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Richard Russell On Gold’s New Record

29 November 2009 245 views No CommentEmail This Post Email This Post

Unless you’re living under a rock, you’ve heard about the price of gold hitting a new record almost $1,200 per ounce.  A lot of people think gold is overvalued and is currently in a bubble. If anything, with the US government bailout taking on new debt at a record pace, there’s a bubble in US Treasuries!  Richard Russell, 85-year-old author of the Dow Theory Letters recently wrote:

There’s still loads of scepticism about the rising price of gold and the bull market in gold. It’s been so long since the US public (since 1971) realized gold was real Constitutional money that they don’t know what to make of the gold action. They think gold near $1,200 an ounce is expensive and they’d rather have dollar bills.

I’ve coined the phrase, ‘dollar-bugs’ for these ignorant Americans. I guess they’ll have to get educated the hard way, which means holding on to their fading Federal Reserve Notes, no matter what. As far as I’m concerned, it’s an amazing example of mass brainwashing. Hey, I’d rather have junk paper turned out by the Fed than the real thing – gold. Pathetic.  And the happy thought is that you can (legally) still swap your junk fiat paper for gold.

Both silver and gold have been used as currencies for over 5,000 years.  A few decades of Bretton Woods is not going to change human nature, nor have Politicans curbed their desire to finance projects that their constituents can’t afford.

The fact is that average people on the street are not buying either metal. They are currently sellers as can be evidenced by all the “cash for gold” ads on the internet and late-night TV and the gold-selling parties. This does not constitute a mania yet. In a mania, the average person on the street (or lay people), are tripping over themselves to get a certain good or commodity. Consider the height of the tech-stock bubble, when people were quitting their jobs to become day traders and everyone from hair dressers to grocery baggers had a hot tip for you. Or the real estate bubble, where postal workers owned 12 houses and the number of people giving state license exams reached record numbers. We are nowhere close that psychological climate in either silver or gold. In fact, silver hasn’t even broken its previous record of $20.64/ounce a few years, nor even is it close to the high of $48 in 1980 ($96/oz if you adjust for inflation). So if you have any money to invest, I’d recommend you buy silver over gold at this point in time.

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