Why Gold Prices Go Up And Down

Why Gold Prices Go Up And Down
Video Transcription

Speaker 1: Hey, what’s up you guys? So I wanted to talk to you today about gold prices. We’re looking today at the gold prices and where they’re standing, they’re going up, they’re going down. Just like any other market. What people don’t realize though is… Well I guess it’s more of a question. Is the price of gold going up? Or is the value of the dollar going down?

So I wanted to talk to you about that today and how gold prices really work. So gold is a store of value. It holds that value regardless. It’s always going to be one ounce of gold is one ounce of gold. That’s not going to change unless you cut it, unless you do with the Roman empire did and shave some of it off the fucking side. But essentially it’s going to keep, maintain its value.

The reason gold is a great, money i.e., is that essentially it maintains its value because it doesn’t tarnish. Because it’s portable. It’s a good store of value and everyone wants it. It’s shiny, it’s beautiful. Enter printed money. So the way… So I’m going to go into something. I’m going to go into inflation, because that’s kind of how you understand… it’ll help you understand how it kind of works. Because it all works together.

So let’s say you have an economy, and you have, let’s say $100 in the economy. We’re going to simplify it. And in that economy, that $100, people are buying stuff with it, they’re going to work, they’re getting their paychecks. And that hundred dollars is all the economy needs right? Now, let’s say someone wants to buy a pizza, okay? Because pizza is popular. Well, what they’re going to do is they’re going to go to the guy, buy the pizza and let’s say it’s $5. Okay? So the economy is running and humming and everything is going fine, but… And these are all pieces of printed paper. So these dollars are printed paper, that’s all they are, okay? There’s no backing. The government just says, “Hey listen, this dollar is worth $1 and you have to use it for trade.” Okay?

And so what happens after that is the government says, “Listen, we need more dollars in this economy, because it’s going to make the economy move better. It’s going to increase trade”, yada, yada. Okay, so what is the value of a dollar prior to them doing that? Well, since there is no backing to the dollar. Since we don’t say $1 is worth a piece of silver. Okay? Since we don’t do that. What the dollar is actually worth. Give me a second. 1/100th. What does that mean? If you own $1, it is worth one out of the $100 that are still in circulation. Now if we said, “Okay, well this is worth a piece of gold or a piece of silver”, well then $1 would be worth a piece of silver. It wouldn’t be worth this 100 here. All right.

So because there’s $100 in the economy, your $1 is worth 1/100th of all the dollars that are in the economy. That’s how that works. And with everything like this, all other things being equal, that pizza is going to maintain its $5 value. Okay? So now let’s say the government wants to print more money. They say, “Listen, adding another $900 to the economy is going to help things move better. We’ll be able to increase the minimum wage. It’ll help push up wages. It’ll help increase prices.” Because increased prices is what everybody wants, right? Hell no, it’s not. But that’s the idea behind it. For some reason increasing prices is important for an economy, which I call bullshit on that, but it’s whatever.

So back to the example. So in this economy, the government says, “All right, we’re going to print 900 more dollars.” All right. So let’s say now we have, instead of $100 floating around the economy, we now have $1,000 in the economy. Now what is our dollar worth? Exactly. It is now worth 1/1000th. Okay? Now I want you guys to tell me, I’m not a big math guy. In fact, I’m really not that smart. Okay? But I’m pretty sure that 1/100th is bigger than 1/1000th, right? So what has happened? This is what we call inflation. All right?

Now when you hear the federal reserve say, “Hey, we need a to hit a 2% inflation mark.” What they’re saying is that they need to print enough money and have enough money circulating through the economy to decrease the value of the dollar. Okay? Now what happens when they do that? Let’s go back to our pizza. So we have $1,000 in the economy. Your dollar is worth 1/1000th. Now, here’s where the free markets come in. What happens when people have more money in their hands?

Now I hear the people out there saying, I hear you saying, “Hey, they’re going to invest it. They’re going to save it.” But come on, let’s be realistic here. Okay? We’re a consumer nation’s. I think it’s like 30% of our GDP is people buying shit. That’s a huge chunk of it, right? Well, that’s what people are going to do. They are going to spend that money. Now let’s go to our pizza guy. So all of a sudden everything’s going well when they have a a hundred dollars in the economy. He’s saying, “All right, I’m doing pretty good being able to turn over pizzas and everything.”

