Dear Reader
 
Please take a look at last week’s Blog on “The Golden Kingmaker” as we enter the run up to the General Election. It examines in greater detail the options we are facing in the UK with a second, possibly different, coalition government and how the outcome of this will impact on the price of Gold and Silver.  Plan ahead, contact Bleyer and invest in Physical Gold and Silver now.
 
While watching this week’s headlines, we came across one that almost made us laugh:  
 
“Art and real estate are the new gold, says Blackrock CEO” from CNBC.  (Blackrock the investment company)
 
In a Wealth Cycle during Recession, it is the things of inherent value – Physical Gold and Silver – that do well, and the things of perceived value – real estate bubbles and art – which don’t fare as well. In fact, in a Wealth Cycle, these two categories of investment are inverted in relation to each other.  To learn more, enjoy a short video entitled “Real Estate Bubble in 2014.” In essence, think about 1930’s Depression. Were people interested in buying houses and art, or being able to trade for food and essentials?
 

When one works within the precious metals industry, one is aware that it is a historic industry, Stretching back millennia. Ancient civilizations used Gold and Silver as ‘currency’ and evidence is found in ancient writings, murals and history books. It’s in our physche. As David Morgan outlines the consequences of the idea of perception of wealth in Maloney’s Seven Stages of Empire video : “In 1965 silver was debased in the United States so that silver content in currency went from 90% to zero. Instead they put out something in a Gold or Silver looking form. For me it’s at a subconscious level. Why are they making them (coins) gold coloured? Why are they making them silver coloured? I think there’s an inherent knowledge in the human specie that knows Gold and Silver have value. So if they look in their pocket and then see something gold or silver coloured, it gives them kind of a warm fuzzy feeling.  But there’s no value in these coins really.”
 
It’s called the Wealth Effect. And yet as many of you our clients express and know, and as Maloney states: “Your true wealth is your Time and your Freedom.” Currency just facilities that.
 
Now we understand that the economy may not ‘look’ or even ‘feel’ like it is in a recession at the moment. This is because Central Banks both in Europe and America have done all they can to re-inflate the market.  This may be the angle from which Blackrock CEO is coming. Typically investments in art and real estate occur when the markets feel flush and buoyant. But that buoyancy isn’t real. It’s based on Quantitative Easing, the injection of millions of created ‘currency’ units into the markets. It’s created by increased Fractional Reserve Banking.
 

But it is exactly when the markets are ‘falsely’ inflated like this that the price of Physical Gold and Silver is said to be “on Sale”.
 

Dominic Frisby is one of our favourite financial commentatories. He wrote the following for MoneyWeek back in 2010: “As we all know, money seems to buy you less and less each year – the above statistic really brings this home. This is because we operate under a system of ‘fiat’ (from the Latin, ‘let it be done’) money and credit. Churchill described it as money ‘by government edict’. In other words, it is the law that what we use as money be money. Without that legal backing, modern money would be just a meaningless computer digit or piece of paper. The problem is that, for all the ‘bond vigilantes’, and for all the regulation and whatever other means there are of imposing discipline, governments and central banks, however well intentioned, find ways of debasing the currency. There are so many ways of doing so, from deficit spending and inflation to artificially compressed interest rates to quantitative easing. It’s just too tempting, as it’s usually the easiest way out of a bind.”

He opens this clear cut article with this question:  “Did you know that if you had sold your average British house in late 2004 and bought silver – just regular bars of silver – you could now sell that silver and buy 5.5 average British houses?”

Now, those figures will fluctuate from start to end year of that comparison. But the point is, this is the only true way to measure the ‘value’ of your real estate – against how many ounces it would take to buy it in Gold and / or Silver.  His point also reiterates what we were saying ealier, that real estate vs. Gold and Silver work in opposition to each other.  So if a mainsteam media financial pundit tells me to go buy real estate and art, I will almost certainly find some spare cash and… go buy some more Physical Gold and Silver while it’s still on sale.  And we highly recommend you our reader does the same.  

