Author Archives: Peter Black - admin

Bullion Analysts Accuracy is Bad

If you are one of those who put your trust in what the talking heads on CNBC etc. are saying, then hopefully we’ve managed to convince you of the prudence in looking at other sources of information as well for your financial decision making. If you stop listening to the static and look at the overall picture instead of day-to-day swings you will become much more successful as an investor.

But what other sources of information should you look at when it comes to gold and silver prices?

Surely the professional bank analysts must have a better understanding of where gold and silver prices are heading than the news anchors. Even though these analysts often have their banks interests as well as their own interests in mind, you would still think that they should be able to give a more accurate prediction than most people.

Let’s look at how accurate these predictions really are.

Every year analysts provide a four-year forecast for the gold price. The graph below illustrates the average of gold price predictions since 2007 by the 25 top analysts over the past 7 years.


Source: Casey Research –

As is clearly displayed by the graph analysts have predicted that the price of gold would fall every year since 2007 – and they have been completely wrong. The 2008 and 2009 forecasts predicted a gold price below $1,000 for 2011 and in 2007 the forecasts pointed to a decline from $656 to $523 by 2011. Instead the gold price rose to an average of $1572 that year – an increase by 140%.

So the immediate take-away from this information is that you shouldn’t pay attention to what analysts at the big banks and brokerage houses say of the future gold price – since their track-record is abysmal.

Forecasting in general is extremely difficult. According to some research analysts only tend to get it right about 50% of the time, which is equivalent to flipping a coin.

The broader picture here is of course that what analysts say does matter, for example to institutional investors and fund managers. To most investors it is much easier to follow the herd and act only on the recommendations that analysts provide, rather than acting on your own judgment, thereby risking being wrong and having to explain yourself.

Over the course of the last few months many have left the gold and silver exchange markets. Not only the traditional weak hands but also institutional investors. At some point when this trend reverses they will enter the market en masse – which will have a significant positive impact on spot gold and silver prices. When this happens is difficult to say, but most likely it will happen when the next leg up in this bull market comes.

How to invest in precious metals – part 1

How to invest in precious metals – part 1

Buying gold and silver bullion will always be the ultimate crisis hedge, but in today’s world we are faced with a wide range of alternatives when investing in precious metals, that can make a decision complex.

ETFs, mutual funds, bullion etc. are becoming increasingly popular and it can be difficult to understand the differences between all of the available options. In some cases you will be giving up security for perceived flexibility, so it’s important that you make an educated decision before going ahead with an investment.

In this two-part article series we take a closer look at the different ways of investing in precious metals. In future articles, we’ll look deeper into the risks and rewards of each of these alternatives.


Buying gold stocks is an option for the investor that feels comfortable in making a conscious decision between different types of stocks traded on an exchange. That is easier said than done though, as the precious metals stocks can be highly volatile.

In this space there are different types of companies – established miners, junior miners and royalty companies. Established miners have existing mining operations whereas the junior miners often are in an exploration phase, which can be highly capital intensive and risky. Royalty companies typically help provide financing to miners and receive a payment stream in the future in return – if the operation proves successful.

Precious metal stocks do have a correlation to the spot price of gold, silver etc. but there are many other factors that influence the stock prices. In most cases, investing in precious metal stocks is a speculative play that can offer great reward but also great risk.

Mutual funds

For those investors who feel less comfortable picking stocks themselves, mutual funds are an attractive option. These funds hold portfolios of precious metal stocks that typically are more established and which produce a known quantity of gold, silver, platinum or palladium each year.

Choosing a mutual fund provides the same type of exposure to spot prices as single stocks do, which is to say limited, but there is generally a lower price risk as the fund will hold several companies in their portfolio.


Exchange traded funds (ETFs) have become increasingly popular over the last few years, since they offer a very flexible way of investing in precious metals. An ETF is a type of mutual fund that trades on a stock exchange like an ordinary stock. They can consist of precious metal stocks or of actual physical gold, silver, platinum or palladium.

