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Record Prices Are Spurring Gold Fever, But Some Advocate Caution

October 9, 2009 by  

Record prices are spurring gold fever, but some advocate caution After falling to near $700 last November, gold rose again past $1,000 last month prompting some to predict the end of the U.S. dollar’s reign, while others have warned about a growing bubble.

According to the National Inflation Association (NIA), the upward march could be permanent due to the unprecedented inflationary pressures stemming from the massive federal deficit.

The declining value of the U.S. dollar, NIA says, means that "foreign countries will no longer have a reason to hold dollars and there will be no interest in buying our debt."

"Almost all of the U.S. government’s deficit spending will have to be paid for by outright money printing by the Federal Reserve," it adds.

The organization also predicts the value of gold could rise to as much as $5,400 per ounce, and it therefore advocates converting liquid assets into the precious metal.

However, some analysts caution against such exuberance. Jon Nadler, who works for the bullion dealer Kitco, says gold is setting record prices amid "some of the poorest fundamentals I’ve seen in the market for a long time," quoted by CNNMoney.com.

He suggests the price is driven by large hedge funds and institutional investors making momentum-driven trades, but as fears of a financial collapse recede, the price may come back down, he suggests.
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Filed Under: Asset and Wealth Protection, Liberty News
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  • Susie

    So, is the consensus to buy silver, because you can buy more for the price and it’s easier to convert for groceries, etc.? Buy it in bullion or as coins? And, if you live in an apartment without a yard in which to bury it, where do you keep it? You cannot keep it in the bank deposit box for you may not be able to gain entry. Any suggestions?

  • Jeffrey Brower

    Pete’s right, if society breaks down, there most likely will be no production or stores to spend your money either. But silver and gold coin or bars have always been the true money. Bartering and trading will be the key for a while in the worst of situations. If that occures, you can always use dollars for wall paper.

  • http://www.easyinvest.co.za pete

    I am looking at this from the funny side since I would need to cry if I did not laugh! My problem is: “What in the world will silver or gold (or anything else for that matter) buy when there is nothing being produced any more? What about the food supply – that is a major concern facing us all and we only think about material wealth – we can’t eat gold, silver, oil or coal…just when do we get our priorities right?

    That would be strangely funny to me – being very rich but having nothing to eat! hmmmmmmmmmmm?

    • Normal American

      Pete, you’re not looking at it the right way. There will always be things produced, just perhaps not as many and certainly not luxury cars, mansions, and the like. Example: Let’s say you have a neighbor with a garden who needs gold/silver to pay his rent. Let’s say you own your house outright and have gold/silver but no garden. So you buy some of your neighbor’s produce with your gold/silver and now he can pay the rent and you can eat. It is about priorities, just not the way you are looking at it. If you have gold/silver you will be better off than most in an complete economic collapse.

      But let’s also talk about the gold “bubble.” We are in the middle of massive deflation right now, not inflation, but gold is rising due to speculation and incorrect cries of massive inflation. Don’t get me wrong, inflation will come, but not before cars, real estate, etc. all drop to 10 cents on the dollar. We will have more massive deflation before inflation. Gold/silver in my mind is a good long term bet, and certainly if you are buying it to protect yourself from a complete economic collapse (rather than to sell for a few hundred dollars profit in the short run) then buy now. Otherwise I would wait. The stock market rally is BS and it will be heading back down. Oil prices, about to collapse. Just my 2 cents.

  • http://BobLivingston Rick Stone

    My opinion is that prudence in buying is paramount. However, that being said, a mixture of gold and silver would be in order at a ratio of from 10 – 25% of savings. Silver has the best spending for necessities advantage but carries a storage problem. Whereas gold will probably be an advantage for continued wealth preservation. The only caution I would observe is not having either.

  • James

    Let’s remember that back in 1933 (when FDR took office) Gold was $25/oz. With gold now over $1000/oz. that’s a 4000% increase in its price, or stated otherwise, a decrease in the value of the dollar by 97.5%. The traditional ratio between gold and silver is 16 to 1. With gold now at $1053/oz. and silver at $17.44/oz., the ratio is 60 to 1. (Back around 1980, gold went to $850/oz. and silver went to $50/oz.)
    When Americans started buying gold, back in the 1930s, FDR had possession of it outlawed. I’m sure the present government will also do that so I agree with Ruth, buy silver instead. Most cities of size have a gold and silver exchange service, so you can buy 5 and 10 ounce bars of silver (I wouldn’t buy coins, when push comes to shove any silver bar or coin is only worth its silver content). When you need cash just trade a silver bar for the going rate of dollars. Remember, the value of gold and silver doesn’t change, the value of paper dollars diminishes as their quantity increases relative to the gold in existence.

  • Tony

    And speaking of groceries , that is something else to buy now ( the things that store well ) When the price of commodities goes up , so will the price for your basic needs ( food , fuel , etc… )

  • Ruth Petersen

    Indeed, it is a bit difficult to go shopping for groceries with a $20 gold coin. Silver is poised for some nice gains .. in 1981, it reached $50, so based on gold prices, silver is still underpriced, and a lot easier to use for shopping.

  • steve jones

    nobody knows where the price of gold is going. thats why they still have a job. you better start worring about the fed buying treasurary bonds. thats not healthy . this system we live in is going down for the count and thats what obama and his gang of marxist want so they can rebuild the country to satisfy their needs and egos.

    • Royce

      I think so too! And I been thinking that for a while, You should really consider silver though, it is smaller denominations, and just as safe. and even if meatal does fall just hang on to it because it will always come back up.

      • http://profitablesolutions-1mill.com William Shaut

        I couldn’t agree more, my fear is that the country will not recover from this radical administration. In looking at the debt being forced on our children and grandchildren buy up all of the precious metals that you can !!!!!!

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