Well all of a sudden these dollars are printed. Let’s say wages go up, or government handouts are given, whatever. And then all of a sudden there’s more dollars. And people want to spend it. Well, they probably don’t want to cook. They’re probably going to want to eat some more pizza. Or at least up it to one or two nights a week, whatever the case may be. So what’s going to happen is that pizza maker is going to go into hyperdrive. He is going to start making more and more pizzas, because there’s more and more demand for his pizza, because people have more money. And let’s say they’re working more hours or they just don’t want to cook, so they’re going to order more pizza.

Well what happens there is the pizza maker starts going into hyperdrive, and making the pizzas. And then all of a sudden he’s making so many more pizzas that there’s not enough tomatoes to make his tomato sauce, or he is ordering a lot more of them. Okay? And what happens when there’s a high demand in tomatoes, but there’s not very many? Let’s say the growers can’t grow as much as he needs. All right? What’s going to happen is the tomato people are going to increase their prices, because they see that people want it really bad, but there’s not very much of it. Okay? So all of a sudden the tomato people, they raise their prices and say, “Hey listen, it was 50 cents a tomato for you. Now it’s 55 cents, because we can’t keep up with this. We don’t have enough land to keep growing it.” Or whatever the case may be. All right?

So the price goes up. Well then what’s going to happen to the pizza maker? Do you think he’s just going to say, “Oh, well I need to make sure that my customers are saving a little bit more money? I just need to go ahead and make sure I keep my prices the same.” Hell no, he’s not going to do that. If you have more people that want pizzas and you, can’t make them fast enough and the cost of your materials is going up, you’re going to raise the price.

So all other things being equal, let’s say the pizza maker after all is said and done, raises the price of his pizza to $20, okay? This is called inflation. The increase of the prices of commodities, food, whatever, due to the printing of money and the cheapening of our currency. Now back to gold, because I want you to understand this, because this is extremely important. I don’t care if you’re an investor or a business person, on social security, or working a job. This is important for you to understand.

Cash is considered an asset. And gold is considered an asset. All right? Now, gold maintains value. Just like that pizza. That pizza has intrinsic value, okay? That can’t be denied. Everything in there has intrinsic value. And well, I lost my train of thought. Okay, back at… So it has intrinsic value. So that value is not going to change. Now, what happens when gold prices go up, it’s actually the dollars value going down. Because if people… If the cheapening of the currency, okay, when they’re cheapening the currency, then if something is going down in value, think about a stock. Think about a piece of real estate. Think about a business. If that asset is going down in value, okay? Work with me here. Do you want to hold it? If you said, “Yes”, shut this video off, not worth your time, just shut it off. Go away. I love you. Good luck, but just go, okay?

But it’s funny that most people do that though. There’s their 401ks or their mutual funds, or their stocks. They’ll hold it and pray and say, “Oh it’ll come up someday.” Yeah, years later. And then what could you have done with that ti- Anyway, that’s a whole nother subject. So the value has gone down. Do you want to hold an asset whose value is going down? No. What is the easiest asset to purchase? The easiest investment to purchase? It’s gold. You don’t need any special education, right? You don’t need any… And you know it’s never going to go down in its intrinsic value, because it is an ounce of gold. It will always hold its value.

On top of that, “Well, we don’t get returns on gold.” Well, that’s right, because there’s zero risk with gold, all right? If you’re holding a stock, there’s a risk. That’s why they pay dividends. If you’re holding a bond, that means that there’s a chance that they may default. A bond, by the way, just in case you don’t know is a government or a company basically selling a hundred dollar voucher. And when you buy that $100 voucher, you have lent them $100, and they’ll pay you a certain amount of interest. The reason you’re getting that return is because there is risk. With gold there is zero. Actually, let me do it the way he does it. Zero. There is zero chance that that gold will lose any intrinsic value.

So what happens when the dollar goes down? People dump the dollar, they want to get out. It’s just like if the stock market’s going down. Why does it go down so much faster than it goes up? Easy. Because when people see things going down, they flip a [pure T shit 00:00:12:59] and want to run. That’s just what happens, okay?

So where do they run to with the dollar? If the dollar goes down, are they going to run full-fledged into the stock market and to other things? Possibly. But one of the main things they’re going to run to, it’s gold. It’s what’s called a hedge. Which we can go over another in another video, but it is called a hedge. So when the value, when the price of gold is going up, and this is going to take a little while to kind of flip in your mind. It took me a long time. But when the price of gold is going down, that means the strength of the dollar is going up. It could be that they are destroying money like they were over the past few years. They’ve been, instead of printing money, they’d been destroying it, okay?

