Gold at $1200 [Archive] - MacRumors Forums

itcheroni

Dec 2, 2009, 01:19 AM

Gold, for the first time, closed above $1200 today. This is a serious indicator for the global economy. For everyone who believes our government's handling of the economy is on the right course, the rest of the world is paying $1200 for insurance against our economy. And they'll pay a lot more very soon. Since the beginning of ever, societies have shifted from commodity based currencies to fiat currencies and back. Currently, I don't think any country uses a commodity backed currency because the dollar used to represent a note for gold equivalent, making it "as good as gold." Now gold is $1200/ounce and in a few month to a year, it'll $1650. And after, the sky is the limit. And in 10 years or so, there will be several countries using commodity backed currencies.

To gauge how early we are in my timeline, I wanted to see how many here have bought gold.

rhsgolfer33

Dec 2, 2009, 02:29 AM

Can I pay my expenses with gold? No? Then I guess I probably won't trading my dollars in for gold anytime soon.

Eraserhead

Dec 2, 2009, 02:53 AM

and in a few month to a year, it'll $1650. And after, the sky is the limit.

Or it could just be yet another bubble. Like housing and Dubai.

And in 10 years or so, there will be several countries using commodity backed currencies.

Which ones did you have in mind?

itcheroni

Dec 2, 2009, 03:40 AM

I'm guessing this isn't as big a deal for you guys as it is for me. haha.

Housing and Dubai can be explained. A crash in gold would be unexplainable. Don't get me wrong, gold could go to $1600 and back down to $1100, but it will be right back up. 2010 will be a very volatile year but we will ultimately be at $1650+ in one year. It will go up exponentially from there.

.Andy

Dec 2, 2009, 03:48 AM

Eraserhead

Dec 2, 2009, 03:54 AM

Exponentially you say?

If its too good to be true it probably is.

Why would you invest in gold (which is just shiny metal) over say Chinese or Malaysian currency? They're both under-valued, and are controlled by successful governments.

itcheroni

Dec 2, 2009, 03:57 AM

Exponentially you say?

Yes. (http://jsmineset.com/wp-content/uploads/2009/12/November-2009-monthly-gold.pdf)

itcheroni

Dec 2, 2009, 04:00 AM

If its too good to be true it probably is.

Why would you invest in gold (which is just shiny metal) over say Chinese or Malaysian currency? They're both under-valued, and are controlled by successful governments.

If I had all my assets in yuan, I wouldn't really care about gold. But for people who have dollars and pounds, gold is the safest bet to not losing all your money.

Badandy

Dec 2, 2009, 04:12 AM

I'm guessing this isn't as big a deal for you guys as it is for me. haha.

A crash in gold would be unexplainable. Don't get me wrong, gold could go to $1600 and back down to $1100, but it will be right back up. 2010 will be a very volatile year but we will ultimately be at $1650+ in one year. It will go up exponentially from there.

If your prediction, which you're presenting as an inevitable course of events, were correct, gold would already be exponentially higher.

.Andy

Dec 2, 2009, 04:18 AM

If your prediction, which you're presenting as an inevitable course of events, were correct, gold would already be exponentially higher.
Don't be such a downer Badandy. What possible conflict of interest could a website run by a precious metals investor have in overinflating the long-term outlook for gold?

Eraserhead

Dec 2, 2009, 04:28 AM

If your prediction, which you're presenting as an inevitable course of events, were correct, gold would already be exponentially higher.

Bankers are perfectly capable of making mistakes with their valuations ;). That said gold is "well known" enough that that is unlikely here.

djellison

Dec 2, 2009, 05:22 AM

Looks to me like we're undergoing the exact same pattern as the late '70's - and we're already past the point to which it will fall again and potentially be another case of recovery lasting 28 years.

CarlisleUnited

Dec 2, 2009, 05:33 AM

Yes. (http://jsmineset.com/wp-content/uploads/2009/12/November-2009-monthly-gold.pdf)

http://www.themarketguardian.com/wp-content/uploads/2009/02/oil-price-chart-1-12-09.png

barkomatic

Dec 2, 2009, 07:16 AM

Gold is actually not at its high if you look at the price in terms of inflation adjusted dollars. Anyway, the sure sign that a bubble is forming/has formed is when people become overconfident in their investment.

The current price of gold is being driven up by speculators. There is little intrinsic value to gold--its used in jewelry but has very limited industrial applications. It's price is solely determined by the market just like any currency--and it can rise and fall like any currency. There are other metals which do have industrial applications and which I consider to be a better long term investment. Unless of course you don't think China has much of an industrial future. ;)

The economy will not be in the dump forever, and when it finally begins to get on its legs again the price of gold will fall as people explore more profitable investments.

That being said, its ok to have a few gold coins stashed away but hopefully you're not spending all your money on gold. The current prices are very high and if you're buying gold now just understand it *could* be back to $700 an ounce or lower in a few years. In the interim, it could very well rise to $1500 or higher on speculative activity.

I have traded gold for 10 years.

Rodimus Prime

Dec 2, 2009, 10:27 AM

Yes. (http://jsmineset.com/wp-content/uploads/2009/12/November-2009-monthly-gold.pdf)

hmm prices of gold there seem to line up pretty well with the economy.
when it goes bad price of gold goes up. when it is booming price of gold goes down.

heehee

Dec 2, 2009, 10:56 AM

My boss is a big believer in gold. He is the founder of one of the largest (by market cap) gold mining companies in the world. I can PM you if you want to know the company. All of the companies he owns right now, he doesn't take a salary, he puts his money where his mouth is. He has over $100 million in gold bullion right now and expects it to go much higher.

Other than the inflation chart posted above, here are some of the reasons why, gold/dow ratio, it's forecasted to be at 2:1 or even 1:1. Gold percentage gain from 1968 - 1980 and 2001 - present.

Edit: I own junior gold stocks and ETFs.

awmazz

Dec 2, 2009, 11:49 AM

That's $1,200 US dollars. What's the US dollar been doing? Gold is actually not much higher than when it was $700 US dollars 12 months ago for people outside the USA.

And adjust for inflation, it's far far lower in value than even its highest peak 30 years ago.

http://www.the-privateer.com/chart/usgmonth.gif

Anyway, it's a consumer product. The Indians and Chinese have all been buying it up for jewellery with their new found wealth over the last ten years. The spike in the late 70s was Japanese economic boom jewellery consumer demand bringing the speculators in en masse in the late '70s.

It cost USD $320 an ounce to dig it out of the ground in 1999, so it was selling for less than it actually cost to physically produce 10 years ago when the consumer demand dried up after the SE Asian 'Tiger' economies hit the wall and they all started hocking their new jewellery.

itcheroni

Dec 2, 2009, 02:43 PM

...

That is a very misleading chart. Why does it stop at lowest point when it is double that right now? If you look at my gold chart, you'll see that there was a low near 2000, which signaled the end of the bear market and the beginning of the bull market for gold/commodities. The bear market lasted from about 1983-2000. We are only 9 years into the bull market. We've got another 5-10 years to go. Oil is in no ways hanging around $78 indefinitely. Warren Buffet says he bought a railroad as a wager on the American economy. It's funny that it is also a great hedge against high oil prices.

That's $1,200 US dollars. What's the US dollar been doing? Gold is actually not much higher than when it was $700 US dollars 12 months ago for people outside the USA.

And adjust for inflation, it's far far lower in value than even its highest peak 30 years ago.

...

Anyway, it's a consumer product. The Indians and Chinese have all been buying it up for jewellery with their new found wealth over the last ten years. The spike in the late 70s was Japanese economic boom jewellery consumer demand bringing the speculators in en masse in the late '70s.

It cost USD $320 an ounce to dig it out of the ground in 1999, so it was selling for less than it actually cost to physically produce 10 years ago when the consumer demand dried up after the SE Asian 'Tiger' economies hit the wall and they all started hocking their new jewellery.

There are two main purposes for gold. One is jewelry. The second, and more importantly, is a store of purchasing power/money. No country is currently using it as a currency and as this poll shows, very few people are using it as a store of wealth. This is certainly not a sign of a bubble.

I should clarify that I don't believe the real value of gold will skyrocket but rather the metric by which we measure it, the dollar, will collapse. If I add a million notches on a yardstick, I haven't gotten taller even if the yardstick says I'm a 100,000 feet tall. That being said, gold's real value will also go up when countries and the masses begin using gold as money.

Don't be such a downer Badandy. What possible conflict of interest could a website run by a precious metals investor have in overinflating the long-term outlook for gold?

I don't understand your point. That chart is simply a plotting of the price of gold across time. The second chart is the price of gold adjusting for inflation using the government's CPI across time. This chart will look the same no matter who inputted the data. In fact, this is a much better chart that the one above on oil because it shows a much longer time horizon while the oil one is cropped to convey a particular message. And doesn't it only make sense that a person with an interest in gold would post a chart on gold? It would be very difficult to try and find an entity with no interest in gold posting a chart on gold. Might I suggest not basing decisions on association? You can do whatever you want, but it might be a good idea to think things through rather than immediately searching for something that might "discredit" the source. You will always find a reason to not listen to someone with whom you disagree, but it doesn't mean you are necessarily correct.

splitpea

Dec 2, 2009, 02:52 PM

I should clarify that I don't believe the real value of gold will skyrocket but rather the metric by which we measure it, the dollar, will collapse. If I add a million notches on a yardstick, I haven't gotten taller even if the yardstick says I'm a 100,000 feet tall. That being said, gold's real value will also go up when countries and the masses begin using gold as money.

Yeah, that's the scary part.

Badandy

Dec 2, 2009, 03:25 PM

The bear market lasted from about 1983-2000. We are only 9 years into the bull market. We've got another 5-10 years to go.

No, you think we have another 5-10 years to go. For example, let's say that AMZN (Amazon) stock is trading at $142. People like you, but advocates for AMZN, will say, unequivocally, that the stock will go up to $200 by the end of the year. But if that rise is as inevitable as they think it is, AMZN would already be at $200 (or at least valued with a reasonable discount rate to the present).

That being said, gold's real value will also go up when countries and the masses begin using gold as money.

Which countries?

Might I suggest not basing decisions on association? You can do whatever you want, but it might be a good idea to think things through rather than immediately searching for something that might "discredit" the source.

Personally, I would have rather seen a disclosure concerning your current positions on gold in the original post. Secondly, maybe an acknowledgement of counter-arguments and why they're wrong. After all, if your predictions are actually as accurate as you posit they are, you'd be the king of investing.

Zombie Acorn

Dec 2, 2009, 03:27 PM

Buying twinkies in mass right now would probably be a good investment where our dollar is going. :) At least you know you won't go hungry.

Also adjusting the gold rise compensating for inflation is wrong, the reason people are investing is BECAUSE of inflation.

Eraserhead

Dec 2, 2009, 03:35 PM

Which countries?

I already asked that - no response.

itcheroni

Dec 2, 2009, 03:50 PM

I already asked that - no response.

Whoever wants to be in the running for the next reserve currency as well as those who want a stable currency.

China was hoping to buy the IMF gold but got cut off by India. They are buying on dips, thus making it really hard for gold to dip too much. They have gone from being a net producer to a net buyer of gold as they hedge against their dollar holdings.

http://news.goldseek.com/BullionVault/1259592961.php

India just bought 200 metric tons from the IMF and they want to buy the remaining 200. They paid about $1048 a couple weeks ago and that was the highest price ever at the time. I can bet you they're not buying it to make jewelry.

http://online.wsj.com/article/SB125722876971624729.html

Even Vietnam and Sri Lanka

http://article.wn.com/view/2009/11/19/Vietnam_importing_6_tonnes_of_gold_in_November/

http://www.ft.com/cms/s/0/5fd5ab32-d9c4-11de-ad94-00144feabdc0.html

And all these country have a lot more to buy. China will want to buy several thousand metric tons of gold to balance their holdings.

http://wallstreetpit.com/12567-gold-may-hit-2600-if-china-increases-its-holdings

Essentially, I don't know. I'm not sure which countries will do what but people holding dollars or some other weak currency may be wiped out. Maybe those countries will try to stabilize with gold or maybe only countries that aren't in trouble are the only ones with the wherewithal to do so.

