Should You Buy Gold at $3,000 an Ounce?

February 7, 2013 will not stand out in anyone’s mind—unless maybe February 7 is your birthday. And if so, Happy Birthday! I know I’m a couple weeks late.

Anyway… that date serves as a great example of “better late than never,” which will ultimately bring us ‘round to gold.

First, though, we head to Mississippi and back in time to the aforementioned date.

It was a Thursday in the state capital, Jackson. Sunny and chilly—a great day for slaves.

Yes… slaves.

And yes… 2013, not 1813.

For on that chilly and sunny Thursday, the State of Mississippi finally ratified the 13th Amendment to the US Constitution that outlawed slavery… 148 years after the amendment was ratified by the US and officially added to the Constitution.

As they say, “Better late than never.”

So, on to gold and two emails I received from readers…

1. From JQ: I know you’ve been hitting the drums, beating the dead horse and humming non-stop about buying gold. Despite this fact, I have been sitting on the fence. My bad and mine only? Going forward, isn’t it too late to get in? I expect the answer is no, it is not too late, but can you please explain why I should buy now that gold is $2,900 per ounce. In addition, should I hold physical gold or buy a gold ETF?

2. From LM: What do you consider the best way to begin investing in gold? We have never done so but agree it appears to be time to move forward. And, I have never understood how it could be cashed in when I actually want to buy groceries or something else that is a practical expense.

First off, great questions.

I suspect JQ and LM represent a large body of people/Field Notes readers who were never really compelled to buy gold because, well, there never seemed to be a compelling reason.

Gold’s highest purpose is as a “crisis asset”—the “Oh, no, Marge! The dookie’s too deep!” asset when the economy or the dollar goes all pear-shaped.

But honestly, I understand why so few people buy into the crisis belief system that would have them buying gold.

America has not had any real crises during the lifetime of anyone reading these words.

Yes, we’ve had our dot-com busts and our housing collapses and what not, but nothing that rises to the level of a Great Depression, or a true 19th-century-style financial panic, or a dollar in freefall against world currencies.

So, as Alfred E. Neuman exclaimed from the pages of Mad magazine back in the early ’80s, “What, me worry?”

Second, like Mississippi finally agreeing that owning slaves is no bueno 148 years later… buying gold now really is a “better late than never” moment.

So let’s address the questions raised by these two reader emails…

1. Is it too late to buy gold?

I’ve been recommending my readers buy gold since 2010. At that time, gold sat at around $1,000.

All along the way over the last 15 years, I’ve continued to hit the drums and beat the dead horses by constantly re-recommending gold. And all along the way, gold has continually pushed past a string of new all-time highs. $1,200… $1,500… $1,900… $2,000… $2,250…

You get the point.

Yes, pressing up against $3,000 per ounce today is a big deal.

But gold has not yet finished playing the game.

On an inflation-adjusted basis, gold needs to hit about $3,572 to reach the all-time high it set in January 1980, when the metal touched a price of $875 in the wake of hyperinflation in America and the Federal Reserve pushing interest rates north of 20% to battle inflation.

I’m not going dive into this here—I’ve written about this ad nauseum in past dispatches—but A) we’re still going to see inflation well above current levels, and B) the Fed will not have the luxury of pushing interest rates up like Paul Volcker’s Fed did in the late ’70s and early ’80s. The economy just wouldn’t be able to take it.

America circa the late 1970s had a debt-to-GDP ratio in the mid-30% range—in other words, practically no debt.

America today, with nearly $37 trillion (and counting) in IOUs, has a debt-to-GDP ratio exceeding 120%. And Uncle Sam is spending more than $1 trillion per year (15% of his annual budget) on debt-servicing costs.

Any effort to slay inflation today by jacking up interest rates would cause a financial meltdown. Like the engineers at Chernobyl who quickly lost containment, the impacts would be catastrophic.

Yet do nothing, and inflation in America spirals out of control, which pushes up interest rates anyway since investors will demand greater reward for putting money into US debt… which breeds its own crisis.

That’s why you buy at current prices: The risk of meltdown remains, and it’s not an insignificant risk.

So, gold will continue to go higher.

2. What’s the best way to own gold?

Personally, I like physical gold. I want to control my own wealth and have direct access to my gold, if I need it.

I use Apmex.com to buy raw bullion coins that were used in trade a century or so back… or I use BullionStar.com, a Singapore metals dealer and vault, to buy modern gold/silver sovereign coins online and to store them in Singapore.

But if you don’t want the hassles of storing the physical metal, then I would suggest an ETF like Sprott Physical Gold Trust, which I’ve recommended to Global Intelligence Letter subscribers.

Unlike too many gold ETFs, Sprott owns the physical metal and it’s not involved in borrowing and lending gold. (Lending like this is causing a crisis in the gold market at the moment and could reveal to investors what I’ve been warning against for years—that too many people who own certain big-name gold ETFs are going to discover, sadly, that all they really own is a claim on a piece of paper, not a claim on actual gold.)

3. How can I buy groceries with gold?

You don’t actually buy anything with gold, except dollars.

If you wanted to buy groceries, you would simply convert gold into dollars that end up in your bank account.

The point being that gold will protect your purchasing power when converted back into greenbacks.

Here’s a simple grocery example based on real data:

• In December 2019, just before the pandemic, the average American family of four spent about $613 per month on groceries, per USDA data. Gold was in the $1,500 range that year. So one ounce of gold would cover 2.4 months of groceries.

• In late 2024, that same family was spending $937 per month and gold was in the $2,700 range… meaning an ounce of gold covered 2.7 months of groceries.

Had you stuffed $1,500 in the bank in 2019, you’d have barely more than $1,500 today and your cash would cover about 1.5 months of food costs. So inflation picked your pocket.

But gold tracked your inflation costs quite well.

All you would have to do is sell an ounce of gold here and there, deposit the dollars into your bank account, and head to Piggly Wiggly and do your normal grocery shopping—knowing that gold has helped protect your financial lifestyle.

And that is why it’s never too late to buy gold.