Judging Freedom - Lear Capital - What you need to know about GOLD Investing

Episode Date: March 8, 2023

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Hi everyone, Judge Andrew Napolitano here for Judging Freedom. Today is Wednesday, March 8th, 2023. It's about three o'clock in the afternoon here on the east coast of the United States, noon in California, where we join our next guest, Kevin DeMeritt. Kevin is the founder and CEO of Lear Capital, which specializes in investments in precious metals. Full disclosure, I am a spokesperson for Lear Capital. Kevin is an expert on the value of precious metals and how you can increase your assets and your wealth by a timely investment in them. Kevin, it's a pleasure. Welcome to the show. Oh, it's great being here. Thanks for having me, Judge. Of course. Of course. So, Kevin, tell me, why should a person invest in gold and what's

the difference between an investment in gold and either silver or platinum or any other precious metal? Yeah, great question. You know, if you look at the gold market, most people are really surprised to find out that the value of gold since the year 2000 has actually outperformed the Dow. So if you would have invested $100,000 in the Dow Jones, that would be worth about $320,000 today. And if you had you invested $80,000 in the Dow and $20,000 in gold, that portfolio is worth $385,000. So you have another $65,000 in the bank today, over and above what you would have just with stock. So that kind of shocks people. But it shouldn't shock people because when the

government has printed the kind of money that we've seen over the past 15 to 20 years, gold is going to help protect against the inflationary effect that that is going to have. It has. It's done an incredible job doing it. The second question is, what's the difference between gold and silver and platinum and palladium is, you know, central banks typically purchase gold. They don't purchase silver. They don't purchase platinum or palladium. So when you see the central banks purchasing enormous amounts of gold, like we saw last year, it was the largest amount of gold that we've seen in over 55 years that the central banks have purchased. That's going to help, obviously, the gold price, not going to really help silver and the other industrial metals like silver, platinum,

and palladium. However, usually when gold moves, the silver market will follow. And ultimately, typically, it will give you a better return on your money over the longer term. It will also have more volatility. Why is the Fed buying gold? And what do they do with it? Do they just store it in the basement of the New York Federal Reserve Bank in lower Manhattan? Well, if it's the U.S. government, yes. But China has been a big buyer. Russia has been a big buyer. India has been a big buyer.

They are just on a buying spree like we haven't seen in quite some time. You go back to 1999 to around 2002, they were sellers of gold and now they're turning around and big buyers of gold. And I think the reason is that everybody has pumped up their money supply. They know inflation's here. Usually inflation lasts a lot longer than most people believe. And the central banks want to be a part of that by backing their currency or backing their economy with real money. Are they attempting to manipulate the price of gold by massive acquisitions? I don't think so. I don't think they're there to manipulate the price of gold.

I think they're opportunistic. I think they know that if they continue to print the kind of money they've been printing, and I don't think they're going to stop. I mean, we haven't seen them stop in the past 20 years, that every time they add another dollar to the economy, the dollars that are already out there are getting worth less. And when you add an increased demand on a fixed supply like gold, it's going to go up in value. So they'd rather hold that. And what determines the price of gold? Is it simply supply and demand? Supply and demand. So when you see the central banks purchasing gold, usually that's a pretty good indication you would like to get in. I mean, if you go back 55 years, the last time they were purchasing this amount of gold, the gold price increased over 700%. Why? Because we had inflation. It was the 70s. They started buying gold and the price of

gold ran up to $850 an ounce from a low of 55, but let's say most people got in at 200 or so. So when they're purchasing, they're not day traders. They're not speculators. They typically hold for 10, 15, 20 years at a time. And the amount of gold that they're purchasing, Judge, is last year, for instance, was 1,140 tons. 1,140 tons. Tons. That's half of all the gold that's pulled out of the ground each year. So it was a large amount in 2023. They're expecting the same. Where would the feds go to find eleven hundred tons of gold? Who would have to sell it to them?

Well, you would find it from, you know, any of the production that's happening, because, again, that's 50 percent of the production that happened. But you would find it from Russia, you would find it from China, you would find it from the United States and any central bank who would sell the precious metals to another central bank. For instance, you saw Turkey sell a little bit to somebody else, but they're in the open market, just like everybody else trying to buy as much as they possibly can. What would happen to the price of gold if more gold were discovered in a gold mine somewhere? If gold is reflective of supply and demand, would that increase the supply and then lower the value? Great question. You know, this is a question that I've been asked for the past 20 years. And if you go back to South Africa, which was the largest producer of gold, and look at what they were pulling out of the ground 15 years ago, they're actually finding and what's being depleted out of the ground is kind of matched up. And that's why I say when you put an increased demand

on a fixed supply, it really is fixed. We can only pull so much out of the ground and it's getting worse and worse as time goes on. They can't pull as much out. Let's say I have $1,000 in the bank for a year and at the end of the year it only buys 850 dollars worth of goods because of inflation and let's say i bought gold a year ago at a thousand dollars where does that stand the value of the gold compared to the value of my dollar we know the value of my dollar went down because the price of everything went up. We'll talk in a little minute about why the price is going up, but why the price of everything's going up. Price of everything goes up, purchasing power of the dollar goes down. Same amount of

gold as I did dollars. Where does it stand vis-a-vis inflation? Yeah. So to answer that question, I like to go over a long period of time so people can understand that this isn't a fluke in a short period of time. Go right ahead. One ounce of gold in 1920, which is a $20 gold coin that we actually used to use as money, was $20. So you could buy it with a paper dollar bill, or you could have an ounce of gold in a $20 gold Liberty or a St. Cotton's. That one ounce of gold today is worth $1,820. If you look at the gold price in 2000, the year 2000, it was $250. And today it's $1,800. If you compare that to the fall in the dollar, gold is actually doing a little bit

better than inflation as far as keeping people's purchasing power of those dollars intact. So, if one were to invest in gold as a hedge against inflation, I gather it's a long-term investment. You're not going to be taking the gold, buying the gold on Monday and converting it and buying something with it on Friday. Correct. You could, but we would recommend holding it typically for a period of time, because if you purchase something with it or turn it back into dollars, then you're back into the currency that's going down in value. So why do that? Can you buy goods or services in America today with gold?

