Why are Gold & Silver Going Up? | The Gold Standard 2415

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In this episode of The Gold Standard, hostess Jennifer Horn and Ken Russo explore the reasons behind “Gold & Silver Going Up.” This engaging discussion explores the current state of the economy and the factors influencing the rising value of precious metals like gold and silver. Against the backdrop of ongoing economic shifts and threats to savings and investments, Jennifer and Ken provide valuable insights into how individuals can protect their buying power. They also reflect on the pivotal moment when President Nixon took the United States off the gold standard in 1971, a decision that continues to ripple and shape the nation’s economy and the global financial landscape. Be prepared to understand these economic dynamics more deeply and discover strategies for navigating today’s economic challenges.

The 1971 Dollar is Today worth 15 cents

When people say that today’s dollar, compared to the 1971 dollar, is worth about fifteen cents in buying power, they’re referring to the concept of purchasing power erosion. This monetary erosion means that over time, due to factors like inflation, the value of money decreases. You can buy less with the same amount of currency. In this episode, Ken mentions, that a dollar from 1971 is now worth about 15 cents. It’s a bold and accurate statement. Here’s what it means. It’s worth contemplating. Imagine you had $100 in 1971. Back then, you could buy a certain amount of goods and services with that $100. However, due to inflation and the decrease in the dollar’s value over the years, that same $100 today would only have the purchasing power equivalent to about $15 in 1971. Prices for goods and services have generally risen over time. What you could buy with $100 in 1971 may cost significantly more today. Another way to say it is that the US dollar slowly, inexorably, lost its value over time due to inflation, our addiction to debt, and continual money printing. If you do that long enough, even currency from the world’s leading superpower becomes more like Monopoly money.

Spot Prices and the Upward Trend

The recent surge in gold’s spot price to a new all-time high of $2,347.58 an ounce has ignited debates among market observers regarding the subsequent trajectory. Optimists are eyeing a target of $3,000/oz, buoyed by bullish forecasts from Citi, Rosenberg Research, and Yardeni Research, all predicting a continual rise.

Driving Forces

Several compelling factors have propelled gold and silver prices upward. Private investors seeking safe havens amidst market volatility contribute significantly to the surge, which is evident even in mainstream outlets like Costco, which offer one-ounce gold bars alongside everyday items. Central banks also play a pivotal role, with sustained buying momentum marking a record level of interest in gold as a reserve asset, notably seen in China’s consistent additions to its gold reserves.

Central Bank Dynamics

Central banks have been buying gold. China’s central bank added 160,000 ounces to its reserves in March, extending a streak of 17 consecutive months of buying. This trend, coupled with collective central bank acquisitions surpassing 1000 tons in recent years, underscores the enduring appeal of gold as a strategic asset diversifier.

Future Outlook

Despite concerns about potential corrections, bullish sentiments persist, as seen in Citi’s revised price targets for gold and silver, anticipating further upward momentum. Banks attribute this not to a weakening US dollar alone but also prospects of lower interest rates, geopolitical uncertainties, robust physical demand, and strategies aligning with continued price rallies.

How Silver Differs from Gold

Silver and gold, both precious metals, exhibit distinct characteristics that set them apart. Gold is a symbol of wealth and stability. Silver is a strategic metal. As a strategic metal, silver has many industrial usages. Uses like electronics, batteries, and medical applications contribute to the demand for silver beyond its role as a store of value.

Don’t Focus Too Much on the Spot Prices of Gold & Silver

While the spot prices of gold and silver are often a topic of intense discussion and speculation, focusing on these numbers with a grain of salt is crucial. Ken Russo emphasizes that the primary reason for owning precious metals like gold and silver is to safeguard your wealth and diversify your assets away from the paper-based financial system. These metals offer unique advantages such as privacy, a reliable store of value, and the assurance of physical ownership. Demand and supply dynamics rather than central bank policies drive the value of these precious metals. Ken’s point that “you can’t print unlimited supplies of gold and silver” underscores their inherent value stability. Therefore, investors should view gold and silver as a means to preserve purchasing power and hedge against economic uncertainties rather than expecting them to behave like traditional investments with predictable returns. Understanding the broader financial landscape and the role of gold and silver as stores of value is critical to making informed investment decisions.
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