By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com …..
Many people consider the ownership of precious metals to be an investment. They are not. Still, compared to many investments, gold and silver have outstanding track records for the past thirteen years.
In my mind, the major purpose of owning physical gold and silver is for insurance against the calamities that hurt the value of paper assets such as stocks, bonds, and currencies. People don’t consider insurance on their life, their health, their home, or their car as “investments” because they are not. Insurance is protection against the risk of negative events that might happen. Insurance is not an asset that is bought or sold like an investment. Instead, you either have insurance or you have greater risk.
For thousands of years, physical gold and silver have proved to be reliable forms of money that have never failed. The performance of other assets such as stocks, bonds, and fiat currencies are measured against a monetary unit, with gold and silver being the most reliable indicator over history. Over the long term, that means that gold and silver have performed their insurance purpose better than any other assets.
However, most Americans still think in terms of how their investments performed relative to the US dollar. A quick review of how some financial indicators did for the year 2012 and for the thirteen year period ending December 31, 2012 is enlightening:
Asset Performance Indicators
|Asset or Index||2012 Performance||2000-2012 Performance|
|Frankfurt Xetra DAX||+29.1%||+9.5%|
|Tokyo Nikkei 225||+22.9%||-3.8%|
|Mint State-63 US $20.00 Liberty||+15.0%||+289.8%|
|Dow Jones Industrial Average||+7.3%||+14.0%|
|Mint State-63 US $20.00 Saint Gaudens||+6.4%||+286.0%|
|London FT 100||+5.8%||-14.9%|
|US Dollar Index||-1.4%||-22.2%|
|Mint State-65 US Morgan Dollar, Pre-1921||-3.0%||+73.9%|
|Interest Rate on 10-Year US Treasury Debt||-6.3%||-72.7%|
As you can see, gold, silver, platinum, and palladium all rose versus the US dollar in 2012, even though some analysts are claiming that precious metals performed poorly in 2012. Some of these same analysts are touting how well the Dow Jones Industrial Average (DJIA) performed in 2012, despite the fact that platinum, silver, and palladium all rose by a greater percentage for the year and gold rose close to the same extent.
The only reason that gold and silver can be knocked for their 2012 performance is that they are well below their average return over the past thirteen years. On an annual basis, the price of gold as measured in US dollars has increased thirteen consecutive years, which is a track record unmatched by the other assets in the above list!
Here are the top five performers over the past thirteen years from the above list:
- Mint State-63 US $20.00 Liberty
- Mint State-63 US $20.00 Saint Gaudens
Gold and silver have achieved these chart-topping long term results even in the face of US government and other central bank efforts to suppress those prices throughout the past thirteen years. The mountain of evidence of this manipulation grew larger in December. In a speech, Edwin M. Truman, the former US Treasury Assistant Secretary for International Affairs and also a former Federal Reserve official, admitted that central banks shared supposedly “confidential information” in recent years to coordinate the suppression gold prices.
Global financial instability, which is the underlying reason why gold and silver prices have been strong over the past thirteen years, is now worse than it was at the end of 1999. Just look at the so-called solution to the US government’s “fiscal cliff” where the politicians are increasing future budget shortfalls while pretending to the public that they are reducing these deficits.
It gives me no pleasure to report that you can pretty much count on politicians to continue the destruction of the US dollar and economy. For your self-protection, do you already have your insurance positions of physical gold and silver?
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.