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Reader Comments on Gold 1979, 1980

Click here for the 1979 gold chart, and here for the '80 gold chart upon which these comments are based.

by M.A. Nystrom
December 11, 2005
Cambridge, MA

Dear Friends and Thinkers,

I cannot say thank you enough for all of the great, thought provoking and some hilarious comments. There were so many - more than I could republish without being overly repetative, so I tried to pick the most representative to reproduce below. I love receiving these comments, because they give such a real representation of what people are thinking, without being sterilized by the filter of mainstream corporate media. Everything is very true and raw.

I did make efforts to correct some spelling and gramatical errors, but did not change the content of the emails in any way. Since there are so many, I gave each of them titles of my own, and organized them into the following loose categories: Memories, Observations and Dark Clouds on the Horizon, Further Investigation, and Sign of the Top. Be sure to read the last two stories in "Sign of the Top," because they are charming illustrations of human nature.

Enjoy. If you have any more stories, please email me, and if I have enough for a round two, I'll put that together. I'm also thinking about putting up a bulletin board of some kind for direct comments - please let me know if you have interest in that. bull@bullnotbull.com


Memories of Gann

The chart you shared on the Gold contract from 1979 brought back memories of all the hours I spent studying Gann. Just for fun I drew a trend line across the tops from '78 (best I could tell from this chart 22.5'), found an expanding channel, looked at the move from 285 to 445 and found support at exactly 365 (50%). Memories are wonderful things sometimes.

Today, however, I am afraid our fiat money and greedy (get all I can while I can politicians) are going to continue a situation which leaves the world no choice but to seek hard currency. The Euro is no better; it is fiat-based as well. To accept the Euro as the World currency would be like dating the daughter of the same Mother expecting a different result.

We had a wonderful situation for the 1st hundred years. It was so good in fact, that it has taken 130 years to tear it down. But I fear the foundations are cracked, the walls are weak, and the roof is about to collapse due to our own inattention and greed. Those are just the heartfelt thoughts of someone who long ago gave up his dream of trading, who nevertheless learned too much to ignore both history and reality.

I don't get the impression that a strike against Iran is on the horizon, given that 1) the U.S. military is so overstretched, 2) the war in Iraq is so unpopular, and 3) the U.S. is getting a lot of international pressure to settle issues with Iran diplomatically.

Thanks. RT

A Dow Jones / Gold Ratio of 1/1

I remember things about that time. I remember that the stock market as represented by the DJ was at about 800 and change, and that people were worried how low it would go. NO ONE foresaw 12,000. Prechter's highest prediction was 3,900. Volcker had to take action and he did, raising short term rates to 18% or better. They say his hand was forced by the Bond Mkt Vigilantes - there were articles discussing some sort of a bond market strike. DJ/Gold was 820/850 -- about 1/1. Yr 2000...DJ 12,000/ Gold 300 -- about 40/1. In 1980 Gold was laughing at the Dollar. Perhaps that forced Volcker.

I think the real problem is Trust or Value. What is a dollar worth? How many are there? How many can be created? What can they buy? I used to think people paying $20 million for a Gauguin were getting a gouging. But it is one of a kind. What is the dollar? One of 20 trillion this week, one of 30 trillion next week. Yet we use it to measure everything like it's that 1 meter bar that used to sit in Paris and set standard measurements.

Thanks for writing your article. I think people do forget exactly how things went down.

Back to the Edge of the Abyss

Wow, brings back memories. If only we all had a crystal ball! There are many similarities between now and then, I was convinced that the end was coming. I immediately got out some topo maps and looked for the most protected, remote cave I could find. I then planned in detail how much and what kind of provisions I and my family would need, gassed up the 4x4, and made plans with my wife regarding where to meet up if the bombs started falling!

And now, many years later, I can't help but feel we're approaching an "edge". How can so many people pollute the earth, for so long, and still have confidence that all will be well? The approach of a new version of the Industrial Revolution is about to hit the earth. Asia, with a zillion times more people than were here in the "West", when the first Industrial Revolution changed the earth forever. Can you imagine the impact on the planet, if and when the peoples of Asia follow our footsteps, and make the same mistakes we made. This planet is just barely getting by now, I can't even imagine what the desolation will be like 100 years from now.