Personally, I would have rather seen a disclosure concerning your current positions on gold in the original post. Secondly, maybe an acknowledgement of counter-arguments and why they're wrong. After all, if your predictions are actually as accurate as you posit they are, you'd be the king of investing.

I have every last penny in various gold and commodity positions(ABX AUY GDX COP EWZ). I withdraw what I need to pay the bills. If gold does crash or just moves down much more than I anticipate, I'd be toast.

And these aren't my ideas. I'm just copying the people who make the most sense to me.

Tesselator

Dec 2, 2009, 04:59 PM

I have about $250,000 in gold coinage right now (if I sell it at $1,000 per/oz.). I knew it was going up back when it was about $400 per oz. I may buy more now as I know (again this time as I did before) with 100% certainty, that in 12 to 16 months it will hit $2,400 ~ $3,000 per oz. (at that point I'll sell it all as we will soon after be on a world currency and gold will again normalize against salaries and etc.)

Back when it was about $600 an oz. I posted to everyone that it would be good to buy gold for them but everyone just laughed at me and told me what BS gold was. The discussion digressed into some absurd back and forth about "the gold standard" and how gold was a lousy form of currency.

I'm having the last laugh now I guess. I'll be laughing again in about a year from now too. ;)

rhsgolfer33

Dec 2, 2009, 06:27 PM

Also adjusting the gold rise compensating for inflation is wrong, the reason people are investing is BECAUSE of inflation.

Not really. We can adjust for inflation because the price of gold is measured in dollars, we're adjusting the price in dollars not the gold... Also, people invest in gold for expected future inflation, the price of gold is being adjusted for inflation that already has happened and has been measured.

I have every last penny in various gold and commodity positions(ABX AUY GDX COP EWZ). I withdraw what I need to pay the bills. If gold does crash or just moves down much more than I anticipate, I'd be toast.

And these aren't my ideas. I'm just copying the people who make the most sense to me.

Wow. As someone with a moderate finance background I cannot believe anyone would sink all of their money into one spot. Do you know how many times people have been ruined by putting all of their money into a someone else's "sure thing?"

I have about $250,000 in gold coinage right now (if I sell it at $1,000 per/oz.). I knew it was going up back when it was about $400 per oz. I may buy more now as I know (again this time as I did before) with 100% certainty, that in 12 to 16 months it will hit $2,400 ~ $3,000 per oz. (at that point I'll sell it all as we will soon after be on a world currency and gold will again normalize against salaries and etc.)

How can you possibly know with 100% certainty what will gold will be doing in the next 12-16 months? As Badandy already pointed out, basic financial theory dictates that if something was certainly going to be at XYZ price in 12-16 months, it would already be trading at some reasonable present value of that amount. It is essentially an application of the efficient market hypothesis; basically, prices reflect all known information and will change to reflect all new information instantly. If people were 100% certain of what gold would be trading at in 12-16 months, it would already be trading at that price.

Zombie Acorn

Dec 2, 2009, 07:25 PM

Not really. We can adjust for inflation because the price of gold is measured in dollars, we're adjusting the price in dollars not the gold... Also, people invest in gold for expected future inflation, the price of gold is being adjusted for inflation that already has happened and has been measured.

I may be wrong on this, but people are investing their money now because its not going to be worth **** later. Why would we take inflation out of the equation? If I buy gold today for 10,000 and inflation skyrockets I may have 15,000 tomorrow if i cash out. If I keep my 10,000 I have 10,000 thats worth less.

MooneyFlyer

Dec 2, 2009, 08:34 PM

bobber205

Dec 2, 2009, 09:16 PM

Techhie

Dec 2, 2009, 09:33 PM

Or it could just be yet another bubble. Like housing and Dubai.

The bubble must me pretty huge, considering it spans across mostly every culture in recorded history. I don't think there is much a way for the gold "bubble" to pop, mostly because it isn't backed by value fluctuating human-made commodities like housing. That being said, who knows; gold's worth is essentially the same as our paper money, an imaginary thing.

Zombie Acorn

Dec 2, 2009, 10:23 PM

Are the gold buyers on this forum scared of a time when we pay for stuff with wheelbarrows of cash?

I was under the impression that when that happened in Germany, the country was in a much differnet economic state that we will ever be in.

Or are you guys scared of something in between now and that?

Its called preserving your hard earned money, why should I take a hit from unneeded government inflation when i can just transplant my money into some other commodity that will hold value through the inflation? Wait till people get pissed about their dollars losing value and then lash back at the government, once this happens I can pull my money out on the backside before everyone else starts selling.

Tesselator

Dec 3, 2009, 10:46 AM

How can you possibly know with 100% certainty what will gold will be doing in the next 12-16 months?

As indeed I know that the Sun will appear in the sky again tomorrow.

As Badandy already pointed out, basic financial theory dictates that if something was certainly going to be at XYZ price in 12-16 months, it would already be trading at some reasonable present value of that amount. It is essentially an application of the efficient market hypothesis; basically, prices reflect all known information and will change to reflect all new information instantly. If people were 100% certain of what gold would be trading at in 12-16 months, it would already be trading at that price.

That's poppycock! Our majority of our market operates on just the opposite principal. This is why insider trading is supposed to be illegal but in reality happens on massive scales day in and day out.

Rodimus Prime

Dec 3, 2009, 12:08 PM

The bubble must me pretty huge, considering it spans across mostly every culture in recorded history. I don't think there is much a way for the gold "bubble" to pop, mostly because it isn't backed by value fluctuating human-made commodities like housing. That being said, who knows; gold's worth is essentially the same as our paper money, an imaginary thing.

well the oil bubble burst and oil drop what 40% very quickly. All it would take is for a slight dip in a day of like 4-5% and a mass sell off would follow.

Raid

Dec 3, 2009, 12:25 PM

That's poppycock! Our majority of our market operates on just the opposite principal. This is why insider trading is supposed to be illegal but in reality happens on massive scales day in and day out. No the market should run on rational expectations and probability. If gold was going to be bought and sold at a specific value in a year (with absolute certainty) then the difference in price of gold in the present would be that value less interest, and inflation (maybe the carrying cost too) for the year.

There's an entire Futures market (http://www.bloomberg.com/markets/commodities/cfutures.html) you might want to have a look at for fun and profit*.

I will say that insider trading does have a temporary impact on the efficient market hypothesis only in the temporary swing where the actions of the insiders change market prices as they use the information for gain. Once the information is open to the free market (like after a quarterly statement or news report) all the insiders have done is cut down the margin of the rest of the market.
Such advantage is seen as unfair as it could result in withholding of information, which damages the efficiency of markets and the impairs the rational expectations of market participants, and in turn may dissuade investors from the market and could cause the market to collapse... so now you know why insider trading is bad. Though it has little to do with the scenario of identifying a future buy/sell price with 100% certainty.

* this is not a guarantee of profit... or fun for that matter.

Tesselator

Dec 5, 2009, 12:17 AM

Yeah, you're right. It's not actually 100%. I mean Jesus could come back before then, the molecular structure of reality may give way to a completely new reality, and the Sun may become a happy sock-puppet floating in the sky.

Still, you are right... nothing is "100%". But humanly speaking and knowing the society I live in I personally am 100% sure gold will double (or more) within two years time. Know what I mean?

Zombie Acorn

Dec 5, 2009, 01:19 AM

OllyW

Dec 5, 2009, 06:37 AM

Gold fell more than $65, or 5%, to $1,161.4 an ounce, down from a record high of $1,226.56 in early trading.

http://news.bbc.co.uk/1/hi/business/8396542.stm

xlii

Dec 5, 2009, 06:43 AM

In 1978 gold was going to $2000. I know because I had an aguem a discussion with my new cousin-in-law. I said bubble, I said supply and demand, I said it was the speculators that were driving up the price. I was right. You need to decide is it supply and demand or is it the speculators controlling the price.

Badandy

Dec 5, 2009, 03:40 PM

Still, you are right... nothing is "100%". But humanly speaking and knowing the society I live in I personally am 100% sure gold will double (or more) within two years time. Know what I mean?

No, we don't know what you mean. If it's a sure thing it will double, it would be almost doubled right now. Further, if insiders have as much power as you think they do, it would definitely be almost doubled if your "information" were correct.

dmr727

Dec 5, 2009, 03:43 PM

No, we don't know what you mean. If it's a sure thing it will double, it would be almost doubled right now. Further, if insiders have as much power as you think they do, it would definitely be almost doubled if your "information" were correct.

Dammit Badandy, why aren't you at the game? Or are you posting from your iPhone? :p

63dot

Dec 5, 2009, 03:56 PM

Any physical gold I own are small rings, but not coins or small bullion. It's stupid to buy now since the price is artificially high. It may go up some, but it's obviously not a good time to buy.

Badandy

Dec 5, 2009, 08:49 PM

Dammit Badandy, why aren't you at the game? Or are you posting from your iPhone? :p

Didn't go. Not only did I know we would lose, but I have finals to study for. :eek:

itcheroni

Dec 5, 2009, 11:17 PM

There is a reason I posted "Gold at $1200." This is a significant benchmark and there will be a small battle here. Gold flirted with $1000 a few times before breaking through decisively and once it broke through, $1100 just flew by until here. After $1200, the next stop will be around $1600-1700.

I don't know how but Jim Sinclair nailed it. Here are some predictions he made in May when gold was $945.

Jim Sinclair’s Commentary
Predictions:
1. Gold reacts as currency support for the dollar enters mid June to a slow decline (that is the official definition of a strong dollar policy, really).
2. End of 2nd week going into the beginning of the 3rd week of June Gold launches towards and this time through the neckline of the reverse head and shoulders formation.
3. Gold rises to $1224 where it hesitates.

As per #3, please take a look at this chart and see gold's high on Dec 2nd. http://www.kitco.com/charts/livegold.html

If you track individual ups and downs, you will be able to look back and say something was up 100 days and down 95 days, which will seem like it didn't go up much when in reality it could have doubled or tripled. For the last 13 of 15 days or so before this, gold it a new high time high every single day. Eventually, there will be days where gold falls more than $100 on the way to $2000. I would be more concerned if a day like Friday didn't occur because only bubbles go in straight line(remember housing prices that never went down?). Gold will climb very steadily, have huge drops, and then continue climbing. That is what will be so satisfying about this investment. All the speculators and traders will be left in the dust. This is only for people who understand gold's preservation of purchasing power.

The main thing to consider is the effect of the jobs report. After the report, gold and commodities took a dive, but strangely enough stocks also went down a bit. You would think good job numbers would boost stocks. This perverted reaction is due to the low interest rate which fuels a carry trade. People have been borrowing US dollars at a very low rate and using those dollars to invest in stocks, commodities, and foreign currencies. An improving jobs report number could mean the Fed raises rates sooner than expected, so people began selling their investments to cover the possibility of a rise in interest rates rather than people getting excited about an improving American economy and investing in it's future. This action also increases a rise in the value of the dollar which is how we measure gold- making gold go "down."

Look at the chart I posted for gold on Dec 4. That green line goes down, then stabilizes, and then takes another dip. What might this mean? I think the initial dip is the reaction and unwinding of the carry trade. The next dip is a firing of stop orders just below 1200 (Most people may believe a drop below $1200 could mean a larger drop, so they set an automatic sell order, which inevitably triggers other sell orders). And the last dip is a combination of margin calls and more stop orders.

Badandy, the above paragraph is why gold isn't at $2000 when I am confident that it will eventually be there. You said it yourself, there are a lot of speculators and traders in gold. These drops will shake them out. And your theory only works with beliefs, not facts. There could be a fact that nobody believes and vice versa. Prices reflect beliefs. If 100% of people believe gold will be $2000 in one year, it would be very close to that. But 100% of people don't believe that as evidenced by this thread. But as an individual, I look at the data and make my own predictions about the future and place my bets even if 99% of people disagree. You have to trust yourself.

Oh, and this jobs report is great news. And what great timing! They're selling $131 billion in Treasuries next week. And remember when the number went from 9.5 to 9.4?

