Gold is TOO Expensive! I Can’t Buy Now. WRONG!

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Gold    Silver    Economy    Central Banking

(September 2012)

Yes, of course, gold appears too expensive now (a bit under $1,700 as of this writing) compared to an under $300 price back in 2001. Gasoline was $0.15 per gallon back in the 1950s, and it is approaching $4 per gallon today. Does its current high price stop you from purchasing gasoline? Of course not. We need gasoline to drive our cars, so we pay the price. We need gold to preserve our purchasing power, since interest rates are now practically zero and long bonds are returning under 3%. Most other investments have not kept pace with the real rate of inflation experienced by the middle class in the United States.

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So, is gold expensive at $1,700? Compared to 2 years ago, 5 years ago, and 10 years ago – YES! But the past is the past; the real question is what will be the price of gold five years from now? A five-year Certificate of Deposit might return 6% or even 12% over the course of five years. So do you think gold will be priced higher than $1,700 plus 12% – about $1,900 in five years? I do. In fact, I fully expect gold to exceed $1,900 by the end of 2012 or in early 2013.

What about safety? The CD is probably safe – you are likely to get your dollars back. But, what will those dollars be worth in five years when the Federal Reserve is diluting the value of trillions of existing dollars by creating hundreds of billions or trillions of new dollars each year?

Gold has been increasing in price by about 15% per year for the past decade. That tells me that our economic system worries many people who are buying gold for protection and that the supply of dollars must be exponentially increased to keep the system from imploding. This might not end well for the dollar, but I expect it will end quite well for the price of gold and for your purchasing power if you put some savings and investments into gold.

This is just my opinion, but the price of gold seems to agree with me. What do you think? What preparations have you made to preserve your purchasing power?

GE Christenson
aka Deviant Investor

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6 thoughts on “Gold is TOO Expensive! I Can’t Buy Now. WRONG!

  1. Hi Gary,
    I am a regular reader of the Market Oracle and I think gold is a very good investment. I think if you are prepared to keep it in the longer term, it’s got to be one of the best.
    My only concerns with Gold is the ability to trade it for a fair exchange in the future, assuming currencies are rendered worthless. What would I get for my gold and from whom in a crisis, bearing in mind I don’t want paper money for the same reasons I bought gold in the first place. I can’t eat gold and would willingly give it away for a meal or two to save my family. Extreme I know but hope you get my point. What will be the true value of my gold and who will want to take it off me and for what? A van full of food? Assuming a meltdown of the value of currencies is inevitable, may be I should invest in tinned foods as well? That would be a very good resource to trade with! And probably a gun to protect all I have!!

    just a thought and would like your take on this.

    Anthony Bloom

    • Good question! I see gold as insurance and wealth preservation. I think there will always be a demand for gold, especially if financial systems collapse, but you make a good point about its usefulness in the extreme. In the case where we are practically forced back to barter (I doubt it, but could happen) then I suggest 1 ounce silver coins. They are universally recognized, valued, and still reasonable in value compared to gold. Historically, silver has been used as daily money while gold has been stored away as wealth.

      What also makes sense to me are smaller silver coins. In the United States that would be pre-1965 coins which still contained silver. Gold has its place in the long term, but purchase some silver also. It will appreciate more, and will be more useful for small purchases in the case of a catastrophe. Others advocate the purchase of ammunition, both for its intended purpose, and for its barter value.

      GE Christenson
      aka Deviant Investor

    • The choice is yours! But if my article discouraged you on buying gold or protecting yourself financially, then perhaps I did not communicate well. Regardless, think it through and make a decision based on today and a likely tomorrow, not what used to be 10 or 100 years ago.


      GE Christenson
      aka Deviant Investor

  2. Gary, this is exactly what I like to see you post. You are getting right to the point where most novice’s/beginner’s heads are at. The price (high or low) is only worth knowing when you put it in perspective to the rest of the world. You did that beautifully with the gasoline comparison!

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