Follow The Yellow Brick Road
By Tyler Durden
Submitted by Jeff Thomas via InternationalMan.com,
For over a hundred years, it’s been theorised that author L. Frank Baum wrote his 1900 book, “The Wonderful Wizard of Oz”, as a fanciful way to explain the economic situation at the time and that the Yellow Brick Road was a reference to the path created by gold ownership. Whether or not the theory is correct, for many people today, “Follow the Yellow Brick Road” might serve as a mantra for alleviating economic woes.
What will happen is that one day, gold will suddenly be up $100 per ounce, then the next day, $200 per ounce. At first the pundits will be claiming that it’s an anomaly, but as it continues rising, a point will be reached when the average person says to himself, “This seems to be a trend. I’d better buy some gold.” Unfortunately, once the trend is underway, the price that day will have no bearing on whether gold is available. Your local coin shop may be sold out. If you go online, the mints may say that demand is exceeding supply. Large entities will be buying all they can get and the smaller buyers will be way down on the order list, unlikely to take delivery of even a single ounce.
These Are the Good Old Days
Gold has experienced a four year bear market and only recently has begun to rise again. But is it in reality a barbarous relic? Not by a long shot. For over 5,000 years, whenever people have experienced erratic economic periods, they’ve bought gold in order to stabilise their economic position. This has particularly been true whenever fiat currencies have been on the rise and were in danger of hyper-inflating, as in recent years. Most currencies are in decline against the U.S. dollar—a currency which, itself, is very much in danger of collapse in the not-too-distant future.
In the ’70s, I was buying gold in London, as it rose from $35. It reached a high of $850 in January, 1980, then crashed. When gold dropped below $400, I began buying Krugerrands. Sounds like a bargain, and yet, word on the street was that gold was headed further south.
But I was buying long. I was not playing the market; I was building my economic insurance policy. I wasn’t too fussed over price fluctuations, as my gold holdings were meant to cover me if my other investments proved to be a mistake.
At present, gold is well above the high of 1989, but, if we adjust for inflation, we see that gold is actually a bargain at present. This excellent Casey Research chart from 2014 explains it better than mere words:
This tells us that $8,800 would not be an unreasonable level for gold today, if conditions were as dire as they were in 1980. However, conditions are far more dire—debt levels are far beyond any historical levels and markets are in a bubble, just waiting for the arrival of a pin.
A decade ago, when gold topped $700, I predicted $1,500 …read more
Source: Follow The Yellow Brick Road