With an ETF you will thus have a real exposure to the spot price, but there are caveats. In many cases there are also questions on whether the funds actually match the full exposure of the fund with ownership of physical bullion. In any case it will be difficult for investors to covert their shares to actual bullion, as most funds reserves the right to settle in cash. The correlation to actual spot prices will be higher than when investing in precious metal stocks, but depending on the exact type of ETF it can still vary.

Leveraged ETFs should be considered short-term speculative instruments. Unleveraged ETFs are a good way of gaining exposure to precious metals for the longer term, but these funds still don’t provide the same level of security as actual physical ownership of bullion.

Stocks, mutual funds and ETFs all have advantages such as ease of buying and selling, transparent and in some cases low management fees. They are however in their nature more speculative plays on prices, rather instruments of insurance and crisis hedges. In a real crisis scenario there is no telling if the net asset value of funds would plunge or if exchange prices for ETFs would divert completely from the price of physical bullion. We’ve already seen examples of this during the last few months.

In the next part of this article series we look at the remaining options available for investing in precious metals.

How to Sell Your Bullion For the Best Price

Looking for how to sell your bullion for the best price? When you choose to buy bullions, you wish to make an investment that will eventually bring you a profit when you decide to sell. And how do you buy bullions? By being extremely careful, checking the historic and reputation of the dealer and going for the best quality. Well, when you sell bullions, you should be as thorough, meticulous and attentive as when you buy them. Don’t let yourself be rushed or carried away by the fact of earning money because you may be the victim of a scam. And never meet with certain persons to sell your bullions like they are a pair of headphones because you risk putting your well-being in danger and get robbed. Here is what you need to know to make sure the price for your bullions is the best.

1. Check the distributor


Probably the best way to sell silver bullions is through a distributor. Still, you will need to check its reputation and historic in this business branch. If you avoided buying bullions from dealers with an unknown reputation, then why would you sell your bullions to them? Also, before settling for a distributor and close the deal, check the prices at several distributors and see which one can make you the best offer. It is the best way to go if you want to ensure you take the best advantage out of your bullions. It doesn’t really matter if you find the distributor online or in your home city, as long as you can find a reliable record about them.

2. Don’t put a sale announcement online, just like doing in the case of shoes


Never try to sell your bullions online like a regular object, because it won’t work. So avoid websites like EBay, or Amazon, for selling bullions. You will never get a fair price, and the ad may attract people that wish to trick you. All professional bullion buyers will always check reliable providers and will not search on the local market for them. So this may be a bad move.

3. Don’t accept face-to-face meetings with people


Never accept such kinds of invitations. If, by any mean, a person find out you have bullions for sale and contacts you to meet him and make the transaction, don’t follow the invitation. It may turn into a dangerous robbery. Selling bullions is not a difficult operation, but it must be done with care and respecting some conditions.

4. Online vaults


The online vaults are probably the safest way to sell bullions. They usually work in partnership with multiple distributors, so when you decide to empty your vault and cash your bullions, you will receive offers from the dealers that will want to purchase your bullions. Not to mention that you won’t have to carry the bullions anywhere, since after the transaction is closed, the manager in charge of the vault will just transfer the property titles to the new owner and send you the money.


Please click below to access the best bullion distributors Singapore – cheapest bullion Singapore

Singapore cheapest bullion: and BullionStar review

Liberty Silver Estonia – cheapest bullion

Liberty Silver Estonia

Estonia cheapest bullion: and Liberty Silver Estonia review


How To Store Bullion Safely

How to store bullion safely and securely


Investing in bullion is an attractive way of safeguarding your wealth. Whether you wish to secure your fortune, or you’re passionate about making silver coin collections, your return on investment may be greater than expected. Still, you need to find a safe way to store them, without putting your well-being, and the silver’s integrity, in jeopardy. It is obvious that if you choose to invest money in silver bars, it is not wise to store them in your home. The quantity is rather large to deposit, and if anyone ill-intentioned finds about them, your residence may be a target for burglars. Also, if you know your coin collection is highly valuable, or you have large amounts of silver already, you may want to know it stored in a safe place. A home safe may be an option if you don’t have too large quantities, but it may attract people that will wish to break it.