Desertrat

Dec 6, 2009, 09:09 AM

History: When the price of gold went down from its $800 peak in January of 1980, there was a reason: Volcker's jack-up of the Fed rate in 1979. Gold had run up during the time of the low Fed rate of the 1970s.

The Fed can't do that, now. We're already in the recessionary stage, and the economy is already in the toilet--and any serious rise in the Fed rate would be a wipeout. So, any Fed-rate influence on the price of gold won't happen.

We--and other central banks--are printing paper money like madmen. Monetizing debt Running huge deficits The more there is of any item, the less any one unit is worth. Gold is a refuge, a storehouse of value against currency degradation.

New mines are harder to put into operation, and recent discoveries show lower grades of ore. The annual production is in general decline. The costs of production are now up toward $400 per ounce.

Barrick has spent some $6 billion in getting out from under its forward sales and hedges. What other reason but an expectation of increases in price?

Eight large banks hold short contracts on roughly 25 million ounces; JP Morgan is the largest. This manipulation to hold down the price has been going on for years--and has merely slowed the rise during these last half-dozen years.

Add in the problems folks are having in getting physical delivery and now this scandal about tungsten counterfeits, and you can add in a certain amount of worry and panic about fraud.

I guess my summation would be that there are forces acting on gold which will continue to cause an upward movement in price. Dips? Sure. No trendline is uninterruptedly smooth.

'Rat

Tesselator

Dec 7, 2009, 04:06 AM

Gold will not double, the dollar will split in half.

Hehe, yup. That's exactly right.

Gold fell more than $65, or 5%, to $1,161.4 an ounce, down from a record high of $1,226.56 in early trading.

http://news.bbc.co.uk/1/hi/business/8396542.stm

Yep, it'll zig-zag all over the place for a good bit yet.

MooneyFlyer

Dec 20, 2009, 08:03 AM

The fact that it's being talked about here is enough to keep me out. In general, I believe in the inflation trades and declining dollar... however, if gold starts to correct, say 5-10%, there is going to be a rush for the exits and I don't want to be part of that... (again -- been there)

This thread has gotten quiet...

I think the day I posted the comment above (Dec 2) was nearly the absolute short-term top. I'm quite happy to stay out of gold for a while longer even though I do believe in the play longer term. The dollar looks to have some upside momentum building...

For those that were buying at the time, more of the same, or wait and see for a while?

akutad

Dec 20, 2009, 08:53 AM

To hedge yourself from inflation buy silver, gold, oil, and/or real estate. Silver I belive will be a better investment than gold as silver is also used in manufacturing so the demand is higher. Yes you can't pay your bills in silver however that is not the intention. Because today savers are loser it's best to own things of intrinsic value.

MooneyFlyer

Dec 20, 2009, 09:29 AM

I've started accumulating silver through the SLV but I'm hedging with the UUP.

Desertrat

Dec 20, 2009, 03:55 PM

I won't argue with the notion that there is some liklihood that the percentage increase in the price of silver will be greater than for gold. But, I dunno. Maybeso, maybeno. Sure doesn't hurt to keep buying, however.

What's interesting at the moment about the gold price is that it's a sort of sideways trading pattern, in spite of the incredible number of short sales contracts by JP Morgan et al. I'm a tad behind the curve, but it's been running in a range of around 25 million ounces of shorts. Gold is holding or rising in spite of their efforts to hold down the price.

There is one thing that paper money can do that gold can't: Go to zero value. :D

'Rat

itcheroni

Dec 21, 2009, 01:10 PM

I've started accumulating silver through the SLV but I'm hedging with the UUP.

I'm a bit weary of ETF's. You don't really own any of the metal. And if the government confiscates it, like they did with gold, ETFs will be the first stop.

I'll probably pick up some gold and silver bullion before January. I wish I had more money to invest because this is quite a significant dip. I'm good at judging fundamentals but I'm such a terrible timer, which is much more important for a trader.

MooneyFlyer

Dec 21, 2009, 01:23 PM

It's certainly a risk but there are people that hold a lot of this that don't seem to be as worried...
http://money.cnn.com/quote/major_holders/major_holders.html?symb=GLD

You can buy gold coins at spot +4%. You have to have them shipped and you need to store them...

itcheroni

Mar 23, 2010, 02:07 AM

Jim Sinclair has been making the same argument that Gold will go to $1650 since 2000.

He now says that it will reach $1650 by January of 2011, or as Martin Armstrong said, by June of 2011.

That is a 50% increase in about one year. (Gold is $1104.10 as I type this).

I normally don't care about timing the markets but it's interesting to witness because Jim Sinclair really knows what he's talking about.

.Andy

Mar 23, 2010, 02:19 AM

itcheroni

Mar 23, 2010, 03:20 AM

Sounds like you should invest all your money and you will be rich by January or June!

I already have my positions.

.Andy

Mar 23, 2010, 03:31 AM

I already have my positions.
I hope you have time to come back and post when you are rich in 2011 :).

itcheroni

Mar 23, 2010, 04:08 AM

I hope you have time to come back and post when you are rich in 2011 :).

Don't worry. I'm planning on bringing this thread up in January or when Gold does reach $1650, whichever comes first.

By the way, you should buy a little before it starts its move upwards again. :)

.Andy

Mar 23, 2010, 04:16 AM

By the way, you should buy a little before it starts its move upwards again. :)
Don't worry I got my parents and my in-laws to both mortgage their houses and buy bullion when you initially posted this thread. I am a bit sad that it's been revised to hit $1650 in early to mid 2011 though. Initially you said that it would hit that range before early december 2010:

(posted on dec 2, '09) Now gold is $1200/ounce and in a few month to a year, it'll $1650.

It will go up exponentially from there.
So I was really banking on exponential profits by mid 2011.

Still I'm glad it's such a safe bet. Who would have thought exponential profits were such an easy thing?

itcheroni

Mar 23, 2010, 04:36 AM

Don't worry I got my parents and my in-laws to both mortgage their houses and buy bullion when you initially posted this thread. I am a bit sad that it's been revised to hit $1650 in early to mid 2011 though. Initially you said that it would hit that range before early december 2010:

So I was really banking on exponential profits by mid 2011.

Still I'm glad it's such a safe bet. Who would have thought exponential profits were such an easy thing?

That was my guess. January is Jim Sinclair's estimate. June '11 is Martin Armstrong's estimate whoever he is. And every date could be wrong.

I can see you still don't understand. I am not expecting to get rich or even make a lot of money. Gold isn't going up. The dollar will be going down. You can replace gold with a barrel of oil or a piece of land-it's the same thing. A candy bar might cost $10 in just a few years. But I wouldn't recommend investing in candy bars. Gold is easier to store.

.Andy

Mar 23, 2010, 04:46 AM

And every date could be wrong.
What am I going to tell my family :(

I can see you still don't understand. I am not expecting to get rich or even make a lot of money. Gold isn't going up. The dollar will be going down. You can replace gold with a barrel of oil or a piece of land-it's the same thing. A candy bar might cost $10 in just a few years. But I wouldn't recommend investing in candy bars. Gold is easier to store.
Ah I see. So you have gold that's worth more than when you bought it. What do you do with it then?

itcheroni

Mar 23, 2010, 05:11 AM

... So you have gold that's worth more than when you bought it...

Still wrong but that's okay.

It is money. You would do with it what you do with money.

.Andy

Mar 23, 2010, 05:56 AM

Still wrong but that's okay.
Whoops sorry. The price of gold will go up exponentially because the US dollar is going to go down log exactly proportionally. I forgot that part.

It is money. You would do with it what you do with money.
I buy groceries with it?

Desertrat

Mar 23, 2010, 08:44 AM

Aside from the currencies of the developed nations losing buying power, mine production of gold is declining ("Peak Gold"? :D) and the cost is rising. Add in that central banks are net buyers of gold, including Venezuela, India, China and even Mauritius. India bought 200 tonnes of IMF gold, and it is possible that China and India might bid against each other for the remaining 190 tonnes.

Gold is holding near $1,100 in spite of the massive short-selling by JP Morgan, et al.

How to use gold or silver in trade? Easy. A no-brainer: Go to any of the thousands of coin shops or wealthy people who buy gold and silver. Sell some of yours. Take the paper money and go shopping for whatever you need. I've been in that game for forty years, now. So far, I've never lost money by following my understanding of worldwide monetary events. From that standpoint, I'm smarter than the folks at Lehman, Bear/Stearns and Merrill Lynch. :D I'm still around and independently not-broke.

Western governments have long poo-poohed gold. Why? Simple: Gold makes people independent of governmental manipulations of currencies. Individual sovereignty is anathema to governments. If you don't believe me, try being proud and independent the next time you deal with the TSA.

Edit-add: Just as an indication of the weakness of the US Government and its debt problems, from this morning's "Daily Pfennig":

"So what do the markets think of the US economy and all of the debt we are accumulating? Apparently not as much as they think of Berkshire Hathaway. Yields on two year notes issued by Warren Buffet's company are yielding 3.5 basis points less than US treasuries of the same maturity. US Treasuries are traditionally seen as the safest of all investments, and form the base of the yield curve. But in what is a very rare occurrence, bonds issued by quality corporations are trading at lower yields than US Treasuries. Investors apparently feel Procter & Gamble Co, Johnson & Johnson, and Lowe's Co. all are better credit risks than our Federal Government. I guess it was inevitable, as the US budget deficit swelled and the Treasury department issued record amounts of debt. But if this continues, US Treasuries will lose their 'save haven' status and the US dollar's position as the global reserve currency could also be in jeopardy."

IOW, the CPI has no way to go but up, as is the case for gold and silver. The only unknown is "when"; it's not an "if".

flopticalcube

Mar 23, 2010, 08:51 AM

Everyone should have 5-10% of their portfolio in gold/silver, preferably physical, and hope that it never goes up.

Desertrat

Mar 23, 2010, 08:57 AM

flopticalcube, that was true in normal times. Now, however, with monetary policies generally 180 degrees off from reality, a person should have already shifted to at least 20% and even more. Shift back when the unemployment rate gets back toward 5%, or when the FRB raises its rates above four or five percent.

flopticalcube

Mar 23, 2010, 09:10 AM

StruckANerve

Mar 23, 2010, 10:07 AM

Desertrat

Mar 23, 2010, 12:46 PM

nnmrjw, if one assumes that gold and silver would be used in any sort of daily commerce, small-size gold coins (fractional gold, such as 1/10th-ounce) and US junk silver (dimes, quarters and halves minted in 1964 and earlier) would enable small transactions and the making of change.

If, for instance, gold were $1,000 per ounce and you needed $100 worth of groceries, you could use either a 1/10-oz gold coin or sell it to somebody for $100 in paper.

Again: Gold has never gone to zero value. While I'm highly dubious about a complete collapse of the US dollar, I'm fully aware of history, and that a collapse is not an impossibility. Serious degradation in buying power, however, has already occurred and is occurring now.

While I don't expect it, I know that in 1920 a half-million German marks would buy a house. By late 1923 it would not be enough to pay for a loaf of bread.

For thousands of years, gold and silver have been items of self-defense against the idiocies of rulers and governments. I don't see where anything has changed.

Be that as it may, if one regards them as mere commodities, I note that profit is profit--and Messrs Soros and Buffet agree with me.

miniConvert

Mar 23, 2010, 06:02 PM

rhsgolfer33

Mar 23, 2010, 06:32 PM

If the value of gold is based on the US Dollar and the Dollar collapses what then? Are you people expecting to purchase goods with actual physical gold currency when this happens? Rat said he takes physical gold and trades it for paper currency. Isn't that losing him money in the long run if the value of paper currency is falling? How much food can I buy with a gold coin?

He's not losing money in the long run because as the dollar loses value, the number of dollars it takes to purchase gold (the price) goes up. In other words, he's hedging against the dollars decline in value by purchasing gold. He can then trade the gold he purchased at $x for (he hopes) more dollars, or $xx. The hope is, that as the purchasing power of the dollar declines, the price of gold goes up at least a corresponding amount; this would mean that the amount of dollars he has at x point in the future by selling the gold has the same amount of value or purchasing power as the number of dollars he had when he purchased the gold (of course, most people are hoping that the price of gold increase more than the decline in value of the dollar so that they can make a nice little profit in addition to having the same purchasing power).

