Gold and Silver Forum

Why buy gold or silver now and when to sell it

GoldAndSilverForum.net 7/17/2011 - Why buy Gold or Silver now?

Are you wondering why with all the gains that gold and silver has made in the last 10 years why buy now? I would understand why you feel that way. You were probably burned in the stock market crash of 2000 - 2001 like most people (me too). And you are probably confused with information overload at this point and wondering who to beleive.

Don't beleive governement officials, they will say that everything is fine with the economy or that they can fix it and the Dollar because they have to say that. What are they going to say? "We don't really know why the economy is not responding to our stimulus plan but we are going to try to spend your hard earned tax dollars to try another expensive bailout." .. I don't think so.

The few that are speaking the truth, like Ron Paul are often seen as radicals. No 4 year term administration is going to start to take the tough road to getting out of debt because it will be very painful. It's easier for them to keep kicking the can down the road to the next administration. After all, the Dollar hasn't completely crashed ... yet. That is quickly coming to an end. It's inevitable.

Don't believe bankers because they have been taking free money from the government to be bailed out for their own mistakes. The big banks are the ones who are some of the most elite and super rich in the world (and they want to keep it that way). Along with the US government they have been printing money by way of Fractional Reserve Banking and they are the ones who gave the loans to people who could not afford the homes that caused the housing bubble. They should have been allowed to fail so that the free market can correct itself. Big government bailouts are rewarding the bad decisions that caused the problem in the first place and is only going to make the coming crash that much worse.

Don't beleive Wall Street because they took the average person's 401k or retirement plan and invested it in a market that was destined to crash. Because all bubbles have to come to an end in a free market. And they are happy to see the government print more money. The biggest stock market bubble in history started in 1980 and ended in 2000. Many people have been saying that the market has bottomed out and can only climb from here. Wrong. The market has mostly been going sideways and what gains have been made is only because of inflation.

You can see that clearly when you look at a chart of the Dow versus Gold or the Dow/Gold Ratio. When you use Dollars as a unit of measure it clouds everything up. When you measure gold against real stuff, stuff you can buy like oil, food or a house it becomes much more clear.

Dow / Gold Ratio

So the question remains, should I buy gold or silver now?

The short answer is yes, absolutely, buy now or as soon as you can. Gold and silver are no where near the top as long as the government is going to keep printing money. There is no indication that they will do otherwise with Ben Bernanke in control of the Fed. He's on record as saying that he would drop money from helicopters if that is what it takes. Hence, the nickname "Helicopter Ben". And as long as they are printing money, inflation will continue to accelerate.

I would recommend that you buy as much as you can now and buy more when you can. And I'm not telling you this because I have an agenda. This is what I'm doing and I want as many non-bankers, non-wall street investors and non-polititians to come out ahead in this big fiasco - probably the greatest financial crises in history.

I say greatest financial crises in history because this time it is global. If the US Dollar collapses as the world currency then it will affect all of the world currencies, most of which are pegged to the US Dollar. But I have good news - there is a good side to a ll this. You can profit from this situation if you prepare now before it's too late!

Mike Maloney, author of "Guide to Investing in Gold & Silver", the #1 best seller in gold and silver investing on Amazon calls this opportunity the "greatest wealth transfer in history". Did you know that during the Great Depression more people became millionairs than any other time in history? This time more people are going to become wealthy because more people are informed, are taking action and are able to invest than back in 1929 AND this cycle has been building since 1980.

Mike Maloney is not a gold bug, a largly negative term pinned on those investors that promoted gold and silver during the 80's and 90's when we were in the greatest stock market rally of all time (largely due to forced investment of the average baby boomer in the stock market). By that time, when the majority of people started catching on, the gold cycle had already peaked in 1980. From 1971 to 1980, gold increased from $35/oz to $250/oz.

Mike teaches something called Wealth Cycles. Wealth cycles is about investing in the asset class that is increasing in value and NOT investing in the asset class that is not. For example, let's say 2 babies were born in 1903, Bob and Paul. For luck, their parents each bought them one share of the Dow for $30 with one $20 and one $10 gold piece (1.5 ounces of gold).

By 1923 their conservative investment tripled in price over the next 20 years, but then the stock market really took off and by 1929 each share was worth more than 12 times their initial investment ($360). Paul was getting uneasy, figuring the market can't go up at this rate forever. So in the summer of 1929 he cashed out of the stock market and received 18 ounces of gold.

Just a couple of months later the Dow crashed, and three years after that, it bottomed out at just 40 points (2 ounces of gold). So Paul took the 18 ounces of gold and bought 9 shares of the Dow ($360). Paul's investment did very well over the next 3 decades and over the years he learned how asset classes become overvalued and undervalued over time in cycles. So in 1966, he could see that the stock market was overvalued and gold was undervalued, just like in 1929.

So in 1966 Paul cashed out of the stock market once again and bought gold with the proceeds the next day. For 9 shares of the Dow he received 252 ounces of gold.

In the 70's gold began to rocket and on January 1980 gold was on the front page of the newspaper every day and there were long lines in front of coin shops . Also, the P/E ratios of stocks were at the lowest that they had been since 1932. Stocks were extremely undervalued.

So one day in 1980, gold was $850 an ounce and the Dow was 850 points. On that day Paul sold his 252 ounces of gold and bought 252 shares of the Dow.

In 1999, a friend told Paul that he should invest in dot.com and tech stocks. He got an uneasy feeling and looked up the P/E Ratio of the Dow and found that it was 30% higher than the stock market peak before the crash in 1929. Next, he divided the points of the Dow by the price of gold and found that, in terms of gold, stocks were almost two and a half times more overvalued than they were before the crash. That day he sold the Dow and a few days later took the proceeds and bought 11,088 ounces of gold.

In July of 2011, Bob and Paul lived a long life and both had passed away. Bob kept his original investment in the Dow and today (July 15, 2011) it is worth $12,479.73. By contrast, Paul's investment is worth $17,675,380. All thanks to the power of understanding wealth cycles.

Want to make comment about this article? See the Gold and Silver Forum