"As silver shows its temper tantrum in the form of price volatility, the media’s pundits are coming out in mass to declare that gold is now the better investment. Their claim is very simple: if silver is going to be so volatile, why should investors own it?
Our answer is even simpler; growth is what makes silver shine.
Compare and Contrast
In contrast to silver, gold does appear to be a happier purveyor of anti-inflationary dollars. However, from the top-view, the reality is that gold hasn’t yet given investors a climb equal to that of silver. Instead, it is a slow mover, a relative non-starter, and traditionally very conservative when compared to other commodities.
To compare gold, the new anti-inflationary investment, against silver is to compare the S&P500 to a single micro-cap equity. While the S&P500 average has provided for slow, but tangible long-term performance, a single micro-cap stock may provide twice the returns with ten times the volatility.
It makes perfect sense why financial traditionalists would prefer to own a low-beta security or commodity; low beta investments can be levered to a much greater extent than a high-beta investment.
Investors should realize that the change in investment recommendations have come with an obvious change in investment philosophy. Active investors and media pundits have a greater interest in realizing paper profits than does the individual investor who chooses to make small, unleveraged purchases of real, physical bullion.
On Wall Street, nothing short of exchange-traded funds, an effective derivative, or options on exchange-traded funds, a double dose of speculative derivative plays, will do.
The Industrial Advantage
Last year, we evaluated why we believe silver to be the preferred investment to gold, and the fundamentals surrounding such a call have not changed. Certainly, silver has provided better returns and continues to have better upside, despite all the market chatter.
The true advantage of silver isn’t that it is more volatile, or that it is a smaller market, or even that it is less expensive. No, the real advantage is in industry. Most silver investors, despite having a very bearish sentiment toward the US economy, know that the world can grow in light of the United States, and in places as far off as China and India, economic growth is tallying up in the double digits, even as the US economy stagnates.
In looking at both metals for their industrial exposure, it becomes very clear which one shines brighter. Gold, which is consumed mostly in jewelry, provides very little outlet for consumption, as Cash4Gold proved there are plenty of people willing to cash in their valuables. Gold which is not easily recycled—gold used in dentistry products, the manufacture of electronic products—represents roughly 10% of annual consumption.
Silver is used primarily in industry, particularly in the rising field of RFID technology, which will experience double digit growth rates in a log scale only the money supply chart could match. Jewelry consumes only very little of total silver consumption—less than 30% of silver is used in jewelry—and thus silver, holding all else constant, is likely to shrink in supply far faster than gold will.
While both are inflation hedges, there is only one monetary metal that provides opportunity to profit on inflation, a breakdown of the dollar, or even a complete revival of the American economy, and that metal is, more so than gold, silver.
To the individual investor who cares very little about the day to day movements of the market but instead the long-term performance of a quality investment, silver makes a perfect investment vehicle on recovery and economic calamity."
"When the news broke that Dominique Strauss-Kahn, head of the IMF, had been arrested in New York and charged with a sex crime, we thought that there might be more to it than that. It had been rumored that he would challenge Nicolas Sarkozy in the next presidential election in France and so this incident, should it be true, would effectively eliminate him from the presidential race. We don’t really pay any attention to conspiracy stories, but this piece carried in The European Union Times is an interesting read. A new report prepared for Prime Minister Putin by the FederalSecurity Service (FSB) says that former International Monetary Fund (IMF) Chief Dominique Strauss-Kahn was charged and jailed in the US for sex crimes on May 14th after his discovery that all of the gold held in the United States Bullion Depositorylocated at Fort Knox was ‘missing and/or unaccounted’ for. According to this FSB secret report, Strauss-Kahn had become “increasingly concerned” earlier this month after the United States began “stalling” its pledged delivery to the IMF of 191.3 tons of gold agreed to under the Second Amendment of the Articles of Agreement signed by the Executive Board in April 1978 that were to be sold to fund what are called Special Drawing Rights (SDRs) as an alternative to what are called reserve currencies. This FSB report further states that upon Strauss-Kahn raising his concerns with American government officials close to President Obama he was ‘contacted’ by ‘rogue elements’ within the Central Intelligence Agency (CIA) who provided him ‘firm evidence’ that all of the gold reported to be held by the US ‘was gone’. Upon Strauss-Kahn receiving the CIA evidence, this report continues, he made immediate arrangements to leave the US for Paris, but when contacted by agents working for France’s General Directorate for External Security (DGSE) that American authorities were seeking his capture he fled to New York City’s JFK airport following these agents directive