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Precious Metal Prices

Unsurprisingly, we’ve seen another strong month in precious metal prices.

Gold remains in the nine hundred dollar range, silver stays around fourteen dollars an ounce, platinum stays in the eleven hundred area, and palladium sticks in the lower two hundreds.

Of course, here’s the thing about precious metal prices: These prices do not represent the true value of the metals.

The true value of gold is that it’s worth its weight in gold. The value of silver is that it’s worth its weight in silver, and so on.

Because we tend to use dollar as a signifier of value these days, we forget that a dollar really has no inherent value. It is only in the faith that we put into the dollar that it has any value whatsoever. Gold, on the other hand, has inherent value whether you believe it or not. You can print more money, you cannot print more gold.

So precious metal prices are really an interesting, almost philosophical thing to look at. Gold isn’t worth nine hundred dollars an ounce, that’s more like what we pretend it’s worth. Again, gold is worth its weight in gold.

Platinum doesn’t have price jumps, rather, the dollar declines, and as a result, it takes more dollars to buy an ounce of platinum than it did previously.

We’ll skip the “brain in a jar” theories of what is real and what isn’t and just say this: Know that the money in your pocket is only money if both you and the person you are trading with believe it to be money. The fact is that a dollar bill really has no value but the value of the paper it’s printed on.

This is why precious metal investors are wise to hold onto their investments in any financial weather. The dollar will always have its ups and downs, we’ll always see inflation and deflation, we’ll always see surges and crashes, but the value of metal, in fact, never goes down.

Oh sure, precious metal prices can go down, but to put that into perspective: a dollar, by the gold standard, was worth, to take the 1933-1971 US standard, 1/35 of an ounce of gold, with an ounce of gold being fixed at $35 during that time. Now, a dollar is worth whatever people say it’s worth. In other words, you can’t really value an ounce of gold by how many imaginary fractions of an ounce it’s really worth. Right now, a dollar is worth something like 1/900 an ounce of gold, and that’s likely to change by the time you read this.

Of course, it’d be foolish not to keep an eye on precious metal prices, as, like it or not, we all have to use official currency to make it in life, and the dollar will simply have to be our closest approximation to grading real value, as ridiculous as the whole notion really is. Still, the important thing to remember is that an ounce is always an ounce, no matter what the precious metal prices might say.

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Janet Villalon

Jul 12, 2009

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