Of course, this all has the possibility of going incredibly wrong if the dollar gains value or the price of gold losses value.

Putting all or a large portion of your money in gold isn't a good idea, just as putting all of your money into GM or Enron wasn't a very good idea either; diversification is key to managing risk.

Serious degradation in buying power, however, has already occurred and is occurring now.

Really? Inflation last year, 2009, was -.04%. The consumer price index isn't showing any serious degradation in buying power either.

itcheroni

Mar 23, 2010, 07:38 PM

I've been thinking about acquiring some gold myself; I don't have a lot of faith in the GBP given how massively our government and successive governments are going to have to rely on inflation to manage our national debt.

Is there a particularly good way to go about buying gold? I assume I'd want some sort of measured/certified gold coinage? Know any good UK sources?

I don't about the UK but here in the US I've been buying online from apmex. They have the closest to spot price I've found. Maybe they can ship internationally but that might not be worth it if you are required to pay some sort of tax. I'm sure you can find a coin shop near you but know the current spot price before buying and try to get as close to that as possible, like 1-5% above spot. Coins have a bit of mint value, so coins will sell for a little higher than bars above spot but you will probably get that value when you sell.

I think gold is at an all time high for the pound and euro. But from the US perspective, it is off its all time high because of recent strength in the dollar compared to European currencies. I think that makes now an opportunity to buy a little bit of gold.

KingYaba

Mar 23, 2010, 10:12 PM

I think now is the time to sell your gold and buy oil.

itcheroni

Mar 24, 2010, 02:47 AM

I think now is the time to sell your gold and buy oil.

Ideally you should have both. Even if you go all in on oil, you should have a little gold in case you need money. Or some junk silver like Desertrat suggested.

SactoGuy18

Mar 24, 2010, 06:21 AM

I wouldn't bet on oil long term, though. Especially now with the potential to grow oil-laden algae on a huge scale even in seawater, which could be a gigantic killjoy to the oil exploration industry since the oil from oil-laden algae can be "cracked" to make diesel fuel, heating oil, gasoline (petrol) and kerosene.

Desertrat

Mar 24, 2010, 09:58 AM

rhsgolfer33, I suggest you check out Williams' "Shadowstats.com" website. He's far more in line with reality than the highly-massaged government numbers. Myself, I keep track of such as restaurant prices, motels, hydraulic oil, Campbell's chunky soup and certain car parts. I'd dealy love to see something besides notable price incrreases.

As example of my lack of trust, note that the CPI number-crunchers assume that if the price of Del Monte goes up, Mrs. Housewife will substitute Generic. I guess the CPI folks are bachelors.

SactoGuy, no way in Hell can you grow enough algae to make a dent in the amount of consumption of liquid fuels to compare with the millions of barrels of oil per day that we use. As far as algae, where will the water come from? This country is already in deep doo-doo for quantity as well as quality.

I've no problem with buying online, except that the premiums above spot, plus shipping, run the buy-price higher. My own preference is to develop a relationship with a coin store, where I'm known to them and they're known to me. I've mostly paid a premium of 4% to 5% above spot.

I started buying in after the 1980 collapse, trickling in on any dips. It was with a certain amount of fear and trepidation that I jumped in at around $800, bringing my average buy-in to around $500. So far, so good. Since I'm near the production cost of gold, I can't lose.

I see no reason for gold to not continue to rise, albeit by fits and starts. The US Treasury has worked with JP Morgan and others to fight this steady increase; it has been slowed but quite obviously not stopped. Their problem is the turnaround by foreign central banks having become net buyers instead of net sellers. GATA commentary is quite interesting; they have a website.

So: Gold for survival? I dunno; does it matter? If not needed for survival, hey, great! Profit is nice. Been my attitude for forty years; I've done quite well by following my advice to me; I'm pretty much uninterested in the opinions of any naysayers. Why should I be?

:), 'Rat

mcrain

Mar 24, 2010, 11:55 AM

But is gold a good hedge against these two risks? Will gold maintain its purchasing power value if inflation erodes the purchasing power of the dollar or the euro? And will gold hold its value in euros or yen if the dollar continues to decline?

The short answer is no on all counts. The dollar price of gold does not increase with the U.S. price level. And the value of gold does not increase in dollars to offset the fall in the value of the dollar relative to the euro or the yen. There's more....

http://host.madison.com/ct/news/opinion/column/article_68f99b80-4258-5f44-a817-5cc64c6e1884.html

1. Is gold a good long term investment?: No. If you are looking to invest long term, you better consider something that consistently moves in the right direction. The average rate of return tracked as far back as history will go is a little better than 2%; in more recent years, the rate of return has been a little better- 4.4%. Yes, only just slightly better than inflation. If you were to have invested your money in a good index fund (i.e. S&P 500 or Dow Jones), you would have earned on average 12% in those same years! So, in other words, gold is a pretty lousy long term investment with a fairly mediocre track record. Though it’s doing very well right this second, don’t count on it.

2. Is gold a good short term investment?: Not right now; that is, if you don’t already have money in it. A common rule of thumb when it comes to investing is to NEVER buy high. And right now gold is plenty high. In fact, we haven’t seen gold on this level EVER. But, again, with its track record, I would be very careful about taking any chances. I don’t currently have much gold in my portfolio, but if a large portion of it was, this might be a good time to sell. Then again, maybe not… who can say?! Maybe it shoots up to $1,000 per ounce before it drops again.http://www.financialnut.com/is-gold-a-good-investment/

Anyone but me find it interesting that the guys who are heavily invested in Gold are now trying to get you to buy it?

itcheroni

Mar 24, 2010, 02:06 PM

There's more....

http://host.madison.com/ct/news/opinion/column/article_68f99b80-4258-5f44-a817-5cc64c6e1884.html

http://www.financialnut.com/is-gold-a-good-investment/

Anyone but me find it interesting that the guys who are heavily invested in Gold are now trying to get you to buy it?

It's obvious to me the guy who wrote that knows very little about gold and economics. Since the dollar was first pegged to gold, the dollar has lost 97% or so of it's purchasing power. Gold has gone from $20 to $1100. Gold doesn't hold its purchasing power against the dollar? Don't these numbers mirror each other?

And the 2% long term number. Looking at a long term number without taking into consideration context is ...terrible?

Look at the chart of gold price and compare it to the DOW. Take note of 1982-2000. Then look at 1966-1982. Then 1946-1966. Then look at 2000-present.

In 1982- the Dow was worth about 1 ounce of gold
1966 - the Dow was worth about 25 ounces of gold
1946 - the Dow was worth about 1 ounce of gold

In 2000, the Dow was worth 43 ounces of gold, the most ever. Now, it is worth about 10-12 ounces of gold. We are halfway through the current bull market in precious metals and bear market in equities. And note, the periods when gold was in a bull market coincided with high inflation and low interest rates.

I definitely would not have bought gold in 1982 when Mr. Volcker came to town. Today, Volcker is to be seen and not heard. Buying gold in response to poor monetary policy is one of the safest things anyone could do with their money.

mcrain

Mar 24, 2010, 02:22 PM

It's obvious to me the guy who wrote that knows very little about gold and economics. Since

Betcha $5 in gold you own gold. When the price of gold comes crashing down to pre-stupid levels, whatcha gonna do?

itcheroni

Mar 24, 2010, 02:38 PM

Betcha $5 in gold you own gold. When the price of gold comes crashing down to pre-stupid levels, whatcha gonna do?

I'll sell it when the government stops being stupid.

mcrain

Mar 24, 2010, 02:45 PM

I'll sell it when the government stops being stupid.

It's a shame my taxes are going to support you when you're broke.

(edit)

It is March 24, 2010. Current price = 1086.53.

What's the trend in the two charts... top left and top right...

http://www.goldprice.org/gold-price.html

(edit2)

Gold for April delivery, the most actively traded contract, declined $14.90, or 1.4%, to close at $1,088.80 an ounce in electronic trade.

The SPDR Gold Trust /quotes/comstock/13*!gld/quotes/nls/gld (GLD 106.38, -1.94, -1.79%) , the largest exchange-traded fund backed by gold, declined 1.7% to $106.38.
http://www.marketwatch.com/story/gold-slumps-as-portugal-downgrade-lifts-dollar-2010-03-24

By the way, I'm not stupid, I realize you won't be broke, you will just have a lot less than you would have had otherwise. It's a shame Beck/Limbaugh conned you into buying Gold.

itcheroni

Mar 24, 2010, 02:52 PM

It's a shame my taxes are going to support you when you're broke.

:confused:

Did you read my other post or did you stop at the first line? And I had no idea your tax dollars are being saved for my future support. Can I have it now to buy gold? I wonder who my tax dollars are being saved for.

itcheroni

Mar 24, 2010, 02:57 PM

It's a shame my taxes are going to support you when you're broke.

(edit)

It is March 24, 2010. Current price = 1086.53.

What's the trend in the two charts... top left and top right...

http://www.goldprice.org/gold-price.html

(edit2)

http://www.marketwatch.com/story/gold-slumps-as-portugal-downgrade-lifts-dollar-2010-03-24

This is starting to get pathetic. Do you really want to make a point using information from the last few hours? And what is the point of knowing something went down if you can't explain it? Can you explain it?

Compare these day charts with an 80 year chart. Then look at equities and interest rates during the same period.

rhsgolfer33

Mar 24, 2010, 03:03 PM

It's obvious to me the guy who wrote that knows very little about gold and economics.

Well, the guy that authored the first link, Martin Feldstein, is a professor of economics at Harvard, has a Ph.D. from Oxford, has published about 350 articles, and was considered to chair the Fed in 2005 when Alan Greenspan's successor was chosen. I'd say he probably knows a little bit on the subject at hand.

mcrain

Mar 24, 2010, 03:04 PM

This is starting to get pathetic. Do you really want to make a point using information from the last few hours? And what is the point of knowing something went down if you can't explain it? Can you explain it?

Compare these day charts with an 80 year chart. Then look at equities and interest rates during the same period.

Did you buy the gold you own 80 years ago? Are you going to live 80 more years? Ok, so let's be realistic. You bought when, for how much, and where do you expect it to go.

If you expect gold to go up forever, you've been duped. If you expect gold to outperform any other investment, you've been duped.

Like I said, it's March 23, 2010, and we'll see where we are 6 months - 1 year from now.

itcheroni

Mar 24, 2010, 03:04 PM

Well, the guy that authored the first link, Martin Feldstein, is a professor of economics at Harvard, has a Ph.D. from Oxford, has published about 350 articles, and was considered to chair the Fed in 2005 when Alan Greenspan's successor was chosen. I'd say he probably knows a little bit on the subject at hand.

haha, my bad. I only went to the second link and the website looked crappy so I didn't even bother with the other.

EDIT: I went to the first site and although I wouldn't call him an idiot because he's paid a lot of money for his degree, I believe he is very wrong about gold. His main argument takes 1980 to 2010 and claims that it has not been very good even though 2000-2010 has been good because 1980-2000 was so bad for gold. My argument is that 1980-2000 and 2000-now are two completely different scenarios and treating all years equally is a grave mistake. We go through cycles. You need an action for a reaction. That is why I asked mcrain to look at other charts in relation to gold, like interest rates and Dow averages.

By the way, a PhD doesn't make you correct. Economists are some of the worst forecasters of the economy. 95% of them are Keynesian and have no clue. The fact that he was considered for the fed would mean he is more likely to have an anti-gold bias. Central bankers hate gold because it exposes their incompetence.

itcheroni

Mar 24, 2010, 03:17 PM

Like I said, it's March 23, 2010, and we'll see where we are 6 months - 1 year from now.

I'll bet you a 3g iPad that gold will make a new all time high (above $1224) before the end of the year. Seriously.

EDIT: to make it sweeter for you, how about $1324?

mcrain

Mar 24, 2010, 03:23 PM

I'll bet you a 3g iPad that gold will make a new all time high (above 1224) before the end of the year. Seriously.

Gold is 1086, so you're willing to bet that in the next 9 months it will go up 138? 12%

Ohhhh risky bet.