not to take his cell-phone because US police could track his exact location. Once Strauss-Kahn was safely boarded on an Air France flightto Paris, however, this FSB report says he made a ‘fatal mistake’ by calling the hotel from a phone on the plane and asking them to forwarded the cell-phone he had been told to leave behind to his French residence, after which US agents were able to track and apprehend him. Within the past fortnight, this report continues, Strauss-Kahn reached out to his close friend and top Egyptian banker Mahmoud Abdel Salam Omar to retrieve from the US the evidence given to him by the CIA. Omar, however, and exactly like Strauss-Kahn before him, was charged yesterday by the US with a sex crime against a luxury hotel maid, a charge the FSB labels as ‘beyond belief’ due to Omar being 74-years-old and a devout Muslim. In an astounding move puzzling many in Moscow, Putin after reading this secret FSB report today ordered posted to the Kremlin’s official website a defense of Strauss-Khan becoming the first world leader to state that the former IMF chief was a victim of a US conspiracy. Putin further stated, “It’s hard for me to evaluate the hidden political motives but I cannot believe that it looks the way it was initially introduced. It doesn’t sit right in my head.” Interesting to note about all of these events is that one of the United States top Congressman, and 2012 Presidential candidate, Ron Paul [photo bottom left] has long stated his belief that the US government has lied about its gold reserves held at Fort Knox. So concerned had Congressman Paul become about the US government and the Federal Reserve hiding the truth about American gold reserves he put forward a bill in late 2010 to force an audit of them, but which was subsequently defeated by Obama regime forces. When directly asked by reporters if he believed there was no gold in Fort Knox or the Federal Reserve, Congressman Paul gave the incredible reply, “I think it is a possibility.” Also interesting to note is that barely 3 days after the arrest of Strauss-Kahn, Congressman Paul made a new call for the US to sell its gold reserves by stating, “Given the high price it is now, and the tremendous debt problem we now have, by all means, sell at the peak.”
Bizarre reports emanating from the US for years, however, suggest there is no gold to sell, and as we can read as posted in 2009 on the ViewZone.Com news site: “In October of 2009 the Chinese received a shipment of gold bars. Gold is regularly exchanges between countries to pay debts and to settle the so-called balance of trade. Most gold is exchanged and stored in vaults under the supervision of a special organization based in London, the London Bullion Market Association (or LBMA). When the shipment was received, the Chinese government asked that special tests be performed to guarantee the purity and weight of the gold bars. In this test, four small holed are drilled into the gold bars and the metal is then analyzed. Officials were shocked to learn that the bars were fake. They contained cores of tungsten with only a outer coating of real gold. What’s more, these gold bars, containing serial numbers for tracking, originated in the US and had been stored inFort Knox for years. There were reportedly between 5,600 to 5,700 bars, weighing 400 oz. each, in the shipment!” To the final fate of Strauss-Kahn it is not in our knowing, but new reports coming from the United States show his determination not to go down without a fight as he has hired what is described as a ‘crack team’ of former CIA spies, private investigators and media advisers to defend him. To the practical effects on the global economy should it be proved that the US, indeed, has been lying about its gold reserves, Russia’s Central Bank yesterday ordered the interest rate raised from 0.25 to 3.5 percent and Putin ordered the export ban on wheat and grain crops lifted by July 1st in a move designed to fill the Motherlands coffers with money that normally would have flowed to the US. The American peoples ability to know the truth of these things, and as always, has been shouted out by their propaganda media organs leaving them in danger of not being prepared for the horrific economic collapse of their nation now believed will much sooner than later. Do you think that there is something in this? The US, no gold!"
"A day is coming when the rest of the world will decide that it no longer has faith in U.S. dollars or in U.S. debt. When that day arrives, the game will be over. Traditionally, two of the biggest things that the U.S. economy has had going for it were the U.S. dollar and U.S. Treasuries. The U.S. dollar has been the default reserve currency of the world for decades. All over the globe it was seen as a strong, stable currency that was desirable for international trade. U.S. government debt has long been considered the "safest debt" in the entire world. Whenever there was a major crisis, investors would flock to U.S. Treasuries because they were considered a rock. Sadly, all of this is now changing. Today the rest of the world is losing faith in the U.S. financial system. In fact, even the United Nations is now warning of the collapse of the dollar. But if the U.S. dollar and U.S. Treasuries collapse, that will be an absolute nightmare for the U.S. economy. If the rest of the world does not want our dollars someday, then what are we going to give them in exchange for all of the oil and all of the cheap imported goods they send us? If the rest of the world does not want our debt someday, then how in the world are we going to be able to continue to consume far, far more wealth than we produce?
