By Chris Weber, editor, The Weber Global Opportunities Report
I've been getting a lot of people asking me when I'll sell my gold...
First, I have to tell you it is much, much too early to focus on this. This is a time when very few people have gold, and it is still at least half the cost of the peak it reached back in January 1980, when I sold the last time.
When I sold gold and silver back then, I bought a currency that was on the mend and was paying a huge yield. Short-term money paid nearly 20% a year, and longer-term bonds paid around 12%. I believed that as interest rates fell, due to inflationary fears falling, the bond prices would rise. And this is what happened. I lived well all through the 1980s on just what I did during the early months of that decade
That currency I bought back then was the U.S. dollar. But remember that the U.S. and the USD, back in 1980, were still the country and the currency of the world's largest creditor. We owed the world little. We did not have to borrow billions every day from non-Americans in order to finance our debts. In short, it was a very different country, and a different currency, from the USD today.
Back then, you could get 18% on three-month Treasury bills. Last week, for a brief time, T-bill rates were negative: You had to pay the Treasury a bit for the privilege of buying their short-term paper. So I would not sell my gold and buy T-bills today.
I look back on the articles I was writing during the 1970s about how silver and gold would go up. I didn't give much thought to what would happen when I thought they had risen enough, or too much. If I would have thought about it at all, I would have said that I would know when it was right to switch out of them.
The actions of the bull market during 1979, when everyone you knew started to pile into gold and silver, the ascent of Paul Volcker to the Fed and his new policies to fight inflation announced in October 1979, the price of gold and silver going absolutely parabolic around Christmas 1979, and finally, the soaring interest yields on the USD... all that convinced me the time was coming to switch out of gold into the USD.
But two years before this, I would not have thought about it. I would have just believed that the future would take care of itself, and that the opportunity would present itself to make the change. I'm saying that I did not have it planned out even two years in advance of what I ended up doing. I just watched and saw how things played out.
And this time, I think we are far more than two years away from the end to this bull market. So I can tell you that I don't waste time now thinking when I will sell gold. All I can say is that I knew it when I saw it last time, and I hope I know it when I see it this time.
And this time may be different... I know that's a bromide that you want to stay away from. But there are different facts today: The U.S. is much, much more indebted now than then. Americans don't make and save as much as they did back then. The things that they do make, the world does not want as much. Further, any change will have to result in Americans re-ordering their lives in ways that they did not have to do in 1980-1982. Finally, the U.S. was the "only game in town" back in 1980. Today this is far from true. Back then, the Fed could manipulate the price of gold, or at least try to. Today it cannot.
Every day, millions of Chinese and Indians, as well as their governments, are quietly getting out of U.S. dollars and into gold. You see what prices are doing each day. For those wanting to get in, the market is not giving you that chance. It is almost relentlessly rising each day. (Late note: As I update this, gold is finally having a correction. It is at last giving people a chance to get in.)
The Fed cannot be happy about this, but they have to realize that their days of ultimate global monetary power have passed. When they have to go hat in hand to other countries to borrow money each day, what power do they really have?
But getting back to the question of when I would sell my gold, all I can tell you is don't hold your breath. I am only reasonably sure that the price at which I will sell it would be for a far higher price in dollars, euros, yuan, or any other currency than I see offered today, and I would expect a much greater yield than the paltry 1/2% offered today.
Things that you'd think are impossible could be happening with regularity in the next decade or so. Let us just sit back and watch, and wait.