GOLD AND SILVER VALUE
Gold and silver dollar prices recently declined, and yet bullion sales are breaking records, perhaps because an increasing number of Americans realize there is a difference between face (or nominal) value, and inherent or intrinsic value. Think about it. The U.S. Dollar bill has a face value of one dollar. It will never be worth more than a dollar and, adjusting for inflation, its real value is considerably less than a dollar.
It costs little for the government printing presses to keep running, day and night, conjuring $100 bills out of thin air and loading the bricks of notes onto palettes and fork-lifting them off to the vault. But with all of those billions printed, imagine the value of the dollar declining dramatically, as though it now had 70c printed on the face of each bill, instead of $1 (actually, it should have 2c, since it has lost 98% of its value since 1913). Can you imagine Americans stampeding to the banks to accumulate paper dollar bills? It would simply never happen. No, Americans would instead lose all faith in paper currency and turn to the alternatives: gold, silver and the barter system.
COST OF PRODUCTION
By contrast, a gold American Eagle one-ounce coin has a face value of $50. The last time gold sold for $50 an ounce was over forty years ago (note that the purchase price of a bullion coin includes a significant premium price, unlike the purchase of a bullion bar). The cost of mining gold from the ground is variously estimated at between $460 per ounce and $1,000 per ounce. Do you think that the gold price could fall below the price of production, or that it could do so for very long? The clear answer is no.