Is your bet that will cross that threshold, or finish the year over that number? Either way, what am I betting against you? It would feel wrong to just take your iPad.

rhsgolfer33

Mar 24, 2010, 03:27 PM

haha, my bad. I only went to the second link and the website looked crappy so I didn't even bother with the other.

EDIT: I went to the first site and although I wouldn't call him an idiot because he's paid a lot of money for his degree, I believe he is very wrong about gold. His main argument takes 1980 to 2010 and claims that it has not been very good even though 2000-2010 has been good because 1980-2000 was so bad for gold. My argument is that 1980-2000 and 2000-now are two completely different scenarios and treating all years equally is a grave mistake. We go through cycles. You need an action for a reaction. That is why I asked mcrain to look at other charts in relation to gold, like interest rates and Dow averages.

I agree with you that gold (and in reality, any investment and the economy in general) goes through a cycle. But that's what Feldstein (and I agree) points out as being part of the problem. Gold is cyclical and, as the second article points out, isn't a great long term investment due to the lower than average return in the long run. You can look at anything in the short-term and say "oh, wow, its up 400%," but there is little chance of it staying that way forever. Eventually gold will drop again; in the next 6 months to a year? Maybe not. In the next ten years? I'd bet on it.

Seeing as how most people are long-term investors, a portfolio with a large amount of gold or other commodities (or any one security) isn't a very good bet (just as putting all your money in GM or Enron wasn't a very good idea). Anyone making a large bet on one commodity (or security, or real estate), in reality, isn't hedging risk much more than someone just keeping all their cash under the mattress.

By the way, a PhD doesn't make you correct. Economists are some of the worst forecasters of the economy. 95% of them are Keynesian and have no clue. The fact that he was considered for the fed would mean he is more likely to have an anti-gold bias. Central bankers hate gold because it exposes their incompetence.

You're right, having a PhD doesn't make you correct, but it does mean he's probably studied the exact thing we're arguing about and probably has a lot more information on this than either of us do.

I'd be surprised if he was very Keynesian (he was Reagan's chief economic advisor), but even if he was, so what? There is large debate among economists about which theory is better. Just because he's Keynesian doesn't mean he has no clue. I know plenty of Keynesian economists who have good arguments and plenty of support for some of their theories.

itcheroni

Mar 24, 2010, 03:29 PM

Gold is 1086, so you're willing to bet that in the next 9 months it will go up 138? 12%

Ohhhh risky bet.

Is your bet that will cross that threshold, or finish the year over that number? Either way, what am I betting against you? It would feel wrong to just take your iPad.

I meant the loser buys the winner a new iPad. How about the moment it passes $1324 be the mark?

RawBert

Mar 24, 2010, 03:38 PM

Mr. T could have made a fortune.

itcheroni

Mar 24, 2010, 03:44 PM

I agree with you that gold (and in reality, any investment and the economy in general) goes through a cycle. But that's what Feldstein (and I agree) points out as being part of the problem. Gold is cyclical and, as the second article points out, isn't a great long term investment due to the lower than average return in the long run. You can look at anything in the short-term and say "oh, wow, its up 400%," but there is little chance of it staying that way forever. Eventually gold will drop again; in the next 6 months to a year? Maybe not. In the next ten years? I'd bet on it.

Seeing as how most people are long-term investors, a portfolio with a large amount of gold or other commodities (or any one security) isn't a very good bet (just as putting all your money in GM or Enron wasn't a very good idea). Anyone making a large bet on one commodity (or security, or real estate), in reality, isn't hedging risk much more than someone just keeping all their cash under the mattress.

You're right, having a PhD doesn't make you correct, but it does mean he's probably studied the exact thing we're arguing about and probably has a lot more information on this than either of us do.

I'd be surprised if he was very Keynesian (he was Reagan's chief economic advisor), but even if he was, so what? There is large debate among economists about which theory is better. Just because he's Keynesian doesn't mean he has no clue. I know plenty of Keynesian economists who have good arguments and plenty of support for some of their theories.

You just can't let me get away with making blanket statements, can you? :p Forgive me, I'm hyperbolic.

What you're saying is correct and I am completely aware that I am taking tremendous "risk" by being heavy in gold. But I am not using it to hedge. I'm young enough to take this risk. I believe it's in a bull cycle with roughly 5-10 years to go. So I am definitely not going to hold gold forever. I will sell it and buy equities when the trend reverses. When the US changes its monetary policy to work towards realistically balancing the budget and reduction the total debt, not just year over year, then I will consider it a bottom for the dollar and begin to buy equities again. I don't see that for another 5-10 years.

Raid

Mar 24, 2010, 03:57 PM

if one assumes that gold and silver would be used in any sort of daily commerce, small-size gold coins (fractional gold, such as 1/10th-ounce) and US junk silver (dimes, quarters and halves minted in 1964 and earlier) would enable small transactions and the making of change. You might want to look up "Fiat Money" and remember money is first and foremost a common unit of exchange.

If, for instance, gold were $1,000 per ounce and you needed $100 worth of groceries, you could use either a 1/10-oz gold coin or sell it to somebody for $100 in paper. Commodity money has it's problems as the price of a certain commodity (in this case gold) has it's own fluctuations in price as the supply and demand shift for a number of reasons. Also your example also notes another problem, where the consumer may need to complete an intermediary transaction (selling the 1/10 oz coin for $100 paper) to complete the primary transaction.

Again: Gold has never gone to zero value. While I'm highly dubious about a complete collapse of the US dollar, I'm fully aware of history, and that a collapse is not an impossibility. Serious degradation in buying power, however, has already occurred and is occurring now. Gold has never gone to zero because it is a commodity and it has an intrinsic value due to it's usefulness as a resource.

While I don't expect it, I know that in 1920 a half-million German marks would buy a house. By late 1923 it would not be enough to pay for a loaf of bread. That period of German hyper-inflation was caused due to a distinct lack of understanding of monetary supply; they simply kept printing more money! There's one famous quote that goes something like 'Do not worry about the amount of money we have, we have purchased more printing machines that are currently making more.'

Myself, I keep track of such as restaurant prices, motels, hydraulic oil, Campbell's chunky soup and certain car parts. I'd dealy love to see something besides notable price incrreases. Interesting that you do your own price indexing, do you base it on goods you buy or observable phenomena. What's your calculated inflation rate?

I started buying in after the 1980 collapse, trickling in on any dips. It was with a certain amount of fear and trepidation that I jumped in at around $800, bringing my average buy-in to around $500. So far, so good. Since I'm near the production cost of gold, I can't lose. Oh, 'rat this has me concerned. Have you calculated the real (inflation adjusted) rate of return on those purchases?

I see no reason for gold to not continue to rise, albeit by fits and starts. The US Treasury has worked with JP Morgan and others to fight this steady increase; it has been slowed but quite obviously not stopped. Their problem is the turnaround by foreign central banks having become net buyers instead of net sellers. GATA commentary is quite interesting; they have a website. If I was the US treasury I wouldn't be too concerned about the value of gold, but at the value of the treasury's holdings. If the treasury is selling off gold right now I bet it's for debt financing and not about the value of gold. If the US Treasury wanted the price of gold to drop, I bet they could do a fair amount of damage in a massive sell off... but that would erode the value of their remaining holdings.

It's obvious to me the guy who wrote that knows very little about gold and economics. Since the dollar was first pegged to gold, the dollar has lost 97% or so of it's purchasing power. Gold has gone from $20 to $1100. Again, you might want to check out those figures in real (inflation adjusted) terms to isolate the fluctuation in the dollar versus the fluctuation in the value of gold.

I would have attached a chart comparing the percentage change DJIA to gold the commodity, but gold was so stuck at the bottom of the 20 year chart I was wondering if I got the right thing... You might want to do something similar to suit your level of satisfaction.

<edit>
By the way, a PhD doesn't make you correct. Economists are some of the worst forecasters of the economy. 95% of them are Keynesian and have no clue. The fact that he was considered for the fed would mean he is more likely to have an anti-gold bias. Central bankers hate gold because it exposes their incompetence. Quote for Fail... What's the best forecaster of the economy? And as for "Keynesian" economists do you even know what that means?

takao

Mar 24, 2010, 03:59 PM

all this predictions always follow the "gold = 100% investing material"

let's face it much much more gold get's used in consumer goods .. which very likely counteracts the tendancy of "fleeing into gold" .. and this factor isn't even really checked scientifically ... tanks to the current gold price, recycling is at an all time high .. and since there is also less demand for electronic goods because of the crisis also less gold is needed in that sector.. which could easily be the reason why the earlier predictions in this thread haven't come true

flopticalcube

Mar 24, 2010, 04:02 PM

I would have attached a chart comparing the percentage change DJIA to gold the commodity, but gold was so stuck at the bottom of the 20 year chart I was wondering if I got the right thing... You might want to do something similar to suit your level of satisfaction.

Dow-Gold is as old as the hills. Its a good reason why gold is a great "timers" investment but not a buy-hold one.

http://home.earthlink.net/%7Eintelligentbear/dj-au-ratio-lt.gif

Desertrat

Mar 24, 2010, 08:23 PM

Raid, I realize that this is the Internet, and I can't prove I'm not lying. But I've been making a profit from bullion buying/selling since around 1970. Do you reckon I might have a clue as to what I'm talking about?

Sure, gold has dropped off from its recent levels. That's simply because of currency trading, mostly out of Euros and into US$$$--due to the PIIGS problem, notably Greece. The dollar is up. So? If you didn't see that coming, you haven't been paying attention.

Not only do I have a clue about Keynes, I'm aware that the neo-Keynesians who have been in control of monetary policy have pretty much betrayed his dictum of 2% to 3% increase in the money supply. The neo-Ks have been pretty much berzerkoid in printing money and monetizing debt.

I rode gold and silver up, all through 1977-1979. On a Friday in January, 1980, gold closed at $800 and silver at $50. By Saturday evening I was sold out of all bullion. On Monday, the prices started their downward plunge. I grant that it was mostly instinct and suspicion for me at that time, but I like to think I've learned a bit since then.

I'm a damned sight smarter than England's Gordon Brown, for sure. I started buying back in during the 1990s. As Chancellor of the Exchequer, in 1998 or 1999, he sold 1/2 of England's central bank gold, 400 tonnes, for $264 an ounce--the lowest bottom for gold in the last 30 years. :D The young lad isn't as smart as the Indian or Chinese counterparts...

As far as the "What to do?" stuff, I tend to listen to those who have been correct in their predictions, over those who have been blind-sided by this present monetary debacle. The latter group includes Greenspan, Bernanke, Paulson and Geithner. Their credibility is between slim and none, and Slim already left town. Bill Bonner and Doug Casey were giving warnings over five years back. Roubini, even before then, although he's gone back to faith in the neo-Ks policy. Soros called the recession in 2006. Heck, even Buffet bought a gazillion ounces of silver, some years ago, at around $7 or $8 an ounce.

Me? I couldn't have predicted how or exactly when, but it was in the late 1980s that it was obvious that the whole US society was embarking on a credit binge of Saturday night spree proportions, and that at some point Sunday morning would show up.

And here it is. The present monetary policies look pretty much like a repeat of FDR's--or, possibly, Japan's--which means we have quite a few years to go before some far-lesser living-standard "normalcy" returns. But Japan started with beaucoup savings and no debt...

Desertrat

Mar 24, 2010, 10:55 PM

Re: Gordon Brown:

http://uk.finance.yahoo.com/news/explain-why-you-sold-britain-s-gold-gordon-brown-told-tele-2a118e333dd2.html?x=0

At least any screwup I make won't cost seven billion pounds.

I'd have to say that on a comparative perspicacity scale, I'm ahead. :D:D:D

SactoGuy18

Mar 25, 2010, 07:14 AM

Desertrat,

I think in the end, my dictum is true: the income tax has caused serious harm to any national economy that uses a progressive income tax system. When the income tax encourages the offshoring of liquid assets and jobs as a means of tax avoidance, small wonder why many national economies are failing.

