There Is An Offer Of ‘Fire Insurance’ While Your Monetary House Burns (And Financial Assets Crater)-Why You Need Gold And Silver Now

Photo credit: discogs.com

By Stan Szymanski

Someone cue Fire by the Ohio Players…

To date, the 2022 S & P has had its second worse start in history. Owners of 401(k)’s and other retirement accounts were not happy when they got their statements for the first quarter. If you take a look at the some of the broad financial indices here is what you might find ‘year to date’:

DJIA: -13.99%

NASDAQ: -27%

Bitcoin: -39%

Etherium: -45%

The biggest stablecoins have ‘broken the buck’

U.S. Inflation:  +8.26% (this is a government number; the real number is over 15% according to John Williams at ShadowStats)

For investors, their house is burning down around them. The market that gave them all their gains is now taking it away. Inflation is a tax on their assets that diminishes the ability of the investor to purchase goods and services. A year ago $100 bought $100 worth of goods in 2021. Today in 2022 that same $100 only buys $85 with of goods in 2021 terms.

Fortunately, while their paper assets are burning, the purveyors of physical precious metals offer a type of ‘insurance’ to address their dilemma. This is not a contract. It is not absolute assurance. Past performance does not guarantee future results. This is not financial advice (consult your advisor).

Gold is known as a low correlated asset to other asset classes like stocks and bonds. Having a low correlated asset means that this asset is -not- likely to be highly influenced by other asset classes. In other words, the performance of Gold is not much influenced by what stocks and bonds do. As an example, while the S & P 500 was down a whopping 39% in 2008, according to Forbes, gold was up 4%.

David Forest, editor at The International Speculator for Casey Research has put together data for the performance of metals around the last four major financial crises (not including the 2020 COVID crash): the Japan meltdown (1990-1992), the Asian financial crisis (1997-1998), the dot-com bubble (2000-2002), and the Great Financial Crisis (2007-2009).

During these crises, Precious Metals generally fell during the downturn. Gold actually eked out a very small gain during troubled times.

Mr. Forest reports that…’Gold is the safest place to be in uncertain times – it holds value well and delivers solid gains. Silver isn’t as reliable and tends to take a much larger hit during crashes. It does rebound well after the storm clears, so it’s best to wait until a bottom before taking a position.’…

As one can see in the chart, one year after the financial trials,  precious metals were generally up from 10% to over 40%.

There is one very important difference concerning the trials that we find ourselves in today compared to the aforementioned  times of trouble: The very real specter of the US Dollar losing its sole position as the world reserve currency.

Russia has linked its currency, the Ruble, to gold. The ruble initially fell at the start of the war in the Ukraine. Then Russia linked its currency to gold and now its legal tender has recovered all of its losses and continued to strengthen.

For 50 years all countries had to exchange their currency for dollars in order to buy oil. Now, many countries, most notably Russia, China and India, are trading in ‘other than dollar’. This reduces demand for the dollar. All three (Russia, China and India) have very large gold reserves and after the debacle of the 2008 financial crisis, want an exchange mechanism that isn’t tied to a US money printing press.

If the dollar goes the way of all other fiat currencies in history, you will need a medium of exchange that maintains its purchasing power and is recognizable and acceptable to most market participants. That would by physical precious metals.

Fortunately for those looking to purchase, the price of Gold and Silver has gone sideways to down. Gold is largely unchanged over the last year and silver is actually down approximately 20%. Why haven’t they moved up yet or in silvers’ case, been pummeled? Because of COMEX Gold and Silver manipulation from a handful of traders. Please read this explanation if you are not aware of the phenomenon written by the foremost authority on this subject, Ted Butler. If this situation persists, you will know why.

This documented smack down of the Gold and silver prices happens because Gold and Silver are competitors directly with the US dollar and it’s fiat backing. The good news for you is that these metals are still affordable for the average person while availability lasts.

And when I talk about availability, I am speaking specifically about physical precious metals, not stocks or ETF’s (exchange traded funds). The motto of ‘if you can’t touch it, you don’t own it’ applies here. If the US dollar begins to teeter as the small, but possibly bell weather ‘StableCoins’ have done recently, you are going to need a physical form of exchange when fiat (the dollar) becomes unreliable.

Generally, you would use Silver for barter and gold for wealth preservation. Start with old pre-1965 silver dimes and quarters as they are easily recognizable and typically not counterfeited. One silver (pre-1965 issue) dime in a time of trouble may buy you a loaf of bread or a box of .22. One silver quarter may buy you a gallon of gas.

At roughly $1,850/ounce for gold it may be out of reach some folks as 60 percent of Americans  could not afford a $1,000 unexpected expense without going into debt. If that is the case, buy silver or buy gold by buying it in single grams, currently about $80-85/gram. If you have savings, retirement or otherwise, buying physical ounces of gold can provide one of the best ways of preserving your wealth long term. If you are truly affluent, the same can be done with larger denominations of the yellow metal. In all cases,  you can exercise your due diligence by making sure you  purchase from an established and reputable precious metals dealer.

There is a caveat in this subject of precious metals consideration. We are seeing shortages of food in the grocery store, shortages of baby formula, shortages of water and more. If the last two years has taught us anything, it is that things are going to get a lot worse before they get better. Therefore, before you buy precious metals, please make sure you have plentiful and sufficient stock of food, water (and a way to collect and filter it), energy, protection and shelter. When there comes a time when there is virtually no food in the stores because diesel is $15/gallon and the trucks are stopped, you don’t want to be on the street begging for a pound of flour with a gold Krugerrand in hand.

Although it is not an absolute guaranty or assurance of future price behavior, Precious metals have a long record of maintaining their purchasing power though out history and should have consideration as an appropriate asset allocation in one’s financial holdings.

So as Rome burns will you look for a fire extinguisher or will you ask the DJ to play Fire by the Ohio Players?

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Stan Szymanski (or Encouraging Angels) is not a medical doctor. This is not medical advice. In all matters pertaining to the health and care of a human being consult a medical doctor. This is not legal, financial or personal advice. Consult appropriate professionals in those fields for that type of advice.