Gold And Silver Are Thriving While The U.S. Dollar Is Dying

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Have you heard the news?  Gold hit another new record high on Thursday.  It reached $1447.40 before settling back a bit.  Most people responded to that news with a yawn.  Why?  Well, because it is happening so frequently these days.  It seems like the price of gold is constantly setting a new record.  Silver likewise is thriving.  The price of an ounce of silver briefly hit $38.13 on Thursday.  That was the highest price for silver in 31 years.  But most people also responded to that news with a yawn.  Why?  Well, because the price of silver always seems to be going higher these days.  Meanwhile, the U.S. dollar is struggling.  The ICE Dollar Index fell to 75.340 earlier this week.  That was the lowest it has been since December 2009.  Even at a time when the sovereign debt crisis in Europe is flaring up again and there is tremendous instability all over the world the U.S. dollar still can’t find much traction.  In fact, many are convinced that the U.S. dollar is on the verge of another major fall.  So what in the world is causing all of this?


Well, as is always the case, there are many factors.  But one of the biggest factors is that the world is simply starting to lose faith in the U.S. dollar.

You see, the rest of the world is not stupid.  They know that the U.S. cannot run trillion dollar deficits indefinitely.  They know that at some point the mountain of debt that the U.S. government has accumulated is going to come crashing down.

In addition, the rest of the world was really put off by this most recent round of quantitative easing.  Most analysts around the world saw that move by the Fed as something that would really cause the U.S. dollar to lose value.

Even some top Fed officials are now admitting that QE2 may have been a mistake.

Richard Fisher, the head of the Federal Reserve Bank of Dallas recently gave a speech in Frankfurt during which he admitted that the Fed had done “a bit too much” quantitative easing and that “there’s lots of liquidity sloshing around the US financial system. We are seeing signs of all the intoxication that typically takes place when we have the ambrosia of cheap and readily available capital.”

Ya think?

The truth is that all of this money printing may give the economy a short-term “rush” right now, but in the long-run it is just going to cause even more pain.  Peter Schiff recently described it this way….

To me, it’s like watching someone walk into the same sliding glass door again and again. Wall Street must know by now that large infusions of liquidity from the Fed spur present consumption at the expense of investment for the future. We are an indebted family going out for an expensive meal to celebrate getting approved for a new credit card. It might feel good (at the time), but we’re still simply delaying the inevitable.

Whenever more dollars are introduced into the financial system, the value of all existing dollars goes down.  As the U.S. dollar continues to lose value, we will continue to see oil, agricultural commodities and precious metals go up.

In the long run, many believe that the U.S. dollar is going to completely collapse.  For example, John Williams of Shadow Government Statistics is particularly pessimistic….

As an economist, I look for the U.S. dollar ultimately to lose virtually all of its current purchasing power. Accordingly, for those living in a U.S. dollar-denominated world, it would make sense to move to preserve wealth and assets over the long-term. Physical gold is a primary hedge (as is silver). Holding some stronger currencies outside the U.S. dollar, as well as having some assets outside the United States, also may make sense.

But it is not just the the U.S. dollar is losing value.  There is something deeper going on here.

For decades, the U.S. dollar has been the reserve currency of the world.  Traditionally, virtually all of the governments of the world have wanted to stockpile U.S. dollars.

But now that is changing.  Central banks around the world are moving away from the U.S. dollar and they are starting to hoard gold and silver.

So are gold and silver now regarded as “reserve currencies” by many central banks around the globe?  Certainly something fundamental is shifting out there.  The behavior of central banks around the world is rapidly changing as an article on CNBC recently noted….

Central banks are shedding dollars, reducing their holdings by about $9 billion in previous quarter, according to Nomura Securities’ Jens Nordvig, global head of G10 FX Strategy.

What are they buying instead? Gold.

Central banks are increasingly viewing gold and silver as great hedges against financial instability.  They understand that all paper money will eventually become worthless but that gold and silver will always maintain their value.

Some nations are reportedly gobbling up gold as fast as they can right now.  For example, there are persistent rumors that China is hoarding gold in anticipation of a global financial meltdown.

In previous years China had been buying up large amounts of U.S. Treasuries, but that is no longer true.  China appears to have changed strategies.  China is still buying some U.S. Treasuries, but they also appear to be extremely interested in precious metals right now.

But China is far from alone.  The demand for precious metals is growing all over the globe and this is likely to continue to push up the prices of gold and silver over the long-term.

In fact, some highly respected researchers are already talking about $2000 gold.  Of course the price of gold will fluctuate up and down in the short-term, but over the long-term the decline of the U.S. dollar is going to continue to mean good things for gold and silver.

Unfortunately, a declining U.S. dollar is going to mean bad things for average American families.

It is going to cost more to fill their cars with gas.

It is going to cost more for them to buy groceries at the supermarket.

It is going to cost more to heat their homes.

Already there are some very disturbing signs of inflation.  The average price of a gallon of gasoline is rapidly approaching $4 a gallon and in February the price of food in the United States rose at the fastest rate in 36 years.

So the truth is that rising prices for gold and silver and the decline of the U.S. dollar are not going to be good news for a whole lot of people.

