The federal government is not going to shut down. They will instead bleed the American people dry of all remaining savings in order to continue functioning, whether through higher charges on licensing and other government controlled paperwork, or through confiscation of pension funds, or by cutting entitlement programs like social security completely.

Finally, the dollar’s world reserve status is most assuredly going to be placed in jeopardy. If a country is unable to sustain its own liabilities, then its currency is going to lose favor. Period. The loss of reserve status carries with it a plethora of very disturbing consequences, foremost being devaluation leading to extreme inflation.

If the debt ceiling is raised yet again, we may prolong the above mentioned problems for a short time, but, there are no guarantees. Ratings agency S&P in a recent statement warned of a U.S. credit downgrade REGARDLESS of whether the ceiling was raised or not, if America’s overall economic situation did not soon improve. The Obama Administration has resorted to harassing (or pretending to harass) S&P over its accurate assessment of the situation, rather than working to solve the dilemma:

Ratings company Egan-Jones has already cut America’s credit rating from AAA to AA+:

Many countries are moving to distance themselves from the U.S. dollar. China’s bilateral trade agreement with Russia last year completely cuts out the use of the Greenback, and China is also exploring a “barter deal” with Iran, completely removing the need for dollars in the purchase of Iranian oil (which also helps in bypassing U.S. sanctions):

So, even with increased spending room, we will still see effects similar to default, not to mention, even more fiat printing by the Fed, higher probability of another QE announcement, and higher inflation all around.

This period of debate over the debt ceiling is liable to be the last clear warning we will receive from government before the collapse moves towards endgame. All of the sordid conundrums listed above are triggers for skyrocketing gold and silver prices, and anyone not holding precious metals now should make changes over the course of the next month.

What has been the reaction of markets to the threat of default? Increased purchasing of precious metals! What has been the reaction of markets to greater spending and Fed inflation? Increased purchasing of precious metals! The advantages of gold and silver are clear…

European TARP?

The MSM blatantly glossed over the EU decision on the latest Greek bailout, as many pundits heralded the plan as decisive action on the part of Europe. But, what was the EU solution to the possibility of Greek default? In the end, their solution was to LET GREECE DEFAULT! Brilliant!

EU proponents of the plan for Greece are calling the solution a “selective default”, which I suppose, is meant to make it sound less default-ish. However, this is, indeed, a default, and many Greek bondholders are going to lose substantial sums of money as the Greek government decides who they are going to pay back, and who they are going to give the finger. Strangely, this plan also includes the creation of a kind of European Monetary Fund, or a European TARP. This means a broader strategy is being put into motion that involves continuing bailouts and fiat injections of Euros, not just into Greece, but into other countries as well, including Ireland, Portugal, Spain, and even Italy:

Extended printing of Euros means devaluation, and devaluation means greater international interest in gold and silver. The EU Council plan is a blinding flashing neon sign telling us to BUY PRECIOUS METALS, while we still can.

Stock Market Facade Is Over And Inflation Is Here

The “great bull run” over the past two years has been somewhat successful in fooling a certain percentage of Americans into believing all the recovery talk was real. The fundamentals, though, show that this run is entirely fabricated. Besides a static real unemployment rate of around 20%, housing market hellfire, and crushing inflation in commodities, trading volume in stocks is also at a three year low:

This means that the overall value of the Dow is being driven by a much smaller pool of investors. A smaller pool of active investors means a more volatile market, with a greater chance of wild swings or inflated values. This lack of stock participation also leads one to question the validity of the bull run as a whole. What, we might ask, has really been holding the markets up for so long, if so few people are feeding the machine?