Observations and Dark Clouds on the Horizon

Not a Breather

Mr. Nystrom, The gold charts were very insightful. Once it broke 500 in Dec79, there was hardly a breather. Makes one wonder what it's going to do today now that gold broke 500 again.

Nystrom's Two Cents

What I noticed was that gold really began its takeoff after the announcement on November 10th that the Fed would discontinue publishing M3, in March, shortly after Bernanke takes over as Chairman. This announcement, combined with Bernanke’s inflationary reputation, was apparently all that was necessary to convince traders that future inflation is a sure thing and that the Fed is taking steps to be able to hide it.

More to Come

What we've seen so far is small potatoes, compared to what is to come. Wait until inflation really starts taking off, then you'll see some fireworks. One thing I've continually seen overlooked in the explanation for the rise of gold during 1979-80, especially the final parabolic spike, was the Soviet invasion of Afghanistan.


(Editor: Thanks BF for pointing out the link to the Soviet Invasion. I incorporated those comments into my commentary on Gold '80)

Why Hold Paper?

Hi, I am a technical analyst institutional dealer from a small Australian stockbroker.

I am on system development - have been for about 2 years - which seems like a long time - and I do not have up to date technical views. However, my take on this is: Why would anyone holding petro dollars, or any fiat currency, not be exchanging them flat out for gold in the present and recent environment? Gold is not over-valued, unlike almost all other asset classes and is mostly not a function of anyone's debt. So, again why wouldn't you replace devaluing paper with solid gold?

Also, there is a lot of world money, which would trade dog droppings upwards if that was the trend. As soon as big trading money gets behind gold it will rocket whether it should or should not, and then there is the public still to come. If I was running the Federal Reserve and people were around who were still prepared to exchange gold for U.S. dollars, why would I not convert them to gold reserves in Fort Knox as if my life depended on it?

Ditto ditto for silver.

Thanks for inviting the comment. Merry Christmas, L

Letter from Argentina

Hi M.A., Trying to answer the question you posted, I think the rising gold today reflects the following fears:

- All currencies are being debased gradually, because promoting growth supersedes fighting inflation for central bankers.

- There is a feeling in the air that the US in particular has taken on too much debt , both government debt and private consumer debt. Since most dollar bills are held by foreigners, the US would benefit by depreciating the dollar

- Financing useless wars creates the need for governments to print more money.

- Even though interest rates rise in the US, the money supply keeps growing!

ps: I'm from Argentina and we Argentines had bad experiences with inflation -- e.g. in 1989 we had hyperinflation and a deflationary crisis in December 2001 that ended up -- guess what? -- in a currency devaluation!

Nice article, especially point of how difficult it is to sell at or near the top !

Best Regards, C

Fiat Currencies like the Golden Ring

I believe some of the fear that the price of gold is reflecting is not just inflation -- not the way "inflation" is usually referred to (basically a synonym for the CPI or the core CPI) -- but monetary expansion. The money base has expanded many times over the last 30 years.

1) A good bit of the movement into gold reflects an increased skepticism about other investments that the public has been told to invest in: bonds, publicly traded companies and more recently, real estate. The mutual fund industry likes to push the argument that if you buy stocks now you'll be rich in 30 years, just because those that did so 30 years ago are rich now. Not only this, but the mutual fund industry and many top academics would have you believe that it is so easy -- that you shouldn't even look at what companies you buy -- just throw your money at them and they will buy random stocks (for a subustantial fee) and then don't worry "just look at this chart of the last 100 years." But the 100 year S&P 500 chart that is commonly used in the marketing material is never, ever, inflation adjusted. If it were, it would give an entirely different flavor to the 1960-1980 returns or losses

2) There has never been a fiat currency that has kept its value forever. It has been tried and tried many times, and always fails after a period of apparent success. Fiat currencies can theoretically work if egos are kept in check and common sense is maintained. They are like the golden ring in the Lord of the Rings. The power is absolutely and totally corrupting. No mortal can withstand it for long. If one can, it only makes the successive mortals all the more apt to fall prey to the self-destructive impulses that fiat currencies create. So while maybe Adam Hamilton and Paul Volcker could handle it, Richard Nixon, Bill Clinton, George Bush, Greenspan and Bernanke cannot (at least that is the fear of many). The pull has been so strong that an entire intellectual class of puppets has been incubated for decades to provide the façade of intellectual support for the whole process (the mainstream economists throughout the world). All empires have debased their currency once they stopped expanding their manufacturing and trade based power and started trying to expand power using plunder, raising taxes, and fighting the "barbarians" (or "terrorists" - editor's comment)….from Rome to the British Empire.