1. Bank storage


A bank is an excellent option. They always have the highest security, with locked rooms, cameras, security guards and reinforced buildings. No one, except you, will have access to your deposit. Knowing that your precious metal is not in your house will give you some piece of mind. In today’s times, when there are so many looking for a rapid and secure income, anything can happen to your house while you are away. Banks will offer you two possibilities of storing your valuable assets. You can either take a safety deposit box or opt for the bank’s vault. Here, it depends very much on the amount of silver you will need to store. Safety deposits boxes are usually not very large, but will go great if you have smaller bars or coin collection. Still, the boxes will be only for private use. In the vault, more people will have their goods stored, so access must be granted for all. Of course, not that this can be a danger, but some may not appreciate that.

Banks are extremely safe, but you must take into consideration some aspects. One, you will have to pay a fee for using their storage space, which differs according to the size of the space you need and values deposited inside. Also, if you wish to have access to your deposit, you will have to go to the bank during their working schedule. That can be a draw if you will face a financial emergency when the bank is closed.

2. Secret Safes


The method implies having a safe in your house, but in an area where it is not noticeable and no one knows about it. If you have silver bullion amounts that range from small to medium, this method is great for you, as it will save you from the roads to the bank and respecting its schedule. You just need to take a safe, and find a hidden place in your house where you can put it. Whether you hide it in a wall, in the basement, floor, or other innovative areas, the point is to camouflage it entirely in the house. Raise walls around it, paint it in the color of the house, even place tiles and make it look like a regular corner of your house, perfectly blending in with the rest. But remember to find a way to leave the door at your disposal. Also, putting them behind a bookcase, or obvious places, where people will not think to look, is also an excellent method to hide the safes. And make sure you don’t share this type of information with no one, maybe with one or two persons you trust in the highest degree.

3. Offsite storage


Storing in your country and/or city of residence makes sense, but it’s also sensible to store your bullion outside of your own home. Some often used options are storage facilities and country homes. Remember that a storage facility typically won’t cover for any losses incurred. So be sensible how and where you store and how much you store in a single location. A good rule of thumb is to never store more in one single location that you can afford to loose.

4. A precious metal depository


Now this is a method useful especially for the people that have a larger amount of silver to store. These types of depositories have a very high degree of security, the depositing spaces are kept under close monitoring, and nothing goes in and comes out without being checked. Also, the climate and moisture levels are kept under control, making sure the precious metals are stored in the most favorable environment, avoiding any risks of altering their state and appearance. All perimeters are filmed and recorded, so security is kept to the highest standards here. They also make periodically inventories to the deposits in the facility, keeping a record of the amount of precious metals existent in each deposit. Thus, they take all the measures to prevent loss or theft. Also, they offer insurance for all the deposits, so if anything is missing or it is damaged, the customer will receive compensation.

5. Reliable bullion distributors


The best way to know that you are investing and storing silver bullions in a proper manner is to work with reliable bullion dealers. Not only will they provide only top quality bullions, but will also be able to offer support when it comes to the best storage methods. After all, they deal with this issue every day since they have to store their silver bullion quantities somewhere, before selling them to the final client. Thus, avoid doing business with silver bullion distributors that don’t inspire trust. The best way to find out about their reputation is to check their mark and history. Unknown marks should be avoided because multiple reasons. For instance, you won’t be able to sell your silver bullion if the mark is not known. Also, the quality of the bullion can be doubtable, and they might not be able to help you with the storage of your valuables. Reputable bullion distributors will put their knowledge and services for the benefit of their customers. So it is easy to tell with whom you should close a deal when it comes to silver bullions. It is easy to understand that once you make such type of investment, you will also want to know it safe. It is why the top of the line distributors will be there for you when you need a storing solution, especially if you are one of their customers.


Please click below to access the best bullion distributors Singapore – cheapest bullion Singapore

Singapore cheapest bullion: and BullionStar review

Liberty Silver Estonia – cheapest bullion

Liberty Silver Estonia

Estonia cheapest bullion: and Liberty Silver Estonia review



How Do You Know Your Bullion is Real?

