Crashing Gold and Silver

By Howard Ruff | Oct 7 2011 2:35PM

A fortnight ago gold recorded its worst week since 1983. Skeptics are now questioning gold’s credentials as one of the few shelters from financial storms. Some investors have begun to worry about whether this is the end of gold’s spectacular surge.”

September was the worst month for gold since Lehman Brothers collapsed in October 2008.

How come? The banking crisis and the threat of government default should have been good for gold, right? Old habits die hard, so when the stock market began to crash, people fled to cash.

If you bought silver or gold in August, you were hurt in September. But you buy silver not only as an investment but also as insurance against inflation. You wouldn’t cancel your insurance policy in the middle of a hurricane, and you shouldn’t sell silver when it takes a tumble. Like any insurance, silver’s value will pay out over time, not day by day.

People buy gold either as an alternative to the dollar as a store of value or as blanket coverage against all the world’s ills.

When I worked as a stock broker many years ago, I learned that the way to make money in the investment world was to buy low and sell high. Gold and silver are both important indicators. Silver has been down even worse than gold percentagewise in the last couple of weeks giving us another opportunity to buy.

I recently received a call from a financial show in Texas. They asked me if I was turning sour on the metals because they had taken a big nose dive. My answer was NO! This is simply an opportunity. If you are supposed to buy low and sell high, how can you buy low unless it is in disfavor?

I believe gold and silver will come back big time. Gold is not a general hedge against calamity; it is a hedge against the loss of the purchasing power of paper money. It’s the opposite of paper.

Paper money is still a means of exchange, but it is no longer a store of value. Gold and silver are stores of value and I believe they will again become a means of exchange.

Don’t panic, but look at these gyrations as real opportunities. Gird up your loins and start buying silver as long as it is depressed. Down the road you will brag about how smart you were.

I remember a time that I panicked back in the ‘70s when Jimmy Carter announced that they would sell gold from Fort Knox to drive down the price of gold to strengthen the perception and integrity of the distressed financial system. Gold plummeted about $300 an ounce. I panicked and sold. Gold not only recovered but went on to new highs. I missed a substantial part of that move.

It scared me then, but it does not scare me now. It is an opportunity, so take advantage of it. Percentage wise silver will outperform gold.

I can’t promise that silver will go up in a straight line, or even repeat its terrific gains of the last couple of years. But the worse price inflation gets, the better silver will do.

By Howard Ruff
The Ruff Times


Howard J. Ruff (born about 1931[1]) is financial adviser and writer of the pro-hard money investing newsletter The Ruff Times. Ruff is the author of Famine and Survival in America (1974), How to Prosper During the Coming Bad Years (1979), Survive and Win in the Inflationary Eighties (1981), Making Money (1984), and other books. He has recently updated and re-released his most successful book, re-titling it How to Prosper During the Coming Bad Years in the 21st Century (2008).

Ruff advised investors to avoid stocks and bonds and instead to put their portfolios into gold, silver, platinum group metals, and collectibles such as art and numismatic coins.


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