3) India, China, Saudi Arabia, Iran, Russia, Kazakstan etc. The billions of people in these countries represent trillions of dollars in wealth. The bedrock assumption of the rich people in these countries is a healthy scepticism towards all government-issued currencies. This scepticism has been passed down through generations. The families who were sceptical of currency schemes over the last 300 years are the families that have accumulated wealth. They see many reasonable signals telling them it may be prudent to keep an additional percent or two of their net worth in something other than US dollar denominated assets. (or more! - Editor)

Rising debt, apparently doomed military interventions around the world, and an aging boomer generation that represents trillions in off-balancesheet liabilities for the US Government are all negative -- pointing towards a lower dollar over the next ten years. While things don't have to stay that way, it is hard to see what political changes will happen that will change the present realities. As a small percentage of the world's wealth moves to protect itself, it causes gold prices to rise. Simple as that. Will it continue? Your guess is as good as mine…would love to know what you find out…I'll be checking your website. GH

Writing on the Wall

Y ou bring up some interesting points and charts that I had not seen before! I was 30 years old at the time, and had just landed a job at the Post Office. I still work there, by the way, as a postmaster now.

Whatever it was that drove gold (and silver, in spite of the Hunt brothers) back 25 years ago was very different than what is driving it today. Americans were hoarding the old silver coinage of 1964 and earlier, and thought the new clad coinage was cheap-looking and cheap-feeling. I remember that very clearly. My parents had a big old coffee can in the kitchen where we all threw any silver coins we came across. It expanded into several big cans, and I inherited them, still in cans, a few years back. Nixon had "closed the gold window" in 1971, the year I finished college, but no one we knew owned any gold, except in jewelry. It wasn't legal yet. (editor's emphasis)

This time around, I think all world currencies are getting stale and worn out. I was surprised to learn recently that the US $ is NOT "up" - it is just not declining as fast as other currencies! This time around, third-world countries, toppled dictatorships, and banana republics alike are flexing their muscles and deciding to say "Go home Yankee and take your dollars" by buying gold, either through their central banks or on the individual level, or both. The West has been trying to stifle any effect this would have on gold, as it suits their interests to keep the paper money going.

Already I can see the writing on the wall. Mexico, under the leadership of the great Hugo Salinas Price, is pushing for a silver Libertad dollar. Recently, they held a Latin American symposium where the idea was put forward that all Latin countries would mint a similar silver coin, for trade amongst themselves. The Islamic nations are working on the gold dinar and silver dirham. Even the US is, in 2006, minting a new type of Gold Eagle, of .9999 fineness, to compete with Canada's popular Maple Leaf. Both of those coins, by the way, are legal tender.

I would not be surprised to see the fiat-money system go down in dust, for awhile anyway. It won't happen tomorrow, but it could happen in a decade. Look at our deficits - has anyone figured out a way for us to pay these? NO! Back in 1980, gold and silver we bought as "investments" (eg, buy low, sell high). This time around, IMO, it's going to be, buy at whatever price you can, and don't sell no matter how high the price goes. This time, its not an investment. This time, if you have no physical gold or silver, you don't have any money. I'm afraid that's how it's going to go. Take a position and hang on!

Best wishes, DA

Couldn't Resist

I guess I cannot resist the opportunity to put my 2 cents in..!!

In the year 2000, I read that the world's Central Banks had been exchanging (i.e. selling) their national treasure, Gold Bullion, and replacing it with USD paper. Being a simple soul, that just sounded ridiculous and I took my first interest in precious metals by buying a few stocks. They did very well and I started to read more & buy more. Of course when you do this and talk about it, you acquire a "Bug" status with friends and associates which is a hard mantle to shake. But I was not shaken from my course from then to now and suddenly, all and sundry are aware of these new higher values of Gold. But the escalating rate since 2001 tell a tale that is not a 'spike' scenario.