I mean, I'm familiar generally with the legal history of gold and when contracts pre the Civil War required that you paid in gold because nobody knew what dollars are worth and the government was printing dollars during the Civil War and all of that. But can I go to a grocery store or can I buy a car or buy a house with gold today? Well, if someone will take it, it's pretty easy to see what the price is and convert it to whatever currency you would like. So most people, when they purchase the precious metals, if you get into a situation where you would need to do something like that, usually they take a small piece of the gold or silver, turn it into cash, and then go down and purchase it that way

and keep as much in precious metals as they would like for that protection of purchasing power. Does the government, aside from its massive buying of quantities of gold, which you just told us about, Kevin, artificially deflate or otherwise affect the price of gold per ounce? I mean, why is it $1,800? Is it a true free market of supply and demand, or does the government have its fingers on the scale in some way that's not apparent to the investing public? Yeah, they could influence the market because they have a tremendous amount of gold and buying power that we don't have. We can't go into our garage and print up a bunch of paper money and then go out and buy gold like they can. So if they're manipulating something, it's probably the paper currency that's what they're manipulating as they print out more dollars the dollars that are out there become

worth less um so their purchase they're printing up paper dollars and going out and purchasing gold that is helping the gold price but as far as manipulation I'm not sure it's a manipulation uh on their part it's like I said I think it's more opportunistic on putting something real in backing whatever currency they have out there with gold. So recently, of course, I bought some gold from you and I have it in a safe and secure place, and I'm probably going to leave it there for a while. But if I came on hard times or if inflation went crazy and I needed to use that gold to buy food or pay the mortgage or whatever, what would I do with it? Yeah, great question. I mean,

you can go anywhere with it. A lot of banks will know the exact value of the gold, so they will take it. A lot of brokerage houses will take it. I'll take it back. All you have to do is pick up the phone and it'll be back here in a day or two. We do everything by two-day Federal Express. So it doesn't take long to get that back to us. And locally, you can go to a pawn shop or what have you, and you know what the price of gold is. You can see it throughout the day. So that person's either giving you that price or very close to that price. So there's a lot of places to go, which is different than a piece of real estate or a stock. You only have so many places you can go. So I can take a gold coin and walk into Chase Manhattan Bank and say, deposit this in my savings account or convert this into cash.

And then we would look up what gold is selling for on that day on at that moment. And they will do that. They will either give me the cash and put the cash in my account or somehow credit me for it and take the gold off my hands. Yes. Some banks will do that more than most people would would suspect. So I don't have them all in my top of my head. So I'm not if chase but uh you know i know people have gone down to bank of america and other banks and done exactly what you just said they've converted it into cash and put it back in their in their safety deposit box or okay baby's account what about uh let's just segue for a minute uh into silver uh is it does it afford the same level of protection against inflation

that gold does? The silver market, like I said before, really follows the gold market. But silver has some unique abilities that gold does not. For is battery technology and solar every without silver there isn't any solar uh panels uh so you kind of have this double play with with silver that you don't have with with the gold market tell me about it it so if the economy is doing well we already know that huge amounts of silver have moved over matter of, there was a statistic out that last year or two years ago, there was a 69 million ounce surplus of silver in the market. And 24 months later, we had a 260 million ounce deficit in the market, mostly because of the solar panels. So if the economy is doing well, it's needed in batteries as well. So the electric vehicles, the solar, this green energy, silver is going to get a lot of demand when the economy is doing well. So great. The silver market should move up.

In bad times, we already know that silver was over $49 an ounce in 2008 and one other time in history back in the 1980s with inflation. So here we are today at $22 an ounce. So it's a double play to me. If we have a bad recession, we kind of know where silver could go. If we have good times, then we're predicting silver in the 30s, $33 to $35 an ounce. Regardless of what inflation does, that's on the industrial side. If you get the gold market going up to 3,500, then the silver market should follow. And usually because it's less of a cost per ounce, it performs as far as return on investment a little bit better than gold does. Okay. I was going to talk to you about inflation in the sort of big picture, but I want to save that for the next time we chat in the next week or so. But if I had $10,000 to invest,

what would you advise me to invest it in? It really depends on your age. Well, if it was you, I already made the recommendation. So you know what my recommendation was for you is start off in the gold market and then work your way over to the silver market. I believe both of them have tremendous potential. If you're looking for the next five years or 10 years or 15 years, talk to the representatives here and we'll try to help you determine what would be the best diversification in both of those metals for your portfolio. Okay. All right, Kevin, it's a pleasure and And I hope we can do this again. And I can see from the people that are sending us messages, they are messages of gratitude. Normally, we're talking

about the Constitution and about the war in Ukraine. But now we're talking about a way people or and we talk about inflation, of course, People can fight inflation and hedge against it and have a nest egg for themselves that will grow. And I'm very grateful for the time you've spent with us. Of course, if any of you are interested in this, you know how to do it. Learjudgenap.com or the 800 number at the bottom. And you'll find some very accommodating, very knowledgeable people who work for that handsome guy in Los Angeles, and they'll help you out. Kevin DeMeritt, Lear Capital, it's a pleasure. Come back and join us again. I will. Thanks, Judge. All the best. Judge Napolitano, for Judging Freedom. Thank you.