Investing in precious metals is a great way to keep your wealth safe. But how can you be sure that what you buy is genuine? You cannot expect every bullion sold in this world to be real because there are plenty people out there who will test your naivety and good faith, and try to sell you fake products. Thus, when you wish to engage in such transactions, you need to take all measures of precautions to make sure that what you buy is real, and your money is well spent. Here is what you need to know to make sure you don’t buy an ordinary metal, coated only with a precious metal.

Recent examples of fake bullion bars

First things first. Is it really true that fake bullion exist? Unfortunately, it is. Have a look at the images below for some examples of a fake bullion bar.


This bar was found in 2012.


If you would like to read further about the case above then visit ZeroHedge by clickign here.

How to make sure your bullion is real

Below you’ll find some information on what you can do to safeguard yourself and ensuring that your bullion is real.

  • Get the bullions checked before reaching for your pocket

There are X-ray spectrometers, ultrasound readers, and electromagnetic force compensation scales, which are used to determine the originality and purity of precious metal bullions. They can immediately notice if a bullion is of pure silver, or only a tungsten bar with a silver coating. The DUX testing system is one of the most reliable method existent on the market, and it is used by reputable bullion distributors, as they also need to check these products before buying them from their owners. The DUX testing is extremely accurate and will not fail.

  • How do I know if the bullions from the provider are genuine?

Well, to avoid any scams, don’t purchase from anyone claiming to have a bullion for sale, no matter how attractive the price might be. Always go for the reputable distributors, as their prestige in selling real products is well known. You can easy check them by looking at their background, previous activity and reputation in the business. And, if there are any signs of doubt, you can always perform a DUX test.

  • Is it safe to use acid tests on bullions?

It is advisable not to do so. Acid can damage the aspect of the bullion, and such testing kits are not allowed to be transported by plane. Plus, they are not very efficient since they get to test only the surface of the bar, and not the core, leading you into error.

  • How do I know the presented DUX report is not a fake?

If the seller presents you with a DUX reports, which states the reliability of the bullion, you can always check the report out to see if it is genuine, in case you have any doubts. The DUX system has an online database that can be accessed. You can find here the exact test presented, and you can compare your copy with the results found online. If it is fake, you can report it further, and not buy the bullion.

  • How can I test a bullion without a serial code?

When tested through the DUX methods, a bullion will receive a Tamper Proof Label, or TPL, which will match the results of the test. This label cannot be removed in the future, and the results will always be available, by accessing the online database. So you don’t even need a printed copy of the DUX testing, as you can take the TPL label and check its corresponding results online.


Please click below to access the best bullion distributors Singapore – cheapest bullion Singapore

Singapore cheapest bullion: and BullionStar review

Liberty Silver Estonia – cheapest bullion

Liberty Silver Estonia

Estonia cheapest bullion: and Liberty Silver Estonia review



Gold Production Cost


At a time when many talking heads on TV are focused on the dwindling demand for paper gold – based mostly on the observation of falling spot prices – there is much more relevant things to say about other parts of the precious metals market.

All of the weak hands are leaving the exchange markets when prices fall but we are still seeing increased interest in physical gold and silver. Demand for bullion is actually growing as evident by sold out supplies and increased premiums. But that’s just the demand side.

We’ve touched upon the supply side briefly before – and we’ll look deeper into this area in coming articles. In this one we’d like to shed some light on the gold production break even cost.

Many gold miners face serious challenges today as the gold production cost is relatively high. Mostly as a result of bad acquisitions, where overspending have left companies with way too much debt to service. This puts them in a position of high dependency in relation to the current gold price level as well as access to new capital. Even though the acquisition target still may have been a valid object – overspending have left the miners in a vulnerable state.

With an ever increasing price of gold, as we’ve witnessed for the past 12 years, it has been easier to justify an increasing break–even level price for production. As the spot price have risen so has the possibility to raise the all-in production cost.

Ever since the summer of 2011, when the gold price started its downward move, the situation for the miners have become more and more precarious. At an $1800+ per ounce price many miners were fine – at sub $1250 per ounce most miners aren’t.

