There were a few articles about gold from 1972 to 1975, but the big stories didn’t really get published until around 1978-79, and especially in January of 1980 - the final blow-off top in both gold and silver.

But it was the stock tables that I found particularly interesting.

In 1975 most or all of the gold and silver stocks were trading under $2, most were penny stocks under $.50. Even with gold up 400% from the 1972 low of $60 to the 1975 top of $200, most gold and silver shares did little to make anyone notice, especially the mass public who had no idea what was going on.

It was not until gold bottomed out in late 1976 at $100, and into 1977, that gold and silver stocks started their historic bull market.

The bull market in gold and silver stocks would end at prices that were unthinkable only a few years earlier. I printed out stock tables from 1975 up until the January 1980 top and was totally stunned at what I found. Here are some examples:

Lion Mines – 1975 price $.07 / 1980 price $380. Yes, that’s not a misprint you could have bought 1000 shares of Lion Mines in 1975 for around $70 dollars and held on for five years riding the wild gold and silver bull until 1980 where you could have sold those same shares for $380 each for a total profit of around $380,000.

Bankeno – 1975 price $1.25 / 1980 price $430
Wharf Resources – 1975 price $.40 / 1980 price $560
Steep Rock – 1975 price $.93 / 1980 price $440
Mineral Resources – 1975 price $.60 / 1980 price $415
Azure Resources – 1975 price $.05 / 1980 price $109

These are only a handful of gold and silver stocks that participated in what I consider one of the biggest financial opportunities in the history of human civilization.

I don’t know of any other, except for maybe the dotcom bubble where in only a 5 year time span you could have tuned so little into so much wealth. Imagine buying in 1975 a handful of gold and silver stocks for under a dollar and selling them in 5 years for $100, $200, or even $500 per share as gold fever ripped through Wall Street.

This is a great example of the kind of investing philosophy that Dr. Marc Faber talks about when he says that to be a great investor you only need to make a few good investment decisions in your whole life to be successful.

This one decision in 1975 to buy just a handful of gold and silver stocks and sell them near the all time high’s of hundreds of dollars per share could have set you up financially for the rest of you life.

I truly believe we are at that same juncture as in 1975, but only this time the fundamentals are even better for gold and silver. The similarities between the 1970s and today are uncanny.

I strongly recommend everyone reading this essay find a copy of James Dines prophetic classic “The Invisible Crash” known around the world as the gold bugs’ bible. The book is basically a documentary and case study of the stock and gold markets of the 1960’s to mid 1970’s. The things that Mr. Dines wrote about back then could have easily been written just last week or talked about on CNBC yesterday. Here are a few quotes from one of my most cherished books.

“It will be hard for people to believe this but, via inflation, their own government did them in. Practically on a daily basis in 1974 people saw rising prices in grocery stores, as they received fewer goods for their dollars. A full-fledged panic away from paper money could start.”

Or how about this quote: “When people see gold and silver standing alone amidst the economic ruins, they will realize that we gloom and doomers were actually right. Hopefully, eternal optimists will pay more heed to warnings the next time around.” I like this one the best: “Too much paper has been printed in the past, and will have to be wiped out no matter what.”

This is a good one too: “People say gold is useless. Not true. It is demonstrating its function right now. Gold is the ballast for the printing press used in making paper money, and gold relentlessly punishes offenders.”

The list of timeless quotes goes on and on in this awesome book, but I will leave you with one last quote that is relevant to today’s problems in the U.S dollar, and the so called economic rebound: “It’s dawning on many people that to defend the dollar, U.S interest rates will have to go up; else, money will be transferred from the U.S to England to take advantage of higher interest rates, and a dollar crisis would ensue. However, if interest rates go up, this might choke off the boom in our economy. What a dilemma!”

WELL, THAT QUOTE COULD HAVE APPEARED IN NEWSPAPERS JUST THIS WEEK. LIKE I SAID, THE SIMILARITIES BETWEEN NOW AND THEN ARE SIMPLY STUNNING. ALL OF THESE QUOTES TELL THE REAL STORY OF WHY GOLD (AND SILVER) ARE SO IMPORTANT THROUGH OUT HISTORY, AND THAT HISTORY DOES REPEAT ITSELF.

These quotes of yesterday explain today why gold is in a bull market, and why the current rally in the general equity markets is only a bear market rally, or a secondary reaction based on 45-year low interest rates, several tax cuts, and a Fed flooding the world with fiat (unbacked) dollars. Once the Fed raises interest rates to save the dollar (coming to a theater near you!) the stock markets, bond markets, housing markets and credit markets will implode.

For anyone reading this essay that would like to know more about why the U.S dollar is doomed unless the Fed starts to raise rates fast, I recommend “The Dollar Crisis” by Richard Duncan. In his book, Mr. Duncan takes you step by step through the causes and the consequences of the U.S dollar crisis.

Here is a quote from the book indicating Duncan’s view that gold and silver are in a bull market and why the dollar is set to fall to much lower levels in the future “Balance of payments deficits of an unprecedented magnitude have resulted in credit induced economic over heating on a global scale. The foundations for sustainable economic growth will not be restored until this flaw is corrected and the U.S. trade deficit ceases to flood the world with U.S. dollar liquidity. That will require that the dollar standard be replaced by a new international monetary system that does not generate, or even tolerate, rampant credit creation.”

THIS CURRENT ENVIRONMENT FOR THE DOLLAR IS HORRIFIC TO SAY THE LEAST.

In my view, the only way to stop the waterfall decline in the U.S. dollar is for the Fed to raise interest rates to attract more buyers, who at this point are getting better returns in safer currencies around the world. But if they do raise rates, that could cause a simultaneous crash in multiple markets (stock, bond, housing, credit).

ONLY GOLD AND SILVER AND THE COMPANIES THAT TAKE IT OUT OF THE EARTH WILL LIKELY PROSPER IN THAT ENVIRONMENT. GREENSPAN HAS PAINTED HIMSELF INTO A CORNER THAT MANY BELIEVE HE CANNOT ESCAPE.

I know it’s hard for most people to think that gold and silver will surpass their old January 1980 highs of $850+ for gold and $50+ for silver, but that is what a 20+ year generational bear market will do to investors who have grown up with falling real assets (gold and silver) and rising paper assets (stocks and bonds).

When the tide of human emotion swings and paper assets start to fall hard (The day the Fed bites the bullet and raises interest rates to save the dollar), the lust and fever for real assets will be unbelievable.

The dotcom bubble, where many stocks went from pennies to hundreds of dollars per share, could look small compared to some of the up coming gains in the first ever gold and silver bull market of the 21st century. Unlike the dotcom bubble that was based on easy financing, false profits and aggressive accounting, the coming explosion in gold and silver stocks will be all about supply and demand and a mad fear to protect one’s savings from paper destruction.

When the entire world wants a piece of the gold and silver stock bull market, there will only be a limited supply of shares so they will have to be bid up to unthinkable levels. The gold and silver stock sector is very small compared to the bond market and the overall stock market and it won’t take much to push these stocks into the stratosphere.

I am sure that most of you reading this essay have co-workers that couldn’t even name one silver stock, but in 3-5 years they will be telling you what silver stocks to buy and that will be a sign that the top is near.

Until then, in my view, gold and silver and the companies that mine offer a once in a lifetime opportunity over the next 3-5 years.

Guest Commentary, by Edward Gofsky
The 21st Century Gold Rush
December 22, 2003