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Gold Profits in the 1970s vs. Today: Big Difference

Written by Gary North on February 9, 2012

In 1976, you could buy gold legally at $106. In January 1980, it hit $850 for one day. Then it fell for the next 21 years.

What abiut today? Are we facing that kind of roller-coaster ride? The self-proclaimed experts who told you NOT to buy gold in 2001 at $257 tell you not to buy it today. I told my readers to buy in October 2001.

Here are some considerations from Rick Rule, who is a gold bug in good standing.

King World News has received many questions about what to expect from this bull market versus the 1970s, so today KWN interviewed Rick Rule, Founder of Global Resource Investments, to get his take on the situation.  Here is what Rule had to say about how this bull market will proceed as opposed to the one from the 1970s:  “It’s a very interesting topic.  That was, of course, the last really good gold market.  People remember the 1970s bull as a market where gold ran from $35 an ounce to $850 an ounce.  This was a truly spectacular bull market and great fortunes were made.”

The one-two punch of guns and butter and social spending kicked off a significant round of inflation, which is eerily similar to today.  We also saw a broad advance in natural resources, in the 70s, as a consequence of two decades of underinvestment.  This is also very similar to today.

I suspect the other thing that argues in favor of gold doing well is the demand for gold is much more diverse now.  In the 1970s market the demand for gold was largely from citizens of Western developed nations.  You didn’t have the availability of gold distribution to societies that have traditionally looked favorably on gold, in particular East Asian and South Asian societies.  This encompasses India and China and it could well be that in the intermediate-term there will be more strength in the bullion market because of continued retail buying in India and China.”

International demand is growing, as Asians get richer.

“It is my belief today that we have a chance to go substantially higher in the gold market.  In the 70s the world economies were in better condition to deal with the stresses they experienced in the late 1970s than they are today.  And as a consequence of heading into serious difficulties, with weakened national balance sheets, the potential for an upside blowout in the metals price is stronger now than it was in the 1970s.

Given that the world economic condition is far more precarious now than it was at the end of the 1970s, the response by fiat currencies to black swans or asymptomatic shocks could very well be much more dramatic.  Because of this it’s possible that you will see more dramatic upside moves in both gold and silver than what we witnessed in the decade of the 70s.”

I think he is correct. But beware a worldwide recession. That will place a premium on cash.

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One thought on “Gold Profits in the 1970s vs. Today: Big Difference

  1. Unfortunately, not all are able to invest, financially.