In fact, the $1250 level is considered a watershed – the general break-even level for producing gold. Today, we are just below this level, which means that most miners are producing gold at a loss. This will eventually lead to bankruptcies.

A shake out in the mining sector will mean that less gold will be produced. Less gold produced will mean increased prices if demand remains constant. As we’ve discussed before there is a plethora of reasons for why demand should increase going forward – implying significantly higher prices for gold.

Gold miners are not in a unique situation though. Many platinum, palladium and silver miners are also in trouble. Physical demand as well as industrial demand is increasing while supply is dwindling.

For gold miners specifically, the often mentioned break-even level of $1250 may not accurately describe their situation. When one counts the “all-in” cost of exploration, production etc. the real number is, according to some estimates, closer to $1600. This means that most miners have been loosing money for quite some time – ever since the summer of 2012.

This is of course not a sustainable situation and you will want to make sure that you buy silver bullion and buy gold bullion continuously to be able to profit from the coming supply shortages.


Please click below to access the best bullion distributors Singapore – cheapest bullion Singapore

Singapore cheapest bullion: and BullionStar review

Liberty Silver Estonia – cheapest bullion

Liberty Silver Estonia

Estonia cheapest bullion: and Liberty Silver Estonia review



Why Isn’t Inflation Higher – part 2

In this second part of our article on why isn’t inflation higher we look at the relationship between the monetary base and the money in circulation.

Even though the monetary base has increased fourfold in the last ten years we still aren’t seeing the flow-through effect of this into the real economy. Banks aren’t lending normally today, partly due to their impaired balance sheets but also due to regulation and less risk taking.

As many small business owners and individuals have noticed it’s not easy to get a loan today as you will have to make it through cumbersome loan application processes. It’s mostly the banks and big institutions that have access to capital currently.

The graph below illustrates the difference between growth in M1 money supply (M0 and M1, also called narrow money, normally include coins and notes in circulation and other money equivalents that are easily convertible into cash) and the M2 money supply (M2 includes M1 plus short-term time deposits in banks and 24-hour money market funds).

why_isnt_inflation_higher_2 copy


The M2 money supply serves as a good indicator of money in circulation, which easily can drive price increases in goods and services. Clearly, we aren’t seeing much of a spillover effect of the M1 money supply into the real economy. Since 2009 increase in bank loans have furthrmore almost been flat.

So while we are seeing increasing asset price inflation, primarily in real estate and in the stock market, as well as a general increase in the cost of goods and services, we aren’t seeing it on a scale that would be proportionate to the actual increase in the monetary base. If that were the case then inflation would be considerably higher. Even though we gradually are heading in that direction, since money is seeping through the economy, it can be of interest to look into this topic further.

What are the prospects for a shift in the flow-through effect of money and what would be the catalysts?

The prospects for even higher inflation almost seem inevitable, as we’ve discussed before. Rising inflation can happen slowly as the velocity of money increases or with an external event like a shock sell off in the bond markets.

When it comes to the Feds stimulus efforts there is no way for them to extract themselves from the market without serious repercussions. Tapering the stimulus, which is closely linked to the discussion of extraction, is furthermore something which the Fed would have a very difficult time to do, as it would create significant turbulence in the bond markets.

As other central banks are decreasing their purchases of U.S. government debt, as illustrated by the graph below, the Fed has actually stepped forward as the single biggest buyer.

why_isnt_inflation_higher_3 copy

Source: Reuters

Between the start of QE3 in the beginning of 2013 and July 2013 the Fed have purchased 90.5% of net issuance of gross federal debt according to

This is not a sustainable situation. It’s furthermore not a situation which the Fed ultimately will control since they don’t control long term interest rates. Inflation will continue to increase but with a crack in the treasury markets we could see a significant shift in the M2 vs M1 money supply, resulting in a rapidly increasing level of inflation.