We must keep in mind that since the credit crisis began the Fed has held interest rates at near zero. That’s almost 3 YEARS of near zero interest rates; far beyond the predictions of many mainstream analysts. The reason? Easy fiat from the Fed is the only thing keeping markets alive. Without it, they would crumble. We hear only of the fiat pumped into the system through bailouts and quantitative easing, but rarely do we hear about all the printing that goes on in-between these public events. The extent of Fed currency creation is made more apparent by the St. Louis Fed’s Adjusted Monetary Base:

According to the Fed publication ‘Monetary Base In An Era Of Financial Change’, the AMBSL is an index measuring the central bank balance sheet, including open market operations, statutory reserve requirements, and foreign exchange market interventions. The index, though, includes only what is reported by the fed, and without an audit, it is impossible to determine its accuracy. In all likelihood, it actually under-reports the amount of fiat being flooded into markets.

Can the Fed prop up the markets forever? No. The volume versus value conflict is too revealing, and I believe we have reached a point at which the weight of negative data is preventing any further significant climbs in the Dow even in the face of manipulation. A kind of critical apex is created; a point at which two forces once balanced meet and derail each other. Stocks, at this time, are very vulnerable, especially when they are supported by a central bank induced fiat framework

When investors realize that the bull run is fake, not to mention over for a very long time, that dollar devaluation is a certainty, and that bonds are a deathtrap, where will they turn to protect their savings? That’s right…gold and silver. The price potential for metals going into the final half of 2011 is extremely high. Lows can strike abruptly, and they do often under such volatile circumstances, but unlike MSM talking heads, we look well beyond week to week progressions. The long term trend is really what matters, and the long term trend for gold and silver has been impressively positive.

To those who chose not to take my advice over the past three years, or the advice of countless other alternative analysts and economists, I can only say we stand by our record. Our purpose is to help you secure the safety of your buying power as much as possible in these dangerous days. That is all. It is not too late to establish a foundation in precious metals, and it is not too late to accept the reality of our country’s quandary. Warnings, though, are just a small window in time, and they are only useful, so far as they are heeded.

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baby_BLYTHE's picture

Not to own any Gold, is to trust a central banker- Marc Faber

Back when Gold just crossed 1,000 per oz he said it would never fall below that level again.

That is when I bought the majority of my PMs. Best investment advice I ever received

GetZeeGold's picture


That is when I bought the majority of my PMs. Best investment advice I ever received

 First bought at $273......went in 2008 during the crisis at $700.

When your eyes are screaming at have to act.


nope-1004's picture

The fact that silver and gold need to be beaten down with such fervor is evidence enough to me that the banksters are intent on printing their way into oblivion.

Vote with your money.  Buy PM's.


Harlequin001's picture

Ok, so when does the buyer ever dictate the market price?

Just a quick question, because when does a price plunge mean that I have to sell?

The big problem for the state sponsored ponzi is that if my price to sell is say $10,000/oz then that is the price that I will sell my PM's at, and I reserve the right to raise it or lower it at my discretion. It matters not one jot what happens to the gold price in the interim, that's my price to sell. One day I'm sure that the chief idiot in charge will realise that manipulating the futures price has no impact on my willingness to hold precious metals other than that I will buy more if the price is manipulated lower.

The problem is the income tax. If these guys were right about one thing it is this, 'Next, austerity measures WILL be instituted, while taxes WILL be raised considerably, and quickly. The federal government is not going to shut down. They will instead bleed the American people dry of all remaining savings in order to continue functioning,' but if I really needed the advice of an investment pundit I would say 'thanks but no thanks' to Alt Market and choose one that could actually read financial markets and wasn't more than 5 years late to the party...

snakeboat's picture

The past is past.  If your teenage child were to have $1,600 in savings today, would you point her towards a shiny coin, or digits in a bank's computer?  I know my grrl is being guided (by me) towards shiny metal.

BrianN's picture

With today problem of US dollars printing to help the economy, it's more actual and appropriate to save your economy in hard precious metals like bijuterii argint silver and gold rather than some paper moneys that have no real value.
As a big US economist said, gold is the currency that will never be someones debt. Try to keep your long-term savings in precious metals and not in common currencies.