The rest of the world is watching the U.S. government run up record-setting budget deficits and they are watching the Federal Reserve print money like there is no tomorrow and they realize that the U.S. financial system is slowly imploding.
As mentioned above, now even the United Nations is warning that the U.S. dollar could collapse. The following is a brief excerpt from a recent news report put out by Reuters....
The United Nations warned on Wednesday of a possible crisis of confidence in, and even a "collapse" of, the U.S. dollar if its value against other currencies continued to decline.
In a mid-year review of the world economy, the UN economic division said such a development, stemming from the falling value of foreign dollar holdings, would imperil the global financial system.
But it is not just the United Nations that is concerned about the U.S. dollar.
On April 18th, Standard & Poor's altered its outlook on U.S. government debt from "stable" to "negative" and warned that the U.S. could soon lose its prized AAA rating.
At one time, it would have been unthinkable for Standard & Poor's to do such a thing.
But today it is amazing that it has taken them so long to make such a move. U.S. government finances are falling apart.
When the credit rating of U.S. government debt starts declining, interest rates will go up. Just ask the government of Greece how painful that can be. Today, Greece is paying over 16 percent on 10 year bonds.
The following is what John Williams of Shadow Government Statistics recently had to say about why Standard & Poor's issued such a warning about U.S. government debt....
S&P is noting the U.S. government's long-range fiscal problems. Generally, you'll find that the accounting for unfunded liabilities for Social Security, Medicare and other programs on a net-present-value (NPV) basis indicates total federal debt and obligations of about $75 trillion. That's 15 times the gross domestic product (GDP). The debt and obligations are increasing at a pace of about $5 trillion a year, which is neither sustainable nor containable. If the U.S . was a corporation on a parallel basis, it would be headed into bankruptcy rather quickly.
Look, the rest of the world is not stupid. They know that the U.S. government is hurtling towards financial disaster. The appetite among foreigners for U.S. government debt is decreasing rapidly.
In fact, according to Zero Hedge, foreigners are dumping U.S. debt at a very rapid pace right now.
In addition, the cost to insure U.S. debt has risen sharply in recent days.
Right now, the Federal Reserve has been buying up most new U.S. government debt with dollars that it has created out of thin air. This is a giant Ponzi scheme, and it is a major contributing factor to the decline of faith in the U.S. dollar.
The dollar has fallen by 17 percent compared to other major national currencies since 2009. What makes that fact even sadder is that all major currencies have been rapidly losing value compared to hard assets over that time period. The dollar is just sliding faster than almost all of the other global currencies that are constantly losing value as well.
Anyone with half a brain could have seen that this would be the end result of reckless government borrowing, but unfortunately our politicians have been ignoring this problem for decades.
Now a day or reckoning is fast approaching and it is going to be very painful.
The U.S. government has piled up the biggest mountain of debt in the history of the world. Just consider a few shocking facts about this unprecedented debt....
*If the U.S. national debt (more than 14 trillion dollars) was reduced to a stack of 5 dollar bills, it would reach three quarters of the way to the moon.
*If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.
*It is now being projected that by the year 2021, interest payments on the national debt will amount to $1.1 trillion dollars a year.
In a previous article on The American Dream, I detailed some more absolutely horrifying statistics about U.S. government debt....
#1 If you divide the national debt up equally among all U.S. households, each one owes a staggering $125,475.18.
#2 The federal government has borrowed 29,660 more dollars per household since Barack Obama signed the economic stimulus law two years ago.
#3 During Barack Obama's first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.
#4 In the new budget that the Obama administration has proposed, the U.S. government would spend 3.7 trillion dollars in 2012 and by 2021 the U.S. government would be spending a whopping 5.6 trillion dollars per year.
#5 The U.S. government currently has to borrow approximately 41 cents of every single dollar that it spends.
#6 The total compensation that the federal government workforce earned last year came to a grand total of approximately 447 billion dollars.
#7 The U.S. national debt is currently rising by well over 4 billion dollars every single day.