Please click below to access the best bullion distributors Singapore – cheapest bullion Singapore

Singapore cheapest bullion: and BullionStar review

Liberty Silver Estonia – cheapest bullion

Liberty Silver Estonia

Estonia cheapest bullion: and Liberty Silver Estonia review



Why Isn’t Inflation Higher – part 1

Recently we discussed how the official U.S. CPI data is flawed as it excludes and replaces certain items, as well as “adapts” the relative increases in costs for goods and services used to calculate inflation. The end result being considerably lower inflation numbers than would be the case with for example the calculation methodology used prior to 1980.

In this article we take a look at the question: why isn’t inflation higher?

Real inflation, experienced by citizens, is definitely higher than the data the U.S. government publishes. Official U.S. inflation is below 2%. However, alternative methods of calculation – as well as some surveys – puts inflation between 4-10%.

The U.S. is not the only country that experiences price inflation though. In most countries the costs of goods and services are increasing and real wage growth is not keeping up pace – leading to a loss of purchasing power and wealth.

The reason behind the increase in inflation is primarily the stimulus packages that most governments launched in the wake of the credit crunch in 2008. The U.S. is probably the best example, but many other countries have followed suit. In fact, in 2009 all G-20 countries were on some sort of stimulus plan.

Today, Japan also stands out with a $1.4 trillion 2-year stimulus package in an effort to double the monetary base. The ECB in Europe, China, South Korea and a host of other countries are on similar programs.

Even though inflation clearly is higher than what the government says one can make some interesting observations when looking at how much the monetary base has grown and how much money we actually see in circulation. Doing so will reveal that we have yet to see significantly higher inflation numbers – maybe even hyper-inflation.

The graph below illustrates the St. Louis Fed’s measure of the monetary base – which is made up of bank reserves plus cash in circulation.


Source: U.S. Department of Labour

Between 2000 and 2012 the monetary base grew fourfold. Before the crisis in 2008 it was around $850 billion with approximately $40 billion in bank reserves. As a result of the significant QE1-3 programs today’s monetary base in the U.S. is around $3.2 trillion with more than $2 trillion in bank reserves.

Under more normal market conditions such a significant increase would flow over into the actual money supply. This has indeed happened, which is why asset prices have started to increase, but not to the extent that you would expect. The markets are behaving far from normal these days.

In the next part of this article we are looking closer at what we can expect going forward and why inflation is likely to increase.


Please click below to access the best bullion distributors Singapore – cheapest bullion Singapore

Singapore cheapest bullion: and BullionStar review

Liberty Silver Estonia – cheapest bullion

Liberty Silver Estonia

Estonia cheapest bullion: and Liberty Silver Estonia review



Increasing Industrial Demand for Silver


Find out more about the increasing industrial demand for silver in this article.

One important component in the demand for silver is industrial use. Silver has hundreds of industrial and medical applications. Being the best conductor of electricity it’s used in switches, medicine, batteries, plastics solar cells, water purification, computers, cars etc. There is furthermore a continuous growth in the many applications for silver.

Recently, the demand for solar cells has seen an important shift. In the wake of the Fukushima disaster several nations, primarily Japan and Germany, have experienced an increased political pressure to move away from nuclear power. In Germany, there is furthermore a plan of replacing fossil fuels with renewable energy.

Even though the willingness and possibility of completely following through on the initial statements can be debated there is nevertheless an increased focus on greener sources of energy. This is proving to be very positive for silver.

The base of the solar industry is photovoltaic technology, which is used to generate electrical power by converting solar radiation into direct-current electricity through the use of semiconductors. A typical solar panel uses the same amount of silver as in 80 cellphones or 20 laptops, which is roughly 20 grams.

In 2012, the solar technology demand only represented 5.6% of total industrial use of silver – but since 2000 the amount of silver used for solar panels has risen by 50% per year.

Previously, Germany has been one of the biggest users of solar panels but other countries are increasingly looking at this source of energy. The future of the solar panel market isn’t Europe, but India, China and Japan, all of which plan to increase their solar output significantly going forward. By 2020 the worldwide solar power generating capacity is expected to be 20-40 times the amount of current capacity.

