Are precious metals too high now to invest in?

PressGoldRising1Q: Should I buy now, or wait until gold & silver stop going up?

A: No, it’s not too late to buy gold and silver. A more accurate question would be: “Is the dollar going to continue to lose value because of Congress’s spending and the Federal Reserve’s printing?” The answer is undeniably yes. Gold and silver remain highly undervalued. The “price” of gold and silver is less important than the purchasing power of gold and silver.

For example, an ounce of gold was worth approximately $20 a century ago, and could have purchased:

  • A simple suit
  • A pair of shoes
  • A dinner out

While the price of gold kept rising, its purchasing power held steady for decades (equal to a suit, shoes, and dinner) until the first decade of the 21st century. Today, $20 will barely get you an appetizer, but that same ounce of gold can purchase:

  • A custom-tailored suit
  • A fine pair of shoes at Saks
  • A half-dozen fine dinners

The purchasing power of gold has strengthened, while the power of the dollar has collapsed—and will continue to do so.

Key Ratios

The silver/house ratio of ounces of silver it takes to buy a house is a key indicator of true value and purchasing power. Right now it takes approximately 5,000 ounces of silver to buy a house in the United States. Just a few decades ago that ratio was about 1,000 ounces. The current ratio indicates that silver is highly undervalued compared to housing at the moment.

Gold and silver today are extremely undervalued compared to other real things. Ultimately, this means it’s still early and you have time to buy precious metals. As long as currency continues to be printed, gold and silver will keep chasing the printing presses and continue to rise in terms of dollars and overall purchasing power.