In 1971 Richard Nixon halted gold convertibility in response to a massive flight out of the US dollar.
The confidence in the US dollar was shattered causing a tremendous increase in the price of precious metals.
At that time the price of gold was $35/ounce
At that tie the price of silver was $2/ounce
At that time the price of platinum was $103/ounce
By 1980 the price of gold increased 23 times to $800/ounce
By 1980 the price of silver increased 25 times to $50/ounce
By 1980 the price of platinum increased 9 times to $900 ounce
If that was to repeat today gold would increase to $26325/ounce
If that was to repeat today silver would increase to $375/ounce
If that was to repeat today platinum would increase to $8388/ounce
- During the 1970's the US and Canadian Federal debt was almost non-existent.
- Money supply was less than today's current annual increases.
- Consumers had significant savings instead of huge debt loads.
- Dangerous, unpredictable derivatives were unheard of in the 70's
- There were no stock price bubbles like we have now.
- The price earnings ratio of stocks was just 12:1 as opposed to 45:1 today.
- Foreign investors did not hold a significant part of US assets.
- The US was not dependent on foreign oil production.
- US dollars were not widely circulated outside US borders.
- The US had no trade deficit unlike record topping deficits in 2015.
- US agriculture and industry were competitive in world markets.
- The world's second largest economy, Japan, was not about to implode.
- A terrorist attack on US soil was unthinkable.
- There wasn't a build up of huge short positions in gold and silver.
- Mining companies were not hedged heavily against future metals prices.
- Investors trusted the financial statements prepared by national accounting firms.
- Gold and silver were not available to 1.1 billion potential Chinese gold investors.
With all of these economic vulnerabilities what will the price of gold, silver, and platinum be in the next few years ?
In the 1970’s relatively few astute investors saw the writing on the wall, and purchased gold and silver. Those individuals who did buy precious metals early experienced tremendous returns. The public at large started buying precious metals in the late 70’s when precious metals prices had peaked. As precious metals prices began to fall, investors lost a lot of money.
In the early 1990’s relatively few astute investors bought into Internet stocks. Those that did made a great deal of money. A big percentage of the investing public, though, bought in when the NASDAQ was at 5000. Once again the public lost out.
These same astute investors have educated themselves about the economic realities today and have already begun to purchase precious metals.
Should you consider doing the same?