Gold And Silver – What Happens To The Price When Retail Customers Buy?

With government money printing and debt loads skyrocketing out of control, it seems that Rick Rule is likely correct that the next currency crisis is a matter of “when” rather than “if.” And when that occurs, it’s fascinating to think about what might happen to the prices of gold and silver when people start to buy on a retail level.

Traditionally when bubbles form in markets, it’s because everyone is clamoring to own that specific asset. But what’s interesting about the gold and silver markets, is that even when prices spiked back in 2011, with gold going above $1,900 per ounce and silver reaching $49 per ounce, there were relatively few people who actually owned any physical metal.

Sure, there were some funds who invested in GLD or SLV. And there was likely more interest in the mining shares as well. Yet outside the libertarian/Austrian economics/sound money community, I would be stunned if even more than 1% of the population owned physical gold or silver at any point in 2011.

Flash forward to today, where the debt loads and printed money burdens are greater than ever. The Fed’s monetary base is still at $3.4 trillion even a decade after the crisis. While the U.S. national debt has now crossed $22 trillion, at the same time the Department of Defense and the Department of Housing and Urban Development have “lost” over $21 trillion!

From a monetary perspective, the situation is even more extreme than in 2011. While from a budgetary standpoint, rather than hearing about any sort of plan to address the deficits, lawmakers just talk about when the debt will hit $30 trillion, and continue to raise the debt ceiling limit every time it’s reached.

Meanwhile, gold and silver prices sit well below their highs. With silver even lower than it was when the debt was $10 trillion, and the Fed’s monetary base was under $900 billion prior to the housing crisis.

Why is that you ask?

Primarily because the precious metals pricing mechanism is determined by paper trading. Where the amount of paper claims on each physical amount is estimated by many experts to be in excess of 500 to 1.

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