If you simply look at a four or five year chart, it indicates what I have labelled 'a pretty determined ride' upward over that period, but invert a similar chart of the drop in value against the Euro and it is almost a perfect match; up until a year ago that is. So that is why things are now changing rapidly. The world is now not so sure of the 'real value' of the USD anymore.

Once upon a time people of the world, including Nations, could sleep comfortably in their beds knowing that the USD in their 'Treasuries, or under their beds, were totally reliable vs. their own currencies. That is what has changed and very soon there likely is going to be a run on the US Dollar which I hope is orderly as if not, it could be very scary....!!

I would like to list a few factors gleaned from my readings:

World War I and then World War II bankrupted European and other countries (Japan included)

The USA was already owed a lot of money and by the completion of the Marshall Plan, was owed a lot more.

The debtor counties had to pay it back with interest of course. The mid 80's pretty much saw the ending of the bulk of those payments.

While the interest on the War Debt ('cash') flowed in from 1947 - 1987, things were great, and during which time the USA was at it's most prosperous and the dollar was untouchable. DeGaul questioned it's true value and we know what happened. The Gold Standard was dumped. The world was poor and the USA was rich, so they made the rules..!!

1985 saw the USA have it's first 'deficit' budgets. The War Debt payments that were a big part of the prosperity within the USA, slowley trickled to a halt.

Those Federal deficits are enormous and accumulative. Add in the credit card 'debt'; house equity refinancing 'debt'; bank loan 'debt' and the picture looks pretty bleak internally but more importantly, bleak externally.

US Treasuries Bonds are deflating to foreign buyers. They are not good investments for those guys.

Finally the proof of devaluation is realised when you travel, particularly to Europe. It is now so expensive in OUR DOLLAR terms, which means they got stronger while we got weaker. Once it was King.

The key factor is debt, debt, and more debt...........!! Sometime the piper has to be paid. Just "Printing" more money will not solve the domestic economic problem. I believe that time has now come with not only the USA' s currency being measured once again against Gold, but all others too.

Now the boot is on the other foot. Other nations are rich so they will make the rules and the only thing that they know is from long, long ago. Currencies must have some tie with a product that is finite. They began buying Gold about a year ago and the real 'run' is on. This 'run' may last awhile yet. I suspect two more years.

I have first hand experience of this kind of event. I grew up in the UK. Was educated to completely believe that Britain was rich and it's influence in the world built up over millenniums, was untouchable. Nobody told me the country was actually broke...!! The greatest navy the world had ever seen was gone..? Taxes were furiously high!! (to pay off those war debts), and continuing to act as the world's policeman was just too expensive. So it bowed to America as the new carrier of the Banner. Hey! That was where all their cash was going so why not?

It is just a case now of believing that all this responsibility is too much for the USA. Then add-in the domestic debt factor.............? The world has never seen so much debt and this makes all things a little 'wobbly'. (nee fear & uncertainty).

Thanks for this opportunity. You asked for it......!! AM, Nova Scotia, Canada

Uncle on the Rates Already!

The Fed has raised rates in efforts to thwart inflation. It has gotten to the point where many are scared of any additional raises, as nobody on Wall Street wants to see an inverted yield curve. Neither do the mortgage bankers or the real estate developers or the home renovators or the construction workers. Nor do the people with adjustable rate mortgages. So in essence about 90% of the public already wants the Fed to lower rates. Not many people care to listen to ramblings about monetary discipline and this is at a time when real short term interest rates are basically zero to one percent (depending on what inflation index you use). So it is just a matter of time before the real interest rates go negative again...just a matter of time ... GH

Gold Leagalized in America (home of the free), 1975

Don't forget that on January 1st 1975 it became legal for Americans to own gold. Being a Canadian that started accumulating gold as early as 1971, I remember Americans coming to Vancouver to both buy and store their bullion. It took Paul Volker and 20% plus interest rates to save the dollar, but at the expense of the economy. However, that enourmous negative yield curve that he created gave us 20 years of relative prosperity, which has most recently ended.

Regards, JM

Don't Forget Inflation

Hello, A very nice article/ I eat up these old graphs and interpretations from yesteryear....

