Why we’re nowhere near the mania phase in precious metals
Yesterday was my lucky day.
The coin was pretty muddy, but I managed to clean it off later with an old toothbrush and some elbow grease… at which point I decided to take my good fortune on the road for a little unscientific poll.
I’ve traveled to plenty of countries where the local population is very in tune with the prices of gold and silver, particularly in Asia, India, and the Middle East. It’s simply part of the culture.
In the developed world, however, people have much greater confidence in their paper currencies because they’ve been brainwashed since birth to believe their currencies are sound.
As such, I was not surprised by the results of my little informal survey.
Walking around the lakefront resort community where I’m staying, I stopped passers-by and explained to them how I had found this coin. Then I’d ask, “What do you think it’s worth?”
The first person I showed it to held it in his hand and felt the coin’s heavy weight with a slight tick of his eyebrow. Then he flipped it over to the reverse side, saw the “1 OZ. FINE SILVER- ONE DOLLAR” marking at the bottom, and replied, “Uh, a dollar…”
One after another, locals, tourists, and staff alike were completely mystified at the prospect of my weighty silver coin having much ‘value’.
Several people commented on the coins year, claiming, “Well it’s probably not worth much, maybe just a dollar, because it’s only from 1996… I mean, if it were from the 1950s, then you might have something…”
Another common response was “I have no earthly idea.” After half a dozen of those, I changed my approach and walked into one of the local casinos where I saw three bored dealers at an empty blackjack table.
I plunked my coin on the table and asked, “How many chips will you give me for this?”
Each one of them examined the coin and looked at each other in silent conference before one of them said, “$1.”
I asked a few other folks milling around the lobby if they’d give me $5 or $10 for the coin, which seemed to offend people much more than spark their curiosity for the opportunity.
Finally I met a man and his wife who were walking their dog on the beach nearby; I walked up to them and said, “You look like intelligent people, maybe you can help me out… see I found this coin during a hike today and have no idea if it’s worth anything. What do you think?”
The man took the coin and noticed it was silver; he said, “Oh, this is silver… it’s probably worth something. You should SELL IT!”
Great. I finally find someone who actually seemed aware of precious metals’ value, and his initial reaction is to trade it for paper
Like I said, I can’t really say I’m surprised. Even here in this wealthy resort area filled with educated, successful people, nobody really had a clue. Western governments inculcate such mindless devotion to their paper currencies, I suppose it’s a hard mindset to break.
But as unscientific as my informal poll may have been, it does suggest one obvious conclusion: we are nowhere near the mania phase for precious metals… and any talk of a gold ‘bubble’ is complete nonsense.
The current pullback is just that– a pullback. Like we saw in 2008, institutional money managers are locking in their profits as they cash up and prepare to take heavy losses over the euro crisis.
Gold and silver’s real breakout will be when the average, everyday guy has signed up to receive gold price SMS alerts to his smart phone and has the local coin dealer on speed dial.
Just like the real estate bubble in the early 2000s when every Tom, Dick, and Harry was flipping off-plan condos in Miami, precious metals will enter bubble territory when the masses get into the market.
It may be a bumpy ride for precious metals as the euro crisis continues to unfold… but it’s clear that we’re a long way off from the Joe Six-Pack mania phase.