But if the price of gold is going up, it’s because the dollar is losing value. And when people see the dollar losing value, they want to hold something that they know is going to maintain that value. I.e. gold. So that’s my spiel on gold prices. If you see them going up, it is not gold’s value going up goes. Gold’s value never changes. It is the price of the dollar going down. Or the value of the dollar going down. Same with silver, palladium, platinum, all that good stuff.

If you guys have any questions on this, just reach out and let me know. I’m not an expert in the field. I just kind of understand some of the economic stuff that goes around. If you’re okay with a little bit of cursing, you can let your kids listen to this. Because I’m teaching my daughter this. In fact, if I actually asked her, “Hey Coco”, my daughter’s name is Coraline, I call her Coco. If I ask her, “Coco, what is…”. Hold on.

I’ll ask her. I’ll say, “Hey, Coco, what is this?” She immediately says, “Fake money.” I say, “Okay.” Well then I ask her, “Well, what is real money?” She says, “Gold, silver real estate.” Okay? She knows the definition of an asset which we can go into in another video. And the definition of a liability, right? And I’m not talking about the complicated crap that you find in the dictionary. I mean, it’s just this is something, it’s an educational thing. And I’m not telling anyone how to parent their child. It’s your thing. Don’t get me wrong. But preparing your children for the future is extremely important. And making sure that they understand that this right here is not real. Did you know that the rules of monopoly say that the bank can never go bankrupt.

All you do is create more money. That’s how it works in the real world too. Very interesting. Thank you 1913 and Jekyll Island. Fantastic book. By the way, Creature From Jekyll Island. It’s hard as hell to read, but once you read it and you understand it, it is good shit. These guys are fricking brilliant. We’ve got a fricking bank, The Federal Reserve Bank. It isn’t even a government institution, but it controls all monetary policy, i.e. it controls us. It controls the economy.

Why do we watch The Federal Reserve? Why do we say, “Oh wow, he’s hawkish. Oh, he’s dovish.”

Why do we always kind of like look at them and say, “Oh, well if they say something, then this could be a huge game changer. The market’s going to move,” yada yada.

Why? It’s because they have the control over the monetary policy. Why do we have such a sharp downturn over back in last year, end of last year? Well, they’ve been destroying money for a long period of time. They continue to do it afterwards, right? But they’re essentially trying to normalize the economy, because back in 2008 we were able to print a hell of a lot of money to get out of it, right? What happened, and this is another video too, is that you know, they printed enough of this money so that we could get money into the hands of these banks. And by the way, those are the benefactors of this whole thing. Like a majority, if not all of the banks should have gone down, but they’re “too big to fail. The economy will collapse. Oh my God, there’ll be millions of people in the streets and no one’s going to be able to have any jobs. If this one company goes down, it’s Armageddon.”

I guess I missed one of those people that believe in the theory of evolution. The weakest will die, the strongest will survive. In business, it is the exact same thing. And by printing money we are helping to protect the weak, and none of the people who orchestrated all of the crap that happened in 2008 went to jail for what they did. If you want a very good educational lesson on 2008 there’s two things. One, I’m still reading and it’s intense. It’s hard for me to understand half this shit, but one of the easiest ways to understand it is watch The Big Short. Or, I haven’t read the book yet. I’ve heard the book is fantastic, but watch The Big Short. Amazing primer on CDO’s and the subprime financial crisis and how things went down.

But I’m also reading a book by Bert Dohmen. It’s called Financial Armageddon. It’s pretty cool. It’s got The White House in the back and the four horsemen of the apocalypse riding through. It’s pretty cool. But Bert Dohmen has a a weekly letter, well actually it’s not weekly. It’s whenever he feels it needs to come out. It’s usually like twice, three times a month, depending. Unless there’s a big market turn, then he’ll put something else out. But he puts that out and it gives a lot of fantastic information. It is a step-by-step account of what happens when credit markets freeze up, and how the financial collapse happened. Really, really cool. But my brain melts when I read it. Even my financial IQ is not that high.

So anyway, thanks for coming out you guys, really appreciate it. I hope this helps you to understand why gold prices go up. When gold prices go up, it is actually the value of the dollar going down. Why? Because they’ve printed more dollars, and people spend more dollars and it’s just a whole… Yeah. Anyway, you guys understand. So thanks so much for coming out guys. Have a fantastic day and I’ll talk to you soon.

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