We need a national taxation system that is 1) simple in implementation to cut down on exorbitant compliance costs and 2) encourages its local citizens not to offshore money and jobs as a tax dodge. Indeed, our Founding Fathers disliked the very concept of the income tax because it was such a drag on the economy in the long run, based on what I've read in the Federalist Papers. Why do you think the radical (yet very common sense) FairTax national consumption tax replacement for the income tax based on Title 26, the Internal Revenue Code, has gained popularity in the last decade?

But getting back on topic, :) I think gold may not be as much use as people think. I can see gold bouncing up and down between US$1,000 and US$1,150 per troy ounce for the next few years.

mcrain

Mar 25, 2010, 09:50 AM

flopticalcube

Mar 25, 2010, 09:57 AM

Or falling off as hysteria wanes.
Sorry? What hysteria?

Desertrat

Mar 25, 2010, 11:32 AM

mcrain, do you not believe that a national debt greater than annual GDP is not of concern? That an annual deficit at or above 10% of GDP is not of concern? That doubling the money supply in a year or two is not of concern?

When I see that the US is in the same sort of trouble as the PIIGS and England, I'm concerned. The history of that sort of trouble is that indeed, "It can happen here."

The Ponzi schemes of Social Security, Medicare, Medicaid and Free Pills for Olde Pharts are taking an ever-greater portion of the national productivity. Now we have socialized medicine with its costs to add on, as well as a growing percentage of the federal budget as interest on the national debt. These aren't causes for concern?

Sorry, but I don't play the Alfred E. Neumann game of "What, me worry?" One thing I learned over a half-century back is that you can't spend yourself into prosperity, whether as an individual or a nation. Our nation has indeed thought in that fashion, trying to spend itself into some mythical prosperity. Another thing that holds true is that a nation cannot tax itself into prosperity. Aesop provided us with that little clue, thousands of years ago with his parable of the golden goose.

People holler about income tax, but that almost pales into insignificance compared to the totality of all the rest of the taxes we pay: City, county, school, state, FICA and the "fees" which are merely taxes by another name. The grand total including IRS's grab is around 50% of one's gross pay.

We have far more government than we can afford, and it's growing. The currency is being devalued, year by year by year in unending fashion. Fiat money's value depends on full faith and credit. Yeah, lots of people still have faith, but we're running out of credit.

And so folks buy gold from wisdom, not panic. The knowledge of when and how much is a function of knowledge about the current world situation, whether foreign money problems or warfare.

rhsgolfer33

Mar 25, 2010, 06:06 PM

I think in the end, my dictum is true: the income tax has caused serious harm to any national economy that uses a progressive income tax system. When the income tax encourages the offshoring of liquid assets and jobs as a means of tax avoidance, small wonder why many national economies are failing.

National economies aren't failing because of a little bit of tax avoidance, they're failing because of poor choices and risk assessment on the part of corporations and financial institutions. Some of the policies in regards to taxation are certainly driving jobs overseas, but I think the mechanism is more like a draw overseas due to lower wages, not a push because of taxation.

We need a national taxation system that is 1) simple in implementation to cut down on exorbitant compliance costs and 2) encourages its local citizens not to offshore money and jobs as a tax dodge. Indeed, our Founding Fathers disliked the very concept of the income tax because it was such a drag on the economy in the long run, based on what I've read in the Federalist Papers. Why do you think the radical (yet very common sense) FairTax national consumption tax replacement for the income tax based on Title 26, the Internal Revenue Code, has gained popularity in the last decade?

While I think we need a simple system that doesn't encourage offshoring and encourages investment, FairTax isn't it. We could easily accomplish the second goal by just not taxing investment income or significantly decreasing the tax on it. The simplification will never happen, every time they try it gets more complicated. FairTax is also regressive and a moderately progressive taxation system is essentially required.

The income tax doesn't encourage people to break the law, greed does.

Wanting to keep money you've earned via work or investment is greedy? The structure of income taxation does encourage people with a lot of investment income to break the law; if we simply didn't tax or lowered the tax on investment income, we probably wouldn't see as many people attempting to hide that income offshore.

Not to mention all the loopholes that were put in place to protect the greedy.

Examples, please. I'd love to hear what loopholes were put in place to protect the greedy. I also love that your statement implies the IRS Is attempting to help or protect the greedy; if you studied tax academically in any detail, you'd know this is simply not the case.

second, when income taxes are higher, those who have more, reshuffle their investments and the resultant increase in the economy is measurable.

As in, people tend to invest in tax free state and local bonds? I'm not sure what you're mean by a reshuffling of investments, but a good portion of investment income is taxed at the same rate as regular wage income (see short-term capital gains, non-qualified dividends, interest income). Would some people shift to state and muni bonds? Sure, but they offer a lower interest rate and rate of return than other taxable bonds, so the shift really isn't going to be that dramatic.

The tax code used to be very simple until the special interests demanded more and more loops and holes...

When was the tax code simple? Maybe when they first created it, but it certainly hasn't been simple in the lifetime of most of the people on this board.

How about jailtime and loss of assets.

That's already the penalty. You can go to jail on tax evasion charges and be fined a very large amount as well. Certainly doesn't seem to be stopping quite a few people.

Desertrat

Mar 25, 2010, 06:51 PM

One amusement in this "tax the rich" class warfare is the built-in presumption that the rich are stupid. Well, the Hollywood rich might act stupid as to ostentatious living, but most rich folks spend a fair amount of time figuring out how to keep what they have and minimize their exposure to the tax man.

For one thing, most don't live all fancified. Their monthly overhead isn't all that high when compared to a lot of credit-card high-rollers. They can make do just fine from income from tax-free munis. Other investments get held on to and don't get sold when capital gains tax rates get jacked up. The holding-on reduces the tax take by the feds, which is why it's dumber'n hammered dirt to raise the capital gains tax rate.

Thousands of legal ways to "hide" income. For instance, I once owned a rent house in a coastal village. I had a deal with the guy who rented it, where I could use the spare bedroom on occasion. I'd go there, do some repairs on the house, and write off the trip as business. But I'd get in a couple or three days of offshore fishing while I was there. The federal mileage allowance made driving a Honda Civic quite profitable.

Rich folks own properties all over the place, and they go there on business. Palm Springs, Vegas, Cannes, Paris, Rio, the Catskills...Get the picture? Go to Aspen, do a business deal, go skiing or fly-fishing...

Remember the "Tax the toys of the rich!" deal? 10% luxury tax on boats and planes. The rich ain't stupid; they quit buying. Thousands of lost jobs, many companies went broke. Less income to the feds. More payout of unemployment compensation.

So who's stupid? The Marxist class-warfare bunch, that's who.

rhsgolfer33

Mar 25, 2010, 07:04 PM

but most rich folks spend a fair amount of time figuring out how to keep what they have and minimize their exposure to the tax man.

Of course they do. Some rich people employ tax accountants or attorney's that do this on a full time basis just for them. People under the new definition of rich ($250k or more per year) don't have this advantage; only the truly wealthy, those who could pretty much quick working and have enough to live the good life, are able to afford this kind of thing.

Thousands of legal ways to "hide" income. For instance, I once owned a rent house in a coastal village. I had a deal with the guy who rented it, where I could use the spare bedroom on occasion. I'd go there, do some repairs on the house, and write off the trip as business. But I'd get in a couple or three days of offshore fishing while I was there. The federal mileage allowance made driving a Honda Civic quite profitable.

The thing is though, you're not really hiding income, you're writing off a fairly legitimate expense. Though any meals, lodging, fishing expense, etc. while fishing likely are likely not actually allowable under the tax code; plus there are cutbacks on meals and entertainment. There is also a specific set of rules regarding leisure time whilst on a business trip.

Plus, you had to report income from that rental, so its not like the IRS wasn't benefiting from you renting that property.

[/QUOTE]Rich folks own properties all over the place, and they go there on business. Palm Springs, Vegas, Cannes, Paris, Rio, the Catskills...Get the picture? Go to Aspen, do a business deal, go skiing or fly-fishing...[/QUOTE]

Those are business expenses and writeoffs though, not personal writeoffs. It's pretty likely that the rich don't benefit much in the way of taxes from having those properties. Any rental income has to be declared, the amount of time a property can be rented and still be considered a personal residence is limited, and the mortgage interest is only tax deductible on the first $1,000,000 of mortgages (so if you have five places with $5,000,000 in mortgages, you can only writeoff the interest on the first $1,000,000 of mortgages).

Remember the "Tax the toys of the rich!" deal? 10% luxury tax on boats and planes. The rich ain't stupid; they quit buying. Thousands of lost jobs, many companies went broke. Less income to the feds. More payout of unemployment compensation.

Or you purchase and store in a more favorable country.

Desertrat

Mar 25, 2010, 07:31 PM

I wasn't worried about doing other than figuring out ways to minimize how much I had to render unto Caesar.

Just like my car racing. Dear ol' Schedule C. Sole proprietorship of a racing business. The race car, entry fees and travel were advertising expenses. I was allowed to write down the car in one year, as is done by the Indycar guys. I had four years to turn a profit from my engine building and chassis setup for customers. The Schedule C losses were written off against my day-job salary.

I do so much enjoy mailing in my 1040 with the gray label. Does my soul good, every time I enjoy a steak or a wee drop of Crawford Reserve.

kavika411

Oct 7, 2010, 11:21 AM

October 7, 2010
Gold slid below $1,340 an ounce in its most volatile trading day in two months on Thursday, having earlier hit a record high on investor expectations for the Federal Reserve to support flagging U.S. growth. Spot gold XAU= was last at $1,337.75 an ounce at 1451 GMT, up from $1,345.80 late on Wednesday, but down from an all-time peak of $1,364.60 struck earlier in the day as a rebound in the dollar against the euro EUR= dented gold.

Link (http://www.reuters.com/article/idUSLDE6960OM20101007)

I'll bet you a 3g iPad that gold will make a new all time high (above $1224) before the end of the year. Seriously.

EDIT: to make it sweeter for you, how about $1324?

The identity of this soothsayer poster will be revealed during tonight's Rose Ceremony (or you can simply go back to Post No. 84).

.Andy

Oct 7, 2010, 02:11 PM

[The identity of this soothsayer poster will be revealed during tonight's Rose Ceremony (or you can simply go back to Post No. 84).
Like all good soothsayers multiple claims were made. And then readjusted. And then remade.

Don't get me wrong, gold could go to $1600 and back down to $1100, but it will be right back up. 2010 will be a very volatile year but we will ultimately be at $1650+ in one year. It will go up exponentially from there.

Now gold is $1200/ounce and in a few month to a year, it'll $1650. And after, the sky is the limit. And in 10 years or so, there will be several countries using commodity backed currencies.

itcheroni

Oct 8, 2010, 12:48 AM

Like all good soothsayers multiple claims were made. And then readjusted. And then remade.

What are you referring to? You seem to suggest that I've been inconsistent.

The only claim I'm 100% behind is that gold is going higher in real terms and much much higher in dollar terms over the next 5-10 years.

As for timing, it is speculation and I am a terrible speculator. But it's fun to try though. As you can see from the beginning of this thread, I thought this current run might have happened sooner, but I also guessed that it could take up to a year. I'm waiting to see if $1650 comes by January 14th.

I threw about $1650 because I have heard that number from a credible source. Although I don't know when, I am sure gold will cross the $1650 threshold, but I used $1324 because that is what I was negotiating for in a wager(why not get the best odds you can if you're wagering).

mcrain

Oct 8, 2010, 11:06 AM

I threw about $1650 because I have heard that number from a credible source. Although I don't know when, I am sure gold will cross the $1650 threshold, but I used $1324 because that is what I was negotiating for in a wager(why not get the best odds you can if you're wagering).

I'll admit I'm shocked that gold prices are where they are. I expected more action from the goverment, and less opposition. I expected more economic recovery, and more efforts to make that happen. I wonder if the tie between gold sellers and the right-wing media is connected to their opposition to liberal policies. Probably not.

itcheroni

Oct 8, 2010, 12:53 PM

I'll admit I'm shocked that gold prices are where they are. I expected more action from the goverment, and less opposition. I expected more economic recovery, and more efforts to make that happen. I wonder if the tie between gold sellers and the right-wing media is connected to their opposition to liberal policies. Probably not.

