By Patrick A. Heller - Liberty Coin Service
Broadcast on WILS-1320 AM
In just the past year, the price of gold is up more than 27% while silver has soared 107%!
During the past decade the Dow Jones Industrial Average is up about 3% and the NASDAQ and Standard and Poors Index have declined. This kind of result is drawing more interest to gold and silver.
With such a dramatic track record for gold and silver, it is fair to ask if it is “too late” to buy gold and silver. In my judgment, the answer is “No!”
Gold and silver prices peaked in January 1980, with gold at $850 and silver over $50. Factoring in inflation, the price of gold now would need to be well over $2,200 dollars to match the 1980 peak, while silver’s price would have to exceed $84. Even at today’s apparent high prices, gold and silver are trading at a fraction of their inflation-adjusted 1980 peak levels.
There tend to be three waves of asset buyers. First are those who got in on the ground floor. Usually, they had to do their own research as few analysts covered the particular asset.
The second wave of buyers includes those whose interest is sparked by a rising price and a favorable track record. If you purchased gold and silver in the past few years, you are part of this group. Rising price charts draw attention. More analysts start following the asset, of which some will downplay future prospects. For example, there is one widely quoted so-called “expert” who has predicted lower gold ever since the price reached $700.
During this second wave of demand, there will be many people who consider buying the asset but never get around to it. Some listen to the naysayers. Over the years, I have heard a lot of different excuses from people who knew better, but just didn’t take action.
The third wave of buyers jump in when prices have risen so far that the asset captures the general public’s fancy. Barbers, taxi drivers, hairdressers, and shoe shiners all plug the asset as a “sure thing” that is going to the moon. Buyers tend to do much less due diligence, almost panicking to make their purchases right now.
When demand for an asset has reached the stage where almost every potential buyer has made their purchase, that is when prices reach their peak. That is the time to be a seller instead of a buyer.
The staff at my company observed this frenzied buying behavior in January 1980 as gold and silver prices peaked. What we are seeing in customer demeanor today is a long way from the public behavior of 31 years ago.
So, just from a buyer psychology perspective, gold and silver prices have a long way to rise. There are also a huge number of supply, demand, and inventory reasons to expect much higher prices in the coming months and years, which I detail in other commentaries.
It doesn’t matter what prices were in years past. Focus on where prices are headed in the future. I believe I am being conservative in expecting gold and silver prices to at least double or triple in the next few years. That is why, in my judgment, I don’t think it is “too late” to buy gold and silver today.
Patrick A Heller is the owner and General Manager of Liberty Coin Service, Michigan's largest rare coin and precious metals dealer since 1971. Mr Heller is the editor of the Liberty's Outlook Newsletter, and gold market commentator for Numismaster. In addition he is a columnist for The Greater Lansing Business Monthly, and has a radio show on WILS-AM 1320.