Millions of American families are going to deeply suffer as the purchasing power of the U.S. dollar goes into the toilet.

Some really tough times are coming.

Are you prepared?

  • Why silver is better than gold:

    More reasons to invest in silver:

  • Aurelius 7

    When the Greatest Depression hits, all the gold and silver in the world likely won’t be as valuable as food.

  • William

    What percentage of Americans know that the Federal Reserve is a PRIVATE bank? Read the US Constitution, and you will learn that the FED is UNCONSTITUTIONAL. Ask your worthless US Senator or Representative WHY they have not led the charge to abolish the FED. Andrew Jackson ran the central bank OUT of America in the early part of the 19th century. We should do the same.

  • Not sure if Gary is still cluttering this site with his ignorance, but he may find this statement hard to dance around. It came from a WND article:
    “Earlier this month, Scott Hodge, president of the non-partisan Tax Foundation, testified before the committee, showing that the top 1 percent of taxpayers in the U.S. now pays a greater share of the income tax burden than the bottom 90 percent combined.”

  • Elihu

    The U.S. $ collapse is certainly on the path of destruction, as in the case with many other issues in the world today. The only unknown is the timing. Amazingly, many (most) of the general public is ignorant (or apathetic) to this fact! The Piper will be paid for our 40+ years of our hedonistic behavior. And yes, I believe in this ‘correction’ will be a major war.

    Ironically, we just happen to have the most incompetent and destructive president ever ‘leading’ the way! Just sayin’

  • Yeah, I also keep yawning when hearing “gold reaches a new all time high”. It’s hard not to when hearing that news on a weekly basis. Good article!

  • mondobeyondo

    Interesting to read the comments that John Williams made concerning the decreasing value of the U.S. dollar.

    Financial advisors, economic gurus, radio talk show hosts, etc. are trying to tell people to “save for retirement”. The paradox is, by the time you reach retirement age, you will have nothing, because the purchasing power of the dollar will be near zero. Your “retirement” savings won’t buy enough gas to get across town.

    Thst 401(k) would be better invested in physical gold or silver. Yes, it’s heavy metal (and I don’t mean Led Zeppelin). But they have value. And these days, their value is increasing.

  • Half of population is retarded. When i watch American shows i cant believe your stupidity.

    Best regards from EU

  • pogue

    I added gold to my investments. Gold may not be edible, but it can provide a ton of buying power when you want things that are edible. I’ve noted that most of the gold I see on sale is in 1 oz coins or rounds and larger ingots and bars. The only problem is, gold is such a storehouse of value, you can’t shop for consumable items with it. Not unless you want a duffelbag full of useless paperbacks (seems like a more appropriate term than greenback, doesn’t it?) for change. I bought silver as small change for gold, but that seems like an imperfect solution.
    Then I learned about sub-ounce size coins, like the 1/10th oz coins. I think that’s a better idea, since the value on one of those coins right now would be roughly 144 dollars. That’s not too bad for commerce. A couple of those and a couple silver rounds in your pocket would be much more manageable than the larger ingots and coins. I understand a lot of folks are running a 2 tier system of higher prices for credit cards, lower prices for cash. I wonder when barter will become common? It’s awful hard to run a complicated tax system off unrecorded cash or trade transactions.

    I would also like to point out-there’s not so much need to buy gold if you start buying things you know you’re going to buy later, anyway, like extra pairs of pants and boots, lots of socks and undershirts, an extra warm coat or two, spares of things you use, tools, spare tires, etc.

  • The dollar will tend to go down because of the trade deficit. Floating exchange rates are supposed to work that way. Were in for a roller-coaster ride…

    We help Americans move to Asia for jobs and prosperity. Learn more at

  • A Dodgy Bloke

    Aurelius 7 is of course right on. I had comment because so many people I listen to are obsessed with Gold and to a much lesser extent Silver. I think many if not most gold bugs really underestimate how bad things would have to get before gold becomes a median of exchange. That $1400.00 plus would be better spent on food, water, getting out of debt securing where you live. $1400.00 would buy a Glock 30 and nice shotgun and good deal of .45 and 12 gauge ammo. $1400.00 would buy you at least 6months or more worth of freeze-dried food, it could buy you a nice water filer and enough filters or lighting elements to last years. That money would be better spent on things you could barter with like sugar, cigarettes, .22 bullets, soap, a number of things.

    When you need Gold you’ll need lead more.

  • Terry

    I laugh when I hear that Obama is projecting trillion dollar defecits for the next decade. I think reality will rear it’s ugly head long before 10 years pass. Our deficit problem will correct itself.
    The captian has turned on the “no smoking” sign. Please fasten your seat belts–we are about to encounter some turbulence.

  • eric karr

    the dollar has dropped so low in value here in Brazil, it has lost like 40% of its value in 2 years. I used to be rich down here, now I live in the getto, I will be going back to the USA to live on welfare soon if the dollar drops any lower

  • Pat

    The People’s Bank of China (PBOC), the central bank, announced today that it will issue more gold and silver commemorative coins featuring the giant pandas to meet soaring demands for precious metals!