I buy gold exactly because of government action. The more the FED goes into Quantitative Easing, the more gold will go up. If they keep monetizing debt, gold will go up. Whenever Obama opens his mouth, gold will go up.

Gold will only go down when the government stops deficit spending, cuts down on needless regulation, and raises interest rates. None of that will happen any time soon.

mcrain

Oct 8, 2010, 02:06 PM

I buy gold exactly because of government action. The more the FED goes into Quantitative Easing, the more gold will go up. If they keep monetizing debt, gold will go up. Whenever Obama opens his mouth, gold will go up.

Gold will only go down when the government stops deficit spending, cuts down on needless regulation, and raises interest rates. None of that will happen any time soon.

So gold will go down then Republicans lose the power to stop liberal policies? I agree!

kavika411

Oct 8, 2010, 03:43 PM

So gold will go down [w]hen Republicans lose the power to stop liberal policies? I agree!

The most powerful (super) minority in history - able to cause the entire worldwide price of gold to go up ... in a single bound.

Amazing.

mcrain

Oct 8, 2010, 03:59 PM

The most powerful (super) minority in history - able to cause the entire worldwide price of gold to go up ... in a single bound.

Amazing.

It is amazing that the American populous hasn't revolted against a minority abusing the rules of the Senate to prevent debate, much less majority rule. It's been a takeover by the minority, and it is a joke.

Amazing.

kavika411

Oct 8, 2010, 05:39 PM

It is amazing that the American populous hasn't revolted against a minority abusing the rules of the Senate to prevent debate, much less majority rule.

That may be another one of their (super) minority powers - not only able to control the entire worldwide price of gold, but able to stop the American populous from revolting.

It's been a takeover by the minority, and it is a joke.

That doesn't sound like a joke to me. It sounds too exciting to be a joke, like when Bizarro Superman infiltrated the good world (when the volcano erupted), and even though he was only one person - a minority, if I may be so bold - he was able to wreak havoc because the rest of the Super Friends didn't know he was a bad guy.

http://qkpic.com/92ea8

I guess it can be said that the Republican (super) minority is like Bizarro Superman, and the Democrats are like the Justice League - unable to stop him, all the while he causes surges in gold prices and stops the American populous from revolting.

http://qkpic.com/f01a4

itcheroni

Oct 8, 2010, 09:48 PM

So gold will go down then Republicans lose the power to stop liberal policies? I agree!

The words liberal and conservative are too misleading and loaded. For my purposes, I invest in gold when the budget deficit is terrible, the government bails out failing entities, and the Fed continues to pursue Quantitative Easing. All of which will occur regardless of whether someone with an R or D after their name is in power.

Desertrat

Oct 10, 2010, 12:07 AM

Quantitative easing--a euphism for excessive printing of money--could be likened to diarrhea of the Treasury. It is accompanied by the verbal diarrhea of the "green shoots" crowd.

Got gold? Think of all those who could have bought when it was down around $300. I sometimes do, and :D and :D and :D

One thing I learned to do, many decades ago: Avoid predicting how high and when. Just figure out the reason for the trend, and ride that sucker with spurs and whip. This trend could easily have pullbacks, at least until JP Morgan et al run out of money. Once Da Boyz quit their manipulations, the trend will steepen and continue in its upward path so long as the fiat currencies maintain the race to the bottom.

Volatility in the currency markets seems to be the way of the day, right now. Gold? Buy the dips...-

itcheroni

Oct 14, 2010, 03:17 AM

Wow. The current price is $1385.70.

It's funny how market psychology works. Gold was up about $20 during the market today, and I thought to myself, I should have bought more yesterday, before the $20 rise. But after aggravating over the decision for a few minutes, I went ahead and bought some more calls. And just now the USDX broke 77, and Gold surged another $14. I know it sounds like I'm bragging but I am just pointing out the pitfall of the "buy low and sell high" mentality. Anyone waiting for a pullback before jumping into gold the last few weeks have missed quite a run. Now, if gold creeps past $1400, it's not going to stop at $1403. It will hesitate at that psychological price barrier for a while until it decides which direction to go. It will blast to $1420+ or fall back a bit from $1400. So I am going to wait and, when it gets to $1405, I will buy more if I can. If it drops, I'll probably buy more too.

Even though what is occurring is exactly what I thought would occur based on everything I know about economics, I am still blown away. It is unfortunate that the greatest opportunity I have to make money in my lifetime coincides with the suffering of the poor and middle class. I would much rather make lower middle class wages and live in a country with a stable dollar and free markets, but that isn't going to be on the table for a while.

mcrain

Oct 14, 2010, 10:31 AM

Desertrat

Oct 14, 2010, 03:25 PM

mcrain

Oct 14, 2010, 03:27 PM

2.5% in a day or two beats heck out of 6% per year. What's gold come up this year? 31%? Something like that. "The trend is your friend," and it's gonna be a while before any peak...

All thanks to our fearless leaders at Treasury and the Fed, and all the other central banks around the world. :)

Sure is fun to watch all this, particularly after all the years of mouth-music from the bubble-vision folks against buying bullion.

Today's movers: Gold up .66% Compare to: these "real" movers. Every day there are stocks that outperform gold.

SVM 9.42 +0.52 +5.84% Silvercorp Metals Inc
MBI 13.00 +1.81 +16.18% MBIA Inc.
RDN 8.91 +0.57 +6.83% Radian Group Inc.
PMI 4.21 +0.22 +5.51%

(edit for the people who think gold has no max) How high will gold go? It's basically nothing more than a commodity with an artificial value. There really isn't a huge "demand" for gold other than from other traders and a small amount for jewelry. Right?

(edit2 for the same people) Wouldn't a free market devalue something that has very little real value? Gold is only valuable because of its rarity, not for its actual use. If it was valuable for use, it wouldn't be sitting in people's bank boxes in coin/bar form. In other words, I call sucker. (edit3) Sure, you may make money, but only off betting with other suckers. Not because gold is any more or less valuable or useful.

Desertrat

Oct 15, 2010, 08:54 AM

Implicit in what you're saying about gold, mcrain, is that your view is wiser than that of the Chinese government as well as central bankers around the world. (Well, all except ours and England's.) Wiser than those contrarians who have predicted this run-up for several years, now.

Gold has been a storehouse of wealth for thousands of years. Only with the Keynesian monetary philosophy has gold been denigrated, and that philosophy is now being shown to be a destroyer of fiat-based wealth.

Low interest rates and cheap money have been driving the stock market upward. All well and good, until the inevitable rise in interest rates enters the playground. QE2 will possibly drive the stock market higher--but there will at some point be an end to that trend. Probably not a problem this year, but next year is problematic. Some say 2012; I don't know. I generally don't try to time markets.

Present volatility has its effect on percentage changes in various stocks. Some benefit in notable fashion. But the movement of money managers appears to me to be much like that of flocks of cowbirds or schools of fish: Changes in direction are swift and at sharp angles. What's attractive today can become anathema tomorrow. This is readily observed in the behavior of the currency markets, changing direction with every rumor, every pronouncement from some central banker.

Regardless, there is a general movement toward gold. JPM has been playing games, manipulating gold prices in an effort to stop or slow the rise. It looks like they're finally in trouble, having to raise an extra $4 billion. There is speculation as to whether or not they're finally in trouble from way too many short positions, or whether it might be related to Foreclosuregate. IMO it could be some of both. The Big If is if they stop their shenanigans wrt gold. If they do, look for a hellacious rise in a fairly short time.

For myself, I don't really care. If gold were to fall back all the way to its cost of production, I'd be at break-even. That might well happen--if and only if the economy recovers and we go back to some sort of 1980s situation. IOW, not bloody likely in my lifetime; maybe in the latter stages of yours.

mcrain

Oct 15, 2010, 10:35 AM

Implicit in what you're saying about gold, mcrain, is that your view is wiser than that of the Chinese government as well as central bankers around the world.

Gold has been a storehouse of wealth for thousands of years.

Present volatility has its effect on percentage changes in various stocks. Some benefit in notable fashion.

All I'm saying about gold is that it is valuable today because it is rare and was considered valuable for thousands of years. So, as to that, I am wise. It's not valuable based on its need for some use, if it were, then those that needed it would buy it and use it.

Gold values went up when the market went down. Now, the market is going up, and gold values are... going up? It's not directly tied to anything with the market or monetary value or intererest rates or property values or anything like that. It's just a commodity, and people are betting on its perceived value in the future. Gold may go up, it may go down, but those things only happen as a result of people betting on how others will value it tomorrow.

flopticalcube

Oct 15, 2010, 10:39 AM

kavika411

Oct 15, 2010, 10:42 AM

<snip>

Please stop advocating that the sky is blue.

mcrain

Oct 15, 2010, 10:52 AM

I disagree. It's not a commodity as it serves no industrial purpose. It's a currency. It's going up because at the moment there is a bit of a currency war going on as each trading nation tries to deflate their own currencies wrt each other. It's definitely acting like the currency of last resort as it's supply is solely dictated by mining practices.

Yeah, you may be right. I think I may have been misusing the term commodity.

flopticalcube

Oct 15, 2010, 11:00 AM

Yeah, you may be right. I think I may have been misusing the term commodity.

Take heart in knowing that your nation appears to be "winning" this currency war. The stock market should continue to rise as the dollar falls.

itcheroni

Oct 16, 2010, 12:18 AM

All I'm saying about gold is that it is valuable today because it is rare and was considered valuable for thousands of years. So, as to that, I am wise. It's not valuable based on its need for some use, if it were, then those that needed it would buy it and use it.

Gold values went up when the market went down. Now, the market is going up, and gold values are... going up? It's not directly tied to anything with the market or monetary value or intererest rates or property values or anything like that. It's just a commodity, and people are betting on its perceived value in the future. Gold may go up, it may go down, but those things only happen as a result of people betting on how others will value it tomorrow.

Gold does have a use. It is a currency and it is the best currency because it is an end in itself. Think of the value of using money instead of bartering. It is much more convenient than having to trade your cheese for some bread. Now consider that gold has been the only currency that is unadulterate-able by someone else. Think about working and not being able to save your purchasing power; having to spend your money as quickly as possible the moment you get it. What is the ability to save your purchasing power worth? Without gold or silver, there have been many many times in history were you could not have saved your purchasing power. The only reason the dollar was ever designated as the reserve currency was because it was backed by gold, so it was considered "as good as gold." A lot of the gold in the world has been used as a currency throughout human history. Since 1971, when the dollar went off the gold standard, no major country has used gold to back their currency. Now, we must necessarily go back to using gold, or some other commodity, to back our currencies, because the world has done exactly what it always does with fiat currency. It is just human nature I guess. Now, I think several countries will slowly transition back to a gold or commodity backed currency after the worst of this QE is upon us.

Think about this, if the dollar were pegged to gold, like it was in 1971 (at $35 per ounce), gold would have to be valued at $5000+.

http://www.youtube.com/watch?v=7gSnV_krW0U

By the way, by the greatest opportunity to make money in my lifetime, I am referring to the bull market in commodities. To make a lot of money, you need a large bull or bear market, and maybe a lot of volatility if you are a trader. This is literally a once in a generation event. Buying out of the money calls, far out in time, and then selling and extending out before expiration may be a strategy that could make someone very rich.

Desertrat

Oct 16, 2010, 09:36 PM

Gold can be treated as a common commodity, buying dips and selling on increases. But it's a long-term storehouse of value when currency values are declining as they are at this time.

Add this foreclosure-gate deal to all the other fears about the economy and the actions of our Fed and other countries' central banks on money printing: The trend for gold will be up for quite a while.

This fiscal foolishness won't become calm until a large amount of bad paper is written down and debts are reduced to some manageable size. Estimates for the US seem to figure a decade or more, at the least; not ever, if present policies and behavior continue.

But some fella said something on the order of, "When something cannot continue, it must stop." Looks to me like the stoppage will be a raving bitch-kitty. So, some gold and silver might ease the pain during that stop time.

itcheroni

Oct 17, 2010, 06:15 AM

Gold is at $1385.70, so it started at $1351.70. The gain of $20 was a gain of 1.48%, the additional $14 makes it 2.5%, and if it gets to $1420, that's a total gain of 5.0%.