Recently, Chinas State Council increased their target for solar generating capacity by 67% compared to previous numbers – an output of 35 gigawatts. The installed capacity in 2012 was only about 7 gigawatts, which means that the increase is projected to be 400% in just a few years. This translates into a global increase of 27%.

Japan is also increasing their demand for solar panels, and is expected to overtake Germany as the world’s largest user of solar panels. An estimated 5.3 gigawatts in generation capacity is projected to be added this year.

This will have a significant impact on the demand for silver. Up to 11% of global mine supply could be consumed just by China and Japan over the coming three years. This amount is two times the current worldwide demand from the photovoltaic industry.

As we’ve talked about before there are several reasons for why the future mine supply of silver could decrease, and with an ever increasing demand for silver for industrial use as well as for investments there is much that point to a higher silver price.


Please click below to access the best bullion distributors Singapore – cheapest bullion Singapore

Singapore cheapest bullion: and BullionStar review

Liberty Silver Estonia – cheapest bullion

Liberty Silver Estonia

Estonia cheapest bullion: and Liberty Silver Estonia review


Incorrect Inflation and Gold – part 2

We’re continuing with our discussion about incorrect inflation and gold in this article.

U.S. CPI data shows a significant increase in inflation since the 1970’s as displayed in the graph below.


Source: U.S. Department of Labour

But even though something clearly has happened with CPI growth we are still hearing reports about inflation not being very high. Official numbers actually show it being in the low single digits. This seems to contradict what regular people on the street are experiencing, where the consensus view is that prices on close to everything is increasing. The question is why?

CPI, or inflation, can be measured in different ways and sometimes the measurements change – at the discretion of the government. Comparing the CPI number based on the methodology used by the U.S. government prior to 1980 with today’s official CPI numbers reveals some very interesting differences – as illustrated by the graph below.



Official U.S. inflation is below 2% today and the alternate inflation methodology displayed in the graph above puts in closer to 10%.

Can inflation really be that high?

As we discussed in the first part of this article it will vary depending on your own lifestyle, but needless to say most people have a hard time coming to terms with a 2% inflation rate when they’re getting less and less for their money. Independent surveys put the perceived rate of inflation in the U.S. closer to 4-6%.

So once we ascertained that inflation is higher than official data shows, two questions come to mind. Why is that and what impact does it have on you?

There are many reasons for the government to prefer lower inflation numbers. Part of it has to do with confidence in how an economy is run. A sky high inflation rate signals that something is amiss. It also has to do with costs as many benefits etc. are indexed to CPI. A high CPI growth thus means higher costs for the government and vice versa. At a time when many developed, as well as emerging nations, are heavily indebted it’s not far fetched to assume that there is an interest in keeping costs down, maintaining faith in the currency and keeping interest rates low.

This all means that your fiat money is loosing its value at an ever increasing pace. Inflating away debt, which is what most governments are doing, is a stealth way of stealing your money. It doesn’t affect the rich as much as it does the poor and middle class – who are loosing purchasing power, having to spend more and more on food, transportation etc. – without the means of benefiting from rising asset prices.

When it comes to investments and savings you will have to pay attention to what the real rate of return is. This will have a serious impact on your wealth.

Most interest rate investments give a negative real return today. For example, the 10 year U.S. Treasury yield is 2.50%. If inflation is running at 4-6% it means you are loosing money.

Stocks are overall performing well currently, but they are very volatile, moving 5-20% in single trading session – so capital gains is not a sure thing. Dividends may in some cases be above the inflation rate but picking the right stocks and keeping them for the long term is not that easy.

That leaves us with gold and silver bullion, which for centuries have preserved value and protected purchasing power.

Given how worrisome most economies look today there is no reason for why you shouldn’t consider buying gold and silver bullion or adding to your holdings. Especially, since prices recently have dropped to levels that again look attractive.


Please click below to access the best bullion distributors Singapore – cheapest bullion Singapore

Singapore cheapest bullion: and BullionStar review

Liberty Silver Estonia – cheapest bullion

Liberty Silver Estonia

Estonia cheapest bullion: and Liberty Silver Estonia review