And I really do have a comment or two. I know that people will want to revisit those old times of market excitements and perhaps use that pattern for entry and exit points of the markets. This for both gold and silver markets, of course. But there is a problem in doing this and it relates to inflation and the ephemeral nature of currencies over time.

If one factors in the US$'s decline solely by its performance on the forex, for example, the DOW is not really back to returning to its highs, (around 11,000 in year 2000), but is closer to 8000 in value terms that mean anything. The profits are the same unit numbers but the units are shrinking in value on the currency exchange market. That is WITHOUT inflation thrown into the evil brew.

How do I know this is a problem? Answer: because almost everyone will equate the $800 1980 high with the one coming. They will be low by a factor of almost 3 fold. I know this will be the case because I ask most of them and they tell me that they will sell short of $800 just to be safe. Naturally these people are T.A. enthusiasts and T.A. does not factor in forex or inflation variables, but instead treats the USD as a constant over time, stretching right back to the '80's. It is more the problem because T.A. works! Not because it is a measure of a market, but because everyone uses it! Never mind that T.A. becomes dysfunctional over the longer time spans and is only valid when currencies are stable, it works because everyone is using it! (Currencies stable ?)

I wonder what these people will make of a hyperinflation when they want to buy bread for the table?

Will these same folks tend to sell down (out) gold and silver by accident because they know that $600 is an important double 0 number? Well, yeah, because virtually everyone IS pointing at gold now as if $500 gold as if it is the same value as it was the last time it was $500!

Regards, LJ

The Function of a Marketmaker is to Not Take Losses!

In 1979 in Rochester NY, I was trading Kruggerand ounces from $220 to $600 when I jumped out. You could not sell coins except early in the day, in an uptrending market. The dealers who were buying immediately then sold the coins over the teletype so as to end the day neutral.

On down days, I was told "we aren't buying today", because the dealer would have to resell at a lower price than he bought. So the street market for physical gold really only had liquidity when it was rising.

After being educated as to why I couldn't sell coins today when I had bought them at a dealer's place two weeks ago, I understood the function of a market maker- to not take losses! Then I picked a target at which to exit, while there were still lots of eager buyers and the price was going higher.

Note the COMEX traders mugged the Hunts after the traders couldn't meet their silver obligations. All legal, of course. Luckily I had seen that coming at the local dealer.

Those trades helped us buy a nice home.

The small coin dealers who were trading in bullion made just gobs of money, great gobs on trading and also their personal collections and inventory appreciation. The inflation in their accounts then led them to buy what they loved, "wonder coins"- museum pieces and rarities, so numismatic coins soared beyond imagination. Most collectors took bullion profits and rolled them into upgrading numismatic collections as a strategy to convert trading profits into long term investments. Later, their prices collapsed too as did the coin grading standards that the numismatic coins were traded by. I suspect we will revisit those conditions along with the boom in bullion prices.

Inflation comes from an expansion of the money supply. This happens even when the money is gold and silver. The history of Spain after the gold from the New World flooded into the empire is not any prettier than post-WWI Germany Weimar Republic's inflation.

History repeated in the 1980's with short interest rates going into double digits. Since short rates peaked in the 1860's Civil War at 9%, (when we were shooting at each other!) I knew those high rates wouldn't last and so zero coupon 30 year bonds were a great buy for gold profits, all guaranteed by Uncle Sam (who keeps making the same mistakes, if you look at a long enough time line). -S

The Depression will arrive

The Volker "high interest rate" medicine for inflation is not now possible, as it would tip into direct depression when one considers the debt levels. Thus, this time, gold will go and stay relatively high, but may repeat the unsustainable peak. There simply is little that can be used to protect yourself from currency expansion driven inflation.

More likely than the 1933 gold confiscation is gold confiscation and an obligatory pension investment in long term US govt bonds. Thats where the money is now. After all, only some 20% of gold coins were turned in in 1933, the rest were later ruled by the US govt to be "lost" as a face saving.

Since it is unlikely that the US gov't can shut down the London gold market or others around the world, gold will remain highly valued relative to fiat currencies undergoing even more rapid expansion. Instead of gold being regarded as the canary in the mine, govts will treat as a unimportant frivolous non-monetary indulgence (investment in to be outlawed as Bernanke tries to force all money into turnover) and argue that their currency not inflating as lower than country B. No govt will want this game to end - loss of power and control is always unacceptable

When the inflation game can no longer be played as no one will exchange goods for worthless fiat, then the depression will arrive and reform currencies (with a consequent lowering of gold price).

