Harry Dent says he agrees with 50% of what the Gold Bugs say, but gold is still going much, much lower. Here’s why (plus a rebuttal)…
Harry says he has predicted the moves in gold better than anybody.
He says that after gold peaked in September of 2011, and then broke through $1525 to the downside three months later, Harry said gold was done.
Harry has been calling for $400 gold for years, and he recently has changed his forecast to a range, which is between $400 and $700.
Harry say that on any rallies here, both for stocks and for gold, to sell and move into safe assets.
Harry says cash is the safest.
Hear the interview in its entirety right here:
Harry is one of the most infamous gold forecasters out there, partly because he is so bearish and partly because his price targets are so low.
Now, everybody is responsible for doing what is called their own “due diligence”, as in, “do your homework before deciding what to do with your money”, but here’s some things that could be considered before selling that shiny stack of gold (the same applies to silver):
- Gold and especially silver are nearly at their cost of production. It is debatable where those costs are, partly because the data from the mining companies at times gets blurred, but it is safe to say that some miners are mining at a loss, some are at break-even, and some are mining for a profit. That said, if the cost of the metals drops far below the cost of production, then how is new metal, especially silver, ever going to get to market since most of the silver mined is consumed by industry? For comparison sakes, because Harry doesn’t mention an number with silver like he does with gold, but let’s say gold drops to the mid-range of his forecast to $550. That’s a drop of over 57%. So we can say that if silver follows gold, then Harry would have a similar target for silver of $7.10. Just how much silver will be mined when only $7.10 is paid for each ounce of it? The point here is there are things called price floors.
- Harry talks about a coming great deflation. The Great Depression is often discussed as a deflationary period. In fact, investopedia says between 1930 and 1933 prices dropped on average of 10%. Now, understand that we were on a bi-metallic gold & silver standard from 1930 to 1933, so gold and silver were the measures. Said differently, the value of gold & silver, being specific weights and purities in our money, increased as prices for goods and services went down. So you see, gold & silver did not go down, and in fact, they bought more good and services, dollar for dollar. In addition, in 1933 FDR unconstitutionally (IMHO) confiscated gold from the citizens at a price of $20.67 per ounce, and one year later, in 1934, in the Gold Reserve Act, which is also the basis of the Exchange Stabilization Fund and all the market manipulations and especially gold & silver price suppression schemes we see today, gold was revalued to $35 per ounce, which means the dollar was devalued against gold. So you see, in deflationary periods, gold doesn’t lose its value like many believe it does. Will it lose value in a severe deflation in our modern economy? It could, espeically since we’re not on a “fixed weights and measures” gold standard, but the prices of other good and services will go down even more, so in terms of purchasing power, gold will once again buy more goods and services. Bottom line: Gold and silver perform in both inflation and deflation. Side note – when using fixed weights and measures on a gold standard, gold is the measure. Think of it like a ruler. Gold is the ruler, something that doesn’t change. It’s a constant. One inch is one inch is one inch just like one ounce of .999 fine gold is one ounce of .999 fine gold is one ounce of .999 fine gold.
- Harry could be wrong about the inflation/deflation debate. I’ve just argued how gold and silver do not care if times are inflationary or if times are deflationary, but if Harry is wrong, and we have inflation, which I think will be the case because governments always resort to hyperinflation when under a debt-based fiat monetary system, well, that is one reason we call gold and silver a “hedge against inflation”. If you have your money in the “safety” of cash as Harry claims, well, you’re losing out to inflation because your dollars buy less good and services, but it you have your savings in gold or silver, then you’re keeping up with inflation and have lost no purchasing power.
- Gold an silver are generally the inverse of the stock market. That means that as the stock market declines, gold and silver rises. Harry is claiming stocks are going to decline, but so are gold and silver. Well, you can’t have your cake and eat it too. In fact, there are times when one ounce of gold will buy one share of the Dow Jones (which only has one remaining company, GE, since the index was created, whereas one ounce of .999 fine gold is a constant, but that’s a different story). Notice this chart:
Well, that’s all for now.
Just some food for thought.
I must be getting hungry.
There are many, many reasons to stack gold & silver, especially at these artificially suppressed prices, and I just went through four of them.
I didn’t even cover things like:
- Debt/monetary reset
- oil for gold / gold-backed yuan
- “flight to safety” or “hedge against uncertainty”
- No counter-party risk
- Ultimate in privacy
And while many may be frustrated with the prices of gold & silver today, that’s just all the extra time we have to board the train and get a good seat, comfortably, before the train leave the station.
You don’t want to miss that train.
– Half Dollar