#8 The U.S. government is borrowing over 2 million more dollars every single minute.
#9 The U.S. national debt is over 14 times larger than it was just 30 years ago.
#10 Unfunded liabilities for entitlement programs such as Social Security and Medicare are estimated to be well over $100 trillion, and nobody in the U.S. government seems to have any idea how we are actually even going to come close to meeting all of those obligations.
#11 If you were alive when Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now. But this year alone the U.S. government is going to go about 1.6 trillion dollars more into debt.
#12 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
So have our politicians learned anything from the mistakes of the past?
No.
The U.S. government continues to spend money on some of the most ridiculous things imaginable. For example, the Department of Health and Human Services has just announced a brand new $500 million program that will, among other things, seek to solve the problem of 5-year-old children that "can't sit still" in a kindergarten classroom.
Isn't it good to see the government investing our hard-earned tax dollars so wisely?
Of course if our kids weren't being constantly fed foods packed with sugar, high fructose corn syrup and aspartame we wouldn't have to spend 500 million dollars to deal with this problem.
When it comes to government waste, nobody seems to do it any better than the U.S. government.
Our politicians continue to assume that the rest of the world will always want our dollars and our debt, but that is simply not the case.
Over the past couple of years, global leader after global leader has publicly talked about the need for a new world reserve currency.
In fact, globalist institutions such as the IMF and the World Bank have been very busy discussing what the world is going to use as a global reserve currency after the death of the dollar.
The rest of the world is not sitting around waiting to see if the U.S. financial system is going to recover. They are already making plans for the demise of the dollar. They are increasingly using other currencies to trade with. They are becoming more hesitant to buy more of our debt. They are realizing that the days of U.S. dominance are coming to an end.
So what is that going to mean for us?
It is going to be a complete and total disaster.
Right now, we live far, far beyond our means. We borrow gigantic piles of money to make up the difference between what we produce and what we consume. We are absolutely dependent on the fact that the rest of the world will take our dollars in exchange for the things that we need.
The current situation is not sustainable.
It will come to an end."
After many years of studying the issue about the US debt, here is my analysis..
In summary, there will be 3 scenarios about the US debt:
1) US is going for a major reform, and suffering for a long period of time
to pay back all the debt
2) US print a lots of money to settle the debt
3) Default on the debt
1) 1st scenario is actually a proper way but unfortunately until now, there is no serious sign US is doing it. Even starting from today lets say they are cutting down expenses, balancing the budget and paying back 1 Trillion USD per year, it will take them a minimum of 15-20 years to settle all the debt.
Are they willing to be disciplined and sacrifice?
Unlikely.
Their whole system is a disadvantage now, and wouldn't allow them to
choose this path.
2) Printing money. US is doing it now.
Every country do print money, but US print the most and fastest.
(behind every US dollar printed, it is backed by debt)
This will cost US dollar less valuable.
QE1, QE2, .. QE(N)
Hence Gold & Silver price in relative will go up.
(short term price might fluctuate, but in the long term at least 6
month to 1 year Gold & Silver price will be rising)
3) If US don't wake up and changing course, there will be a reckoning
day when they are going to default on the loan.
In this case, USD will lose the status as a world reserve currency.
This will cause US dollar a major decline and implode.
At that time Gold & Silver price will 'skyrocket'.
I agree with Les' long-term outlook, and add my opinion that people will increasingly invest more in physical assets during a time when fiat currencies around the globe are in crisis.
On a shorter-term note, the Gold/Silver ratio is around 42.5 as a result of the silver retracement over the past few weeks and gold stepping back up near its all time highs. What are your thoughts on swapping out some gold for silver as a result of this?
Gold & Silver are brothers. Gold is more stable, silver is volatile but got bigger potential.
Both will rise in the future(long term).
For me silver is underprice now.
Base on the 1:16 ratio,
for gold price USD1,500/oz, silver price should be USD93/oz..
Most countries government(especially western) would want silver price to be low.
Its a treat to them and the whole financial system if silver price rise a lot.
Do you take into consideration price movements of Palladium and Platinum as well, and their respective ratios to Gold and Silver? Platinum has performed the worst of the four. I've kept my eye on Palladium. It has risen about 400% since '09.
hi just read few or your posts and find them quite interesting.it seems you the world quite closely.
Itrade in gold and have bought at $1545.What do u suggest should i avearge it out what should be the strategy.
Akhil
New Delhi,INDIA
