If you would have bought gold in October of 2009, you would have paid about $1,050 per ounce. Today, gold is at $1,345 per ounce. That is an increase of about 28% annually. No other investment, stocks, bonds, real-estate, mutual funds, insurance policies have even come close. Most have lost money. What that means is, if you had bought $100,000 worth of gold in your IRA, it would now be at $128,000 and you would not be worried about your retirement.
Silver, one year ago in October, traded at about $16.50 per ounce. Today it is at $22.88 per ounce. That means an annual return of about 39% annually. In other words, if you would have bought $100,000 worth of silver in your IRA last October (6,060 ounces), it would now be worth $138,667 and you would be quietly celebrating your victory with a smug smile, while commiserating with your friends on their heavy losses in a tough market.
Historically, the price ratio between silver and gold has been 15:1. That means, if gold is worth a dollar, silver should be at 15 cents. It also means that, with gold trading at $1345 per ounce, silver should be at $89.67 per ounce. The reason it hasn't happened yet is because of companies like JP Morgan buying naked shorts (no metal behind them), to suppress the metals market. This keeps the "suckers" on the hook for their other worthless paper investments.
The gig is almost up. The futures market will soon collapse and silver will trade at its real value. So will gold. If silver just corrected to $89.67 per ounce and gold stayed the same, you would realize almost a 400% return practically overnight. That means $100,000 invested in silver today would become about $392,000.
Gold, however, will not stay the same. The United States Mint has announced that they are not offering 2010 gold eagles and European mints have also done the same. Now, strategists are calling for gold at $12,000 per ounce. I think they might be a little conservative. If that were to occur, however, one ounce of silver would be worth $800.00.
That means, $100,000 invested today in silver, would become $3,496,503.50. E.T. Benson gave a nice summary in his book "An Enemy Hath Done This" (published in 1969) of how this would occur:
"The root of all evil is money, some say. But the root of our money evil is government. The very beginning of our troubles can be traced to the day when the federal government overstepped its proper defensive function and began to manipulate the monetary system to accomplish political objectives. The creation of the Federal Reserve Board made it possible in America for men arbitrarily to change the value of our money. Previously, that value had been determined solely by the natural interplay of the amount of precious metals held in reserve, the value men freely placed on those precious metals, and the amount of material goods which were available for sale or exchange. (An Enemy Hath Done This, pp. 213-14.)
The pending economic crisis that now faces America is painfully obvious. If even a fraction of potential foreign claims against our gold supply were presented to the Treasury, we would have to renege on our promise. We would be forced to repudiate our own currency on the world market. Foreign investors, who would be left holding the bag with American dollars, would dump them at tremendous discounts in return for more stable currencies, or for gold itself. The American dollar both abroad and at home would suffer the loss of public confidence. If the government can renege on its international monetary promises, what is to prevent it from doing the same on its domestic promises? How really secure would be government guarantees behind Federal Housing Administration loans, Savings and Loan Insurance, government bonds, or even Social Security?
Even though American citizens would still be forced by law to honor the same pieces of paper as though they were real money, instinctively they would rush and convert their paper currency into tangible material goods which could be used as barter. As in Germany and other nations that have previously traveled this road, the rush to get rid of dollars and acquire tangibles would rapidly accelerate the visible effects of inflation to where it might cost one hundred dollars or more for a single loaf of bread. Hoarded silver coins would begin to reappear as a separate monetary system which, since they have intrinsic value would remain firm, while printed paper money finally would become worth exactly its proper value-the paper it is printed on! Everyone's savings would be wiped out totally. No one could escape.
One can only imagine what such conditions would do to the stock market and to industry. Uncertainty over the future would cause the consumer to halt all spending except for the barest necessities. Market(s) for such items as television sets, automobiles, furniture, new homes, and entertainment would dry up almost overnight. With no one buying, firms would have to close down and lay off their employees. Unemployment would further aggravate the buying freeze, and the nation would plunge into a depression that would make the 1930s look like prosperity. At least the dollar was sound in those days.
In fact, since it was a firm currency, its value actually went up as related to the amount of goods, which declined through reduced production. Next time around, however, the problems of unemployment and low production will be compounded by a monetary system that will be utterly worthless. All the government controls and so-called guarantees in the world will not be able to prevent it, because every one of them is based on the assumption that the people will continue to honor printing press money. But once the government itself openly refuses to honor it-as it must if foreign demands for gold continue-it is likely that the American people will soon follow suit. This, in a nutshell, is the so-called "gold problem." (An Enemy Hath Done This, pp. 216-18.)
We have been feeling the exhilarating effects of inflation and have become numbed to the gradual dissipation of our gold reserves. In our economic stupor, when we manage to think ahead about the coming hangover, we have merely taken another swig from the bottle to reinforce the artificial sensation of prosperity. But each new drink at the cup of inflation, and each new drain on the gold supply of our bodily strength does not prevent the dreaded hangover, it merely postpones it a little longer and will make it that much worse when it finally comes. What should we do? We should get a hold on ourselves, come to our senses, stop adding to our intoxication, and face the music! (An Enemy Hath Done This, p. 218.)"
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