The logic of this argues for holding gold till near depression and then exchanging for high value resource stocks (oil, Ur, water, even good farmland), preferably those that have good cash flow (fundamental analysis value).

Regards, TP, Ph.D.

Raising Rates May Not Work This Time

The fear is inflation related mainly to the U.S.'s irresponsible monetary handling and explosion of its money supply during last number of years. Countries such as Japan and others holding our government securities (and supporting our dollar) would probably like to drop them all now. They can't because if they were to return their investments to us, it would lead to a wipe out of the US Dollar, the world's "reserve currency." Their economies would go down with the U.S. There is no question that an inadvertent signal is being sent to the U.S. expressing that "we really no longer want to support your economy any further under these circumstances". Just look at the German central bank, which has declared that half of their monetary reserves are now in gold bullion. And of course the other central banks such as Russia, South Africa and Argentina are declaring an increase their gold reserves soon. I believe these countries are seeing something horizon in the near future indicating a potential world wide monetary collapse of colossal proportions. While traditionally they were playing the mutual game of supporting a lower gold price through central bank sales, they probably now realize that the monetary stability of their individual countries is more important. And of course when one drops out of the club so to speak the others will do so in turn as it is human nature on the geo-politically scale.

The Fed has always, it seems, responded to inflationary pressure by increasing the interest rates (supply side economics). But this time it may not work, as it would send the U.S., whose citizens are now over their heads in debt, into a deep depression, negatively affecting the rest of the world. I believe we are on the brink, closer than most people think, to a disaster. One may see this with more certainly if you also throw in the uncertainty associated with the current geo-political events.

The U.S. can do only 2 things I believe to delay the inevitable. (1) Hyper inflate, a policy that may come to fruition under our new Fed Chairman Ben Bernanke, or (2) Pass draconian police state measures in the U.S. economy to control the economy, a policy that will not go very well with the U.S. population. As per gold in the last several days, it is suspected by a some people that at least one central bank (which one(s)?) is rapidly buying up much of the gold on the markets, or enough to drive the price up. I any event it would be very interesting to see where gold will go. Will the gold bugs and bulls have their heyday??

DK, Ph.D

No Top in Sight

Good advice and a good reminder of history. This time however, the deplorable and dangerous conditions that exists from the tremendous amounts of USD held by nations that are basically hostile to the US and the world religious divisions to the price of oil, to the irreponsible managing of the economy just to name a few make a very good case to hold gold.

It seems as you say that national and international anxiety with large deep seemingly unsolvable problems make people want to hold that timeless hedge GOLD as store of value that has been a source of security for centuries. Its my opinion we won't see a top on the price of gold until and unless these problems are solved and right now we do not have the leadership to even begin to start.

Sinc. WL

Hitting Closer to Home

If one follows the events of the last few years forward one begins to see a pattern. Early fiascos--Enron, Worldcom, Arthur Anderson--were distant from most of us. "How can you possibly defend against fraud? Through the bums out" came to mind. (BTW-I was a secular bear beginning in June of 1998: This is not revisionist history from me.)

As we move forward, however, the disasters start hitting close to home--pension funds. "Weren't those guys required BY LAW to make good on their pension promises?" is the thought. When you realize the answer to that question is either "No" or "Yes, but tough luck," you begin to see the real vulnerabilities of the individual in the current form of capitalism. The sense that nothing is sacred or nothing is too big too fail is growing. The sense that the system has truly become cancerous is underscored by the varied outcomes for executives and workers at recently restructured Delphi. The sense that you cannot begin to understand what is REALLY going on behind closed doors is underscored by Refco--IPO in August and bankrupt in October.

I used to be an optimist, especially when it came to capitalism. What we have now is not what I would call capitalism, but rather crony capitalism. Maybe gold is responding to this. Maybe it is sneaking into the conscious of investors around the world. Maybe it's much simpler: Bernanke is a complete incompetent, and we all know it.

The panic buying of gold isn't close. The gold bull is still in its infancy, IMO.

DC, Ph.D.

