Sept 20, 2010
Precious Metals: "The Canary In the Coal Mine"
The precious metals market has been on fire. Last week, gold hit a fresh all-time high and silver reached a new two-year high. In London, spot bullion hit a nominal record of $1,286 a troy ounce. The yellow metal has risen 17 percent since January. Gold is heading for its tenth consecutive annual gain, the longest winning streak since at least 1920.
Silver rose to $21.03 a troy ounce, the highest in more than two years. The metal is closing in on the thirty-year peak of $21.24 an ounce set in March 2008.
Adjusted for inflation, gold prices are a long way from their high above $2,300 an ounce set in 1980. Silver's old all-time high was $50 an ounce, set when the Hunt brothers tried to corner the market. It would have to rise to $135 to set a new inflation-adjusted high.
The surge in precious metals has caught many producers with unfavorable hedge positions. Anglo Gold Ashanti, the world’s third-biggest gold miner, is spending $1.4 billion to wind down its hedge account. The forward sales of the Johannesburg-based miner are based at an average price of less than $450 an ounce, compared with current prices of more than $1,200. It was just in the early 1990s that you could buy gold for $270 per ounce.
Several news outlets have tried to suggest that gold and silver are in a bubble. Last week, ABC News had a Nightline segment that had financial writer Ben Stein warning that gold investors are at risk of getting burnt as gold prices fall back to earth. One of the reasons for all the headlines about gold being in a bubble is because many financial journalists wants to be the one who called the top on gold. There is a risk of being too early at this game. I was searching on YouTube and I found a broadcast from October 2008 that people were saying gold at $760 was insanely overpriced and it was set for a huge drop.
The long-term reason fothe metals are moving higher has everything to do with our ballooning national debt. We are simply spending ourselves into the poorhouse. Thomas Jefferson once said, "My reading of history convinces me that most bad government results from too much government." The smart investors realize that fiat currency is at risk of imploding, so they have bought precious metals to protect their buying power.
The banking system is no friend of gold. Because banks don't loan out gold, they see it as a competitor to their form of money. Gold’s increase in price also represents inflation, which eats away at the value of currency. Several big banks have been trying to suppress the price of gold and silver by shorting these commodities. In the past few weeks, several of their big positions have come off, as the banks have suffered huge trading losses and are now waving the white flag.
Former Federal Reserve chief Alan Greenspan was recently asked about gold, and he admitted it was the “ultimate means of payment.” He also confessed that the jump in gold prices could be “the canary in the coal mine to keep an eye on.” These are amazing words from the man who did the most to create history’s largest debt load.
At some point, gold will reach a level that it begins to trigger a loss of confidence in the dollar and many other currencies. It may still take a few more years before we reach the panic phase, but when it comes, there will be little that the global financial system can do to stop the carnage.
The old argument that “you can’t eat gold” is true, but when the currency of a nation collapses, precious metals have always become the de facto medium of exchange. When Zimbabwe ’s currency became worthless, its citizens became so desperate that they started to pan the rivers for gold to buy the essentials of life. Here is a link to a video that shows their plight: (YouTube Video)
We are at such a late stage in the debt crisis, I don’t have any financial advice for what the average person can do to get ready. If gold continues to soar, all I can recommend is to place your trust in Jesus Christ. He is the One who has promised to deliver us from this doomed world.
Promise of His Coming
A biblically prophetic reality that perfectly fits our present day, and that has been looked at a number of times, is the forewarning given by the apostle Peter especially to the generation alive at the end of the Church Age:
Knowing this first, that there shall come in the last days scoffers, walking after their own lusts, and saying, "Where is the promise of his coming?" for since the fathers fell asleep, all things continue as they were from the beginning of the creation. (2 Pet 3:3-4)
Almost in every case of looking at this prophecy, the point has been exclusively dwelt upon that both the religious and non-religious of the world mockingly chide those of us who believe Jesus Christ will return to planet Earth. This is a prophecy that has observably come to pass in our time.
However, it is the phrase “promise of his coming” I would like to consider here, rather than the chiding sarcasm of the mockers.
Like the 2 Peter 3:3-4 prophecy, so many other things we can see developing in these troubling although exciting times testify mightily to the evidence that God absolutely keeps His Word. Scripture promises, for example, that ultimately, no matter how scattered and oppressed the Jewish people have been throughout history, Israel will be a nation forever.
Yet in spite of this, when they are in the land of their enemies, I will not reject them, nor will I so abhor them as to destroy them, breaking my covenant with them; for I am the Lord their God. But I will remember for them the covenant with their ancestors, whom I brought out of the land of Egypt in the sight of the nations, that I might be their God. I am the Lord. (Lev. 26:44-45)
Israel was restored to the land after centuries of the people being removed from their own land and being persecuted unmercifully in the nations to which they were scattered. They were regathered and established again as a nation in a single day, just as foretold.
Who hath heard such a thing? who hath seen such things? Shall the earth be made to bring forth in one day? or shall a nation be born at once? for as soon as Zion travailed, she brought forth her children. "Shall I bring to the birth, and not cause to bring forth?" saith the LORD: "shall I cause to bring forth, and shut the womb?" saith thy God. Rejoice ye with Jerusalem, and be glad with her, all ye that love her: rejoice for joy with her, all ye that mourn for her. (Isa. 66: 8-10)
That miracle rebirth took place May 14, 1948, following perhaps the house of Israel’s most horrendous persecution--that suffered under the Nazis. No other nation has been so torn apart and scattered to the winds of history, then re-gathered, having its original language restored. The Lord proved He alone is God. His promise to Israel goes into the future for His chosen people.
"Also I will restore the captivity of my people Israel, and they will rebuild the ruined cities and live in them. They will also plant vineyards and drink their wine, and make gardens and eat their fruit. I will also plant them on their land, and they will not again be rooted out from their land which I have given them," says the Lord your God. (Amos 9:14-15)
Israel’s God is God! There is no other God. He continues to prove who He is through Israel. This, doubtless, is one extremely important reason He chose that people: to demonstrate the absolute veracity of His Holy Word.
That same Word–who is the very person of the Lord Jesus Christ (John 1: 1)—has made a promise of staggering importance to His other chosen people.
Let not your heart be troubled: ye believe in God, believe also in me. In my Father's house are many mansions: if it were not so, I would have told you. I go to prepare a place for you. And if I go and prepare a place for you, I will come again, and receive you unto myself; that where I am, there ye may be also. (John 14:1-3)
His coming again for God’s other chosen people –the church (every born-again member of Christ’s body during this Age of Grace)--is assured. It is a 100-percent certainty, because He continues to prove His faithfulness through the nation Israel, and through keeping every prophetic promise He has made.
Jesus tells us who constitute His chosen bride: "Because thou hast kept the word of my patience, I also will keep thee from the hour of temptation, which shall come upon all the world, to try them that dwell upon the earth” (Rev. 3:10). He promises, “And when these things begin to come to pass, then look up, and lift up your heads; for your redemption draweth nigh” (Luke 21:28).
Jesus is coming. It could be the very next moment!