Ray Elliott's picture

Oldgay illway ithay ivefay 000 oonsay.

Boba Fiat's picture

Did you say, "Old gay bitches"? 

baby_BLYTHE's picture

yeah, well I was only around ten years old then. My allowance money only went so far.

Did however receive some high yielding treasury bonds when I was an infant that paid out pretty nicely at maturity.

Cognitive Dissonance's picture

I love ya baby_BLYTHE......but you're still incredibly young. Nothing wrong with that, except that we all tend to think we are older and wiser than we were yesterday or yesteryear. That is not always the case, though you seem to be making an exception to that rule. :>)

Just remember that we always supply our own confirmation bias whenever we need or want it. And keep saving that allowance, even if it's just you who are giving it to yourself. Pay yourself first, then everyone else. 

DoChenRollingBearing's picture

CogDis is right.  The first time I walked into a real casino, I won.  That wound up costing me a lot more in later on...  Hey!  Those guys CAN play poker better than me!

I stay out of casinos now as my record is so bad:  30 or visits to gamble, walking out a winner only about 5 times.

I also stay away from put and call options:  6 punts, lost all or part of my money all 6 times.

Stick with gold. Save your money as much as you can.  Pay yourself first is exactly right.  The really nice thing about gold is that you can buy and spend at the same time!

Azannoth's picture

Funny when I was 10 years old I tried to buy dollars, because my allowance was in an East European currency(post the fall)

baby_BLYTHE's picture

How easy was it for you to convert into dollars? Were there any restrictions?

Azannoth's picture

It was after the fall of the wall, so no restrictions, but money changers didn't want to do business with a kid trying to buy 10$ ^^

Thomas's picture

Sub-$300 cost basis--started buying while it was gurgling its death rattle. Bought all the way up until about $1000. My exposure now is over the top, by MSM standards.

Thomas's picture

and cost basis of silver starting at $4 and running up to $28.

living on the edge's picture

Been buying gold over the years and bought alot on the dip back to $700. I should have gone all in then but no sense second guessing. I continue to buy every few months and expect gold and silver will set us free.

DoChenRollingBearing's picture

Similar story for me, a buyer for decades, although the bulk I have bought was when gold reached $900 or so.  Even though gold is at $1600, I will keep buying as fiat comes my way.

Onward to $55,000 bitchez!

Overflow-admin's picture

I don't trust central bankers anymore. Being a little late on the run, I prefered buying silver instead of gold. In the little 9 months that followed my PHYSICAL purchase, I'm currently around 25% net (incl. transportation & VAT fees) loss. But I'm for the long run and maybe before next year I'll be net positive.


How I can actually have a net loss on my investment? Stack priced in CHF (which bounced against USD) so...


I'm waiting for a reversal signal in $XSF; I'm currently in CHF cash and waiting the right moment to move (which could come anytime; the BNS is screaming to debase CHF and Silver is breaking resistance).

Marty Rothbard's picture


   I was about your age back in the seventies, the last time the dollar was falling apart, and gold was soaring.  I hope you appreciate how lucky you are to have ZH to read.  The best I had back then was the Charlotte Observer, and they only reported after the fact.  If I had bought into the PM market early, like I did this time (2004), I'd have made a killing.

BrianOFlanagan's picture

wow, a victory lap for the bulls already?  Means an intermediate top must be in.

Henry Chinaski's picture


there is still time for those who missed the boat

Heard that one before...

Bob's picture

I sold my physical silver on Friday, +25% in six months.  There will be a large dip buying opportunity yet . . . I hope. 

SRV - ES339's picture

I got out Friday too... expecting a drop this week once the debt issue is closed (Comex Expiration and Treasury Auctions factors as well)... BTFD!

Lord Koos's picture

You guys would have been a lot smarter to sell your silver for gold, rather than paper.

Bob's picture

Perhaps.  We'll see.  Different people are willing to tolerate different levels of sweat and stress.  I wish I were a type B kinda guy.  In that fantasy, I'd be a happy man.  And I would simply be holding the physicial. 