Gold Limit Moves

Mr. Nystrom, I checked one of my archive Commodity Research Bureau charts from 11-21-80 and as near as I can tell the limit on gold futures trading in January 1980 was $25/oz per day and by the third week of January had been increased to $50/oz per day. An older chart from 11-16-79 appears to have the limit set at $20/oz. I can recall at the time that the CEA would change limits whenever they felt it was necessary and also jacked the margin rates around at will. Most SPOT months had the limits removed entirely!!! Between the two chart dates the grid marks went from $5/grid to $10/grid. Limit days in many commodities were not uncommon. By all appearances I think we could see some wild days ahead of us price wise, unless the government steps in again like they did on the Hunt brothers.

Enjoyed your essay. It is interesting to scan the entire issue of CRB's charts and see the prices of many commodites selling for less than they sold for in 1979-1980. Compared to other consumable prices the price of most commodities remains at multidecade lows, especially if one adjusts today's prices for inflation. - BP

For Further Investigation

James Sinclair's Excellent Website

Dear sir, I saw your gold charts on gold eagle. I recommend you to visit this web site www.jsmineset.com Its run by Mr James Sinclair. He knows a lot about gold and what happened in the last great bull market, he was part of it. He offers his thoughts and experience totally free. He is a man of great integrity.

Sincerely, CH

Editor's note: Thanks for the info - the site looks great, and I think other readers will enjoy it. I didn't know about it, but I'll keep an eye on it in the future!

War is won by breaking the will of the opponent

Dear Bull,

Here is the Big Picture for Gold. See the web site below and the Flash Movie.


SG, Colonel USAF [Ret'd]

The Story on Silver

I can remember the previous precious metals bull market well. I was 'green' at the time and got my fingers burnt by buying silver near the top and listening to the "experts." e.g. Jerome Smith. This time around I know more. I now invest for a living.

I remember in particular how well silver performed in relation to gold. It's just not happening this time around. I have been listening to people such as Ted Butler, Jason Hommel, Warren Buffett and others tell me about silver's bullish fundamentals, some for over four years now. Irrespective how good and experienced they are, they still make the mistake of 'fighting' the market.

An old but interesting article was written by Harry Schultz about doing this and of course it still applies today. In it he stressed the fact to be flexible. Quote: "You have to be a Flexible Fred. " Everyone has their ego and it is is usually, "I'm right, I know I am. You wait and see." It is only the market that is right irrespective of how 'right' you think you are.

So why is silver not performing anywhere near what it done before with the fundamentals such as they are? There has to be an answer. I believe this man could have it. See Google: Silver Versus Gold by Steve Saville.

Sincerely, BL

Gold Rules Change?

Did COMEX change the rules in January, 1980 to cap the price rise of gold and force the longs to liquidate? I think I read something along that theme for silver and the Hunt brothers at about that same time. If so, maybe the same rules changes were applied to gold also?

Regards, RW

Silver Book

Interesting articles. The answer to your question about the limit up conditions may be found in the book, "The Silver Bulls" by Sarnoff. - BB

(Ed: Out of print, but you can get it on Amazon, used, for a buck.)

Sign of the Top

99 Year Olds Selling Silver

I was 22 years old when gold took off, the one thing I remember is i had an older friend who owned a small coin shop in So. California, and one day there was a line in front with everyone, from kids to 99 year olds selling every piece of scrap silver and gold they could find -- silver spoons, forks, knives and gold denture's you name it ..... looking back that was about or near the top but i cannot remember the date.... just about 2 months later the bull run ended.. and it took 25 years to back even :) - GW

Gigantic Silver Knives

....i remember the gold top very well, although at the time i had no idea. i was a new retail broker at merrill lynch in boston, 2 years into the biz. i had latched onto the gold move buying BE, benquet, a small phillipino gold mining co back then for about $1. i traded it often, all the way up to approx $17!!

how did i know the top was in? i was the broker of the day, handling people that walked in off the street. a young 22 year old man walked into my office and held out some gigantic pure silver knives, forks and spoons that his father had received somehow during world war 2. i mean, these were huge!! 18 inches long, easy. he wanted to deposit these into his account, and trade ASA!!! - M

So there you have it! A wild and woolly time, and I'm sure we're bound to see more, and create more stories to tell our kids in 25 years time!

Turn off the TV and think!

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