  1. Most people don’t invest in Physical Gold and Silver, they put their savings in a bank or building society. Or they are in debt with no savings. 
  2. Some people will buy on the incline after a time of rising prices and sell on the decline after a crash.  
  3. Those in the know buy near or at the bottom and sell on the incline just before the crash.  

We believe the CEO of Blackrock is incorrect in his financial view.  Frisby concurs: “First, to put things into perspective, here is a long-term chart of UK house prices in pounds sterling. It is an apparently-never-ending upward slope. It’s why the attitude that ‘you can’t go wrong with bricks and mortar’ is embedded in our psyche. (Really, of course, this is just a manifestation of the never-ending decline in the purchasing power of sterling).
 

Graph showing the average house prices in the UK

 

Now we look at a long-term chart of UK house prices measured in gold, a store of wealth that governments, for all their hard work, find considerably harder to debase. It’s a rather different picture.

 

Graph showing UK House Price and UK Gold Price Ratio

 

“You can see that, until the late 1990s, UK house prices traded in a range between 50 ounces for the average UK house (1930s and 1980) and 300 ounces (early 1970s, late 1980s). In late 2004, with gold at around $400 an ounce and the average UK house price just above £150,000 (below where they are now) that ratio hit an unprecedented high. It took more than 700 ounces of gold to buy the average UK house. With gold now around $1,400 (about £900 per ounce) and house prices in the £165,000 zone, the ratio has broken through the 200 ounces barrier and sits at 183. Indeed, measured in gold, UK housing has already fallen below the lows of the early to mid-1990s. Yet for all the falls since 2004, at current prices (183 gold ounces) we are still above the long-term average which is around 150 ounces. I suspect we’ll go well below that. That is what a real, grinding bear market – the sort of deflation that governments and central banks are now printing money to avoid – looks like.”

Now I personally think Silver is an even greater potential investment based on current price versus historic value and availability. Here is the same chart in Silver:

 

“In 2004, when silver was trading at around $6 an ounce, it took almost 50,000 ounces to buy the average UK home. But in 1980 when silver, manupulated by the hunt brothers spiked at $50 per ounce, you could buy the average UK home for just 1,000 ounces. (Today 1,000 ounces of silver would cost you just $20,000).”

We at Bleyer love these price comparisons that show Real Esate vs. Gold and Silver so clearly in real terms.  Now please bear in mind these figures up to 2010 sound out of date but are in fact incredibly similar, because Silver and Gold have gone through a price rise and then consolidation that leads them back to almost the same level as 2010. So the comparison rings true.

Dominic Frisby’s conclusions are similar to ours in that he “remain a bull on precious metals and a bear on housing. The trade is maturing, but the run is not over. Long-term holders of gold and silver should sit tight. Silver, and the leading silver stocks, have gone absolutely bananas of late and there are lots of arguments for those with shorter time horizons to take some money off the table here and await a correction. But there are just as many arguments – from short squeezes on the Comex, to supply shortages, to government money printing – for higher prices too. Meanwhile, there are plenty of reasons – from unbelievably strict lending criteria to the threat of rising unemployment – that augur serious falls even in nominal UK house prices.”

So, to conclude, some headlines just don’t make sense.  We encourage our readers to continue taking responsibility for their personal wealth, researching the news, markets and demand figures for Physical Gold and Silver. We understand it’s human to get caught up in the strong focus on the General Election but we encourage you to give us a call at this time on 01769 618168 while the price of Gold and Silver is “On Sale.”

As one London broker Marex Spectron commented:  “At these prices, we are seeing a strong pick up in physical interest and I’m sure we are not the only ones.” Join our savy group of investors buying and quietly accumulating their stores of Physical Gold and Silver with Bleyer Bullion. Trusted, approachable yet professional with a high level of customer care, call us today to discuss how we might be able to help you enter the Precious Metals market.  Unlike some of the larger City based companies, we do not require any minimum order, so feel free to contact us even if you wish to buy one or two smaller items. 

Or for a chat with one of our team, call today on 01769 618618.