But not me. 

mayhem_korner's picture

Hoping is not a reliable strategy.

Bob's picture

Hope has a high coefficient in our world . . . in our markets, not so much, since MOMO rulz, but then I'm beginning to literally hate our markets--look WTF they have become. 

Give the devil his due. 

chumbawamba's picture

Amateurs.  Gold is still cheap.  This baby has a long way to go before it runs its course.

DoChenRollingBearing's picture

+ $55,000

Hey, but what would a dumb Bearing know, what with a hole in the mddle where a brain would normally be?  Gold will soon be seen again as the best wealth preserver in town.  PHYSICAL gold only though, in your hands.


"All else will be left behind when the Gold Mothership takes off."

-ZH-er "Gordon_Gekko"

Want to read why (the long version)?

Disclosure: I am not FOFOA, but I do donate to his blog.

Temporalist's picture

Where the heck is GG?


Maybe he and Marla moved to an island together to watch the world crumble?

Island_Dweller's picture

Unless I'm nisunderstanding. his blog hasn't been updated since June 2010.

Island_Dweller's picture

Unless I'm nisunderstanding. his blog hasn't been updated since June 2010.

Bob's picture

Perhaps he's practicing the Gold Standard for gold protection: Silence. 

Bob's picture

That was wickedly funny, Temporalist! 

Bob's picture

Yes, the original Gordon_Gekko.  His day had come

I'm surprised that nobody talks about the Gold Standard for gold protection.  That would be, similarly to the first two rules of Fight Club, that you don't talk about it. 

Otherwise you have to plan for a whole lot of exigencies. Why net costs like those against the value of your gold, I'm always wondering. 

Hey, where the hell is Gordon, anyway? 

We don't hear much from him anymore . . .

Ra-Marduk's picture

Hey chumba, good to see that you dropped the idiotic "I am chumbawumba". You will get much more serious reply's by dropping that non-sense.

Juice Box's picture

Pieces of 8's!  Gold and Silver!  


Pirates were right - if its not shiny, its whiney!

pupton's picture

ONJ's Cameltoe leotard thing almost made it worth the overt homo-sensuality I had to sit through the Fabio "Old Spice Guy" commericial...All in all, at least I'm 4 minutes and 30 seconds closer to going home for the day.

Cognitive Dissonance's picture

When investors realize that the bull run is fake, not to mention over for a very long time, that dollar devaluation is a certainty, and that bonds are a deathtrap, where will they turn to protect their savings? That’s right…gold and silver.

This is what we all expect. So be careful everyone isn't on the same side of the boat just in case it doesn't. We are dealing with desperate men who will do desperate things. Including taking from the minority to satisfy themselves and the majority.

Dr. Porkchop's picture

When the fraud no longer works, they'll use force. Fraud still works pretty good though.

chumbawamba's picture

When they come for your gold, be prepared to shoot, and be prepared for a long stand-off.  Hence:

Gold, Guns, Garden.

Silver, Bullets, Seed.

DoChenRollingBearing's picture

There are 80,000,000 armed Americans.  After some 20 - 50 Fasicist Thugs are killed while coming by to confiscate gold OR guns, that will stop.  The cops will have no heart to take on 80,000,000 people ready to stop that.

Chumba is right about another point too.  Diversification is your friend.  Silver for spending.  Food & water for (some) self-sufficiency.  Guns & ammo to secure your rights.  Booze and prescription meds for barter.  Condo dwelling Bearing misses out on the garden part, but ANYONE could (and should RIGHT NOW) be actively preparing for a nasty period in which all of us are in peril in one or more ways.

pupton's picture

CD - To your last point, did you read the article in American Thinker about the potential for the desperate ones to take our IRAs?

Physical anything must be pried from cold, dead hands.  Minimize paper/electronic exposure IMHO.