Got Gold? Is There Any Left to Buy?

Commodities Investing, Gold & Silver, Investing Strategies

I recently interviewed Chuck Butler; what is going on and what can regular working-class people do to protect themselves financially? Mainstream Americans work hard to provide for their family and save money so they are not a burden on their family in their old age. It’s crime when government policies, using the excuse of a crisis, can destroy the wealth Americans accumulated from 40-50 years of hard work.

This was Chuck’s closing remarks:

“If we’re going to stay away from stocks and bonds, that leaves, cash and Gold & Silver…. Got Gold?”

I sent pundit Bill Bonner’s newsletter to Chuck, highlighting this comment:

“Stocks will rise (“a dead cat bounce”, the old timers call it) on all the “bailout” news, and then give up another 50% of their value.

…. The feds will print money by the trillions to rescue the situation. Spending will rise. But lower output…and more currency in circulation…will raise prices.”

More currency, lower output and prices rising means inflation. Here was Chuck’s response:

“Seems pretty contra-thinking given the stock Market rise since the stimulus package was announced. The guys on the porch deck the other day were really crowing! I just smiled at them and said good for you!

Then asked…got Gold?

I sure hope you have some gold (and/or silver) – and plenty of it. Today physical gold is hard to obtain.

MarketWatch reported, ‘There is no gold.’ Bullion dealers sell out in panic buying:

“If you think gold has jumped about 10% in a couple of days to $1,638 an ounce, the official price quoted on Wall Street, think again.

The real price? Nearer $1,800. If you can get it.

“There’s no gold,” says Josh Strauss, partner at money manager Pekin Hardy Strauss in Chicago (and a bullion fan). …. “There’s roughly a 10% premium to purchase physical gold for delivery. Usually it’s like 2%….”

…. Meanwhile, over at the U.S. Mint, customer service reports they have Eagles available but to buy them direct will cost you $2,175.”

Bloomberg reports, World’s Rich ‘Desperate’ for Gold With Metal in Short Supply.

I contacted my friend and gold expert, Jeff Clark at GoldSilver asking if he had supply. His response, “Yes, with restrictions, and it changes daily so please recheck.”

Mines are shut down due to Coronavirus; transportation is a problem and things are moving quickly.

I asked Jeff, “While the current imbalance between supply and demand is a factor, could the fact the Fed is pumping trillions into the economy also come into play?” He responded:

“Demand was spiking before mines started closing down before Fed announced pumping. Fear, uncertainty, all the usual reasons, when C-19 started making headlines. First clue was US Mint shutting down, then the others followed. Now it’s refiners and transportation/delivery. Fed started pumping, then Goldman came out with report saying to own gold, both leading to demand spiking again. Situation changes daily….”

This JM Bullion gold price chart supports Jeff’s point:

A preview of things to come?

What lies ahead? The government is printing money like the world has never seen before.

The Federal Reserve Now Owns 15 Percent of the U.S. Treasury Market; At Its Current Rate, It Could Own the Whole Market in Less than Two Years – Wall Street on Parade, 3/28/2020

Pundit John Mauldin predicts:

“The 2020s will be the decade of “Whatever It Takes.” I’ve said that before the decade ends, the Fed balance sheet will be $20 trillion and probably approach $30 trillion. I still think that is the case.”

Zerohedge reports, “Total Fed assets grew by $293Bn to $6.08 trillion as of close, April 8, with the increase primarily driven by $294bn of Treasury securities.” Their chart shows the rapid rise:

That amounts to a ten-fold increase in money created out of thin air in a decade. Might high inflation be soon to follow this time around?

Mauldin tells us, “When the velocity of money is falling, monetary policy which would otherwise cause inflation doesn’t seem to do so.”

Subscriber Bernard D. makes this prediction in his blog:

“Precious metal PRICES will be beaten down…until people, in a “naked Emperor” moment realize that the Dollar has the value of Monopoly Money, and will – like China did the other day – demand US payment, not in paper or electronic dollars, but in something “real”…and that’s where gold and silver come in again. That’s where the true value of precious metal is revealed.

So, if you own precious metal, hold it and keep it safe because the time will come when things such as food will be so valuable that dollars won’t buy them. (Emphasis mine)

In demanding something real (such as gold, silver, oil, etc.) we’re talking about commodities. “Dollars are not money.” J.P. Morgan once said, “Gold (silver) is money. All else is credit.”

Bill Bonner offers a historical perspective:

“…. Gold has been such a good “store of value” for thousands of years…while 599 different paper currencies disappeared.

…. No paper currency can be expected to last for very long.

Where’s the bottom?

…. Historically, a real bear market in U.S. stocks takes them down to where you can buy all the 30 Dow stocks for 5 ounces of gold – or less.

That is as reasonable an expectation today as it was in previous bear markets. And assuming the price of gold stays at $1,600 per ounce, that will mean a Dow around 8,000.

Most likely the price of gold will rise as the Dow declines…giving us a target for the Dow (in today’s dollars) somewhere in the middle…or around 15,000.

…. The obvious place for your money during this deflationary period is, of course, gold. Real gold. Gold you can hold in your hands…if you can get it.”

Is it time to buy?

The BEST time to buy is when there is “panic selling” not when dealers are adding 10% plus to the price because of “panic buying”. In a normal market, precious metal dealers operate on very thin margins.

“Got Gold?” does not mean to run out and buy gold at any price!

I asked Chuck if he had ever seen a run on physical metals like this before:

“Toward the end of the Carter years, I was the operations manager for the Mark Twain Bond Dept. Back then banks could trade Gold & Silver for their clients. We had a small division assigned to metals – that quickly grew to a “all hands-on deck” division….

Our banks were small and local. One branch was in an upscale area called Ladue…to say it straight out, Old Money…lot’s of it!

Well, these well-to-do folks…could see that inflation was rising faster than a melting snow cone in Hell, and they wanted to protect some of their “old money” with Gold & Silver….

Our “old money” crowd, hated to pay what they thought were outrageous minting and dealer markup fees…. We offered a promotion where we would sell them 1,000-ounce silver bars and store them in a safety deposit box. They weighed just under 65#. I lifted them and put them in the box for them.

When I drove into work there was a line at the door and around the corner with people looking to buy a 1,000-ounce Silver Bar!

So…if it was good enough for the “old money crowd” it was good enough for me! I couldn’t afford 1,000-ounce Silver bars so I bought coins for around $23 ounce. It took about 20 years for Silver to reach $23 an ounce again, however, it never was worth nothing….”

In our follow up discussion, Chuck and I felt the supply/demand imbalance cause by the Coronavirus is probably temporary. However, with the uncertainty in the world, the need to own precious metals is certainly clear.

If the world even suspects a “naked emperor” moment, our dollar will become Monopoly Money causing high inflation. If Mauldin is right, Bonner says we should own gold during deflationary times. Gold is real money.

My daughter asked, “Dad, what should I do?” I explained that I’m hearing the metals market is slowly returning back to normal. If you want more precious metal, set up a regular monthly purchase program in affordable increments. That allows you to accumulate over time and your prices will even out.

Online dealers like GoldSilver are generally cheaper than your local coin shop. They do not have the overhead and have more leverage on the buying side of the business. They can help you design a plan that works for you.

I don’t want to sound like doom and gloom; however, realistic precautions are reasonable. Even if high inflation is not around the corner, your investment will never be worthless.

Personally, I hope I never have to sell my physical metal. If I do, times will be really tough.

As the conversation with Chuck ended, we concluded that next time we ask, “Got Gold?” all of our readers raise their hand and be smiling.

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