The gains are nice, but they aren't the "greatest opportunity you have to make money in your lifetime." A reasonably diversified mutual fund performs as well.

Every single one of these stocks is doing better.

Gainers Price % Change
FSLRFirst Solar Inc 144.77 +5.73%
EMCEMC Corp 21.37 +5.27%
YHOOYahoo Incorporated... 15.97 +4.72%
CCECoca-Cola Enterpri... 23.80 +3.30%
SWYSafeway Inc 21.96 +3.00%

How did you come up with this particular group of stocks? Compare the 10 year charts for each of these stocks and compare it with the 10 year chart of gold.

Maybe you can, but I can't figure out the fluctuations of the stock prices of American corporations in a bear market. If I bought First Solar for $300 or Yahoo for $40, I would have lost a great amount of money-more than 50%. I would rather put my money into something real that I know for certain will be worth progressively more dollars for the next several years based on the actions of governments around the world. Many countries are competing to devalue their currency because they mistakenly believe a weaker currency will help their exports and thus their economy. It has happened many times in history and it is happening right now. And the same thing has happened every time. Gold becomes a very important and sometimes only source of retaining purchasing power.

mcrain

Oct 18, 2010, 08:37 AM

How did you come up with this particular group of stocks? Compare the 10 year charts for each of these stocks and compare it with the 10 year chart of gold.

Gold becomes a very important and sometimes only source of retaining purchasing power.

I got the stocks from a search of the day's big movers. They just happened to be listed. Stock value is tied to the value of a company, and thus can change independently of other companies, currencies, and even that particular companies performance.

On the other hand, if gold is a currency, and what people are doing is attempting to protect purchasing power and predict where the purchasing power of other currency is going to go tomorrow, then are you really making any money, or are you merely protecting the value of what you've made.

I suggest all you are doing is protecting the value of what you've made. Assuming the value of gold goes up in the long term, doesn't that merely mean that the value of the currency used to purchase it has been deflated? You basically have exactly what you had when purchased the gold.

$1000 of todays money buys $1000 worth of stuff or $1000 worth of gold.

In 5 years, if it takes $3000 to buy the same stuff and the same amount of gold, did you make any money? If you don't outperform inflation and currency fluctuations, then its really nothing more than insurance. Right?

Am I missing something? If it is just insurance aganist currency failure, then why are people so excited about it?

itcheroni

Oct 18, 2010, 12:13 PM

I got the stocks from a search of the day's big movers. They just happened to be listed. Stock value is tied to the value of a company, and thus can change independently of other companies, currencies, and even that particular companies performance.

On the other hand, if gold is a currency, and what people are doing is attempting to protect purchasing power and predict where the purchasing power of other currency is going to go tomorrow, then are you really making any money, or are you merely protecting the value of what you've made.

I suggest all you are doing is protecting the value of what you've made. Assuming the value of gold goes up in the long term, doesn't that merely mean that the value of the currency used to purchase it has been deflated? You basically have exactly what you had when purchased the gold.

$1000 of todays money buys $1000 worth of stuff or $1000 worth of gold.

In 5 years, if it takes $3000 to buy the same stuff and the same amount of gold, did you make any money? If you don't outperform inflation and currency fluctuations, then its really nothing more than insurance. Right?

Am I missing something? If it is just insurance aganist currency failure, then why are people so excited about it?

You are finally starting to get it. People are excited about it the way people would have been excited to have a lifeboat on the Titanic. No one has to guess where currencies are going, that is a lagging indicator and easy to predict. Most countries in the world have told us they want to devalue their currency and they are following through.

I explained the nominal and real value of gold will both rise as the world shifts back to gold as a currency. As you said earlier, if there was some use for gold, people would use it and it would be valuable. The more people use gold as a currency again, the more real value it will have. The more governments debase their currencies, the more gold will increase nominally. Of course, debasement of currencies will only cause more people to save their money in gold.

I also highly doubt there is enough gold to satisfy everyone who will eventually want it, so the real value could skyrocket due to demand.

Also, prices do not move in lock step. If the dollar is tanking, and masseuse in Colorado won't be able to sell his/her services abroad. An orange farmer can sell abroad. So food will be very expensive and you probably won't gain much on that front but your gold will probably buy you much more of things that can't be exported. If you've ever traveled in a poor country, a lot of things may be cheap, but a pair of Jordan's or a new big brand TV will cost you the same or more.

mcrain

Oct 18, 2010, 01:24 PM

You are finally starting to get it. Actually, I got it from the beginning. Maybe you are starting to get it now:

As you said earlier, if there was some use for gold, people would use it and it would be valuable. The more people use gold as a currency again, the more real value it will have. The more governments debase their currencies, the more gold will increase nominally. Of course, debasement of currencies will only cause more people to save their money in gold.

I also highly doubt there is enough gold to satisfy everyone who will eventually want it, so the real value could skyrocket due to demand.

In other words, gold is only valuable when people think it is valuable? It is only rising in value when other currencies lose their values, and it's only use is to protect the value of money already earned?

If that is true, then it is NOT a way to make money. It is ONLY insurance. (edit) I've never bought insurance that paid out more than the policy was worth.

itcheroni

Oct 18, 2010, 02:18 PM

Actually, I got it from the beginning. Maybe you are starting to get it now:

In other words, gold is only valuable when people think it is valuable? It is only rising in value when other currencies lose their values, and it's only use is to protect the value of money already earned?

If that is true, then it is NOT a way to make money. It is ONLY insurance. (edit) I've never bought insurance that paid out more than the policy was worth.

I have no problem with your characterization. If I had to give only one piece of advice to regular people with no interest in investing, it's to buy physical gold and keep it as insurance. I never said you could become rich by owning gold; you avoid losing everything you have, which, in my opinion, is a very valuable asset.

But there are many ways to play gold. When there are huge movements in the markets, it is also a good opportunity to speculate. Like I said, buying out of the money calls, far out in time and then extending out in time when expiration comes near is a simple strategy that could make an enormous amount of money. For every 100% increase in gold, you might get a 1000%+ increase in the value of the calls, depending on the strike price. You could also lose everything if gold stays flat or goes lower. But as far as risk/reward, it is worth it if you are smart and lucky enough. If you're ultra bullish like I am, you could finance the calls by selling puts.

iJohnHenry

Oct 18, 2010, 04:12 PM

For every ???? 100% increase in gold, you might get a 1000%+ increase in the value of the calls, depending on the strike price. You could also lose everything if gold stays flat or goes lower. But as far as risk/reward, it is worth it if you are smart and lucky enough. If you're ultra bullish like I am, you could finance the calls by selling puts.

If this isn't a recipe for disaster, I am at a loss to give a better one.

You wouldn't be trying to feather your own nest, now would you?

In racetrack parlance, you would be a tout, but at least you acknowledge the down-side. ;)

fivepoint

Oct 18, 2010, 07:22 PM

flopticalcube

Oct 18, 2010, 07:38 PM

Jim Rogers (a man who predicted the economic collapse and explosion in gold prices years in advance):
Krugman is an idiot, Obama doesn't know economics 101, and Gold is going to $2,000. (http://www.youtube.com/watch?v=hBN7UvaEKmI)

Fivepoint: Amen!

I think he is far short of the possible top.

http://www.economist.com/blogs/buttonwood/2010/10/economic_and_financial_disaster

Lee Quaintance and Paul Brodsky, two hedge fund managers, think that so much paper money has been issued that gold is undervalued by a factor of 7; in other words it may head past $7,000 an ounce.

itcheroni

Oct 19, 2010, 01:23 AM

If this isn't a recipe for disaster, I am at a loss to give a better one.

You wouldn't be trying to feather your own nest, now would you?

In racetrack parlance, you would be a tout, but at least you acknowledge the down-side. ;)

It would be a disaster if I put all my money into calls at the same time. I only tie up a small amount of my money in calls. It is my insurance going the other way, in case things shoot up overnight, I won't miss it. To pay my bills, I write cash covered puts and stock covered calls-IMO the safest way to invest.

If it seems like I'm trying to sound like a big shot, I'm not. I'm only working with about 50K. And it's really tough to increase my line since I need to pay for my living expenses.

Desertrat

Oct 19, 2010, 07:16 AM

Volatility is certainly the order of the day. I see where some $60 billion has been pulled out of mutual funds in the last few months, and last week's insider trading report showed 2,019 sales vs. 1 buy. The currency markets are like a flock of cowbirds for changing direction with every rumor.

And, overall, commodities have continued upward as the currencies of the developed nations continue downward. With QE2 coming on, gold and silver are looking better all the time.

mcrain

Oct 19, 2010, 11:52 AM

China rate surprise knocks 2 percent off gold.

And, overall, commodities have continued upward as the currencies of the developed nations continue downward. With QE2 coming on, gold and silver are looking better all the time.

"You've had negative real interest rates in China, but also low rates across the board, so that precious metals and commodities can compete with yielding assets ... The prospect of higher rates in China or elsewhere clearly has got longer term implications as gold can't compete once yields do return to more traditional (levels)."http://www.reuters.com/article/idUSTRE67F05920101019

A "traditional" level of interest rates puts gold at a disadvantage against yielding assets? In other words, if the stock market is not collapsing and interest rates are normal, then the value of gold will decline?

flopticalcube

Oct 19, 2010, 02:35 PM

China rate surprise knocks 2 percent off gold.

http://www.reuters.com/article/idUSTRE67F05920101019

A "traditional" level of interest rates puts gold at a disadvantage against yielding assets? In other words, if the stock market is not collapsing and interest rates are normal, then the value of gold will decline?

Only if real rates are going to be positive.

itcheroni

Oct 19, 2010, 05:15 PM

iJohnHenry

Oct 19, 2010, 06:02 PM

Forty bucks is quite a hit, for one day. Some people must have been hurt, badly.

Peterkro

Oct 19, 2010, 06:23 PM

I'm not in the slightest interested in the price of gold,the state of Reuters language on the other hand:

"United States said it will not devaluate the dollar".

iJohnHenry

Oct 19, 2010, 06:29 PM

I'm not in the slightest interested in the price of gold, the state of Reuters language on the other hand:

"United States said it will not devaluate the dollar".

Americans admitting failure has never been their strong suit.

Peterkro

Oct 19, 2010, 06:38 PM

Americans admitting failure has never been their strong suit.

True,but what I meant is "devaluate" is there something wrong with devalue do they think it's more punchy if you stick some extra letters on the end,surely to christ Canadiens don't think that's a word as well?

iJohnHenry

Oct 19, 2010, 07:04 PM

No, but I am so used to such flubs that I cast them aside, given the source. :p

flopticalcube

Oct 20, 2010, 10:48 AM

True,but what I meant is "devaluate" is there something wrong with devalue do they think it's more punchy if you stick some extra letters on the end,surely to christ Canadiens don't think that's a word as well?

C'est quoi? If you want to make something sound more technical or learned, place an "ate" at the end: Crappy Journalism 101. Head down to Fleet Street right now with fire and pitchforks. Are they still on Fleet Street?

Desertrat

Oct 21, 2010, 08:46 AM

I saw in Ed Steer's column that Russia has added 118 tonnes to their reserves. What with China advising its citizens to buy gold, and with the central bank buying all the in-country production, it's certainly stockpiling there.

The oil states plus Russia and China would like to see the US $ replaced as the world's reserve currency. With the insane monetary policies of this present regime in D.C., it could well happen in a year or two. If so, look for the price of gold to seriously jump up.

itcheroni

Oct 21, 2010, 02:14 PM

Americans admitting failure has never been their strong suit.

I think it's more like: Americans won't confess they are pursuing a plan that is sure to end in failure. There is a mistaken belief that lowering the value of your currency will help your economy by increasing net exports.

The trick is to just name dollar devaluation something else: quantitative easing. That way, you can claim to have a "strong dollar policy" while lowering the value of the dollar through QE.

Raid

Oct 21, 2010, 02:25 PM

I think it's more like: Americans won't confess they are pursuing a plan that is sure to end in failure. There is a mistaken belief that lowering the value of your currency will help your economy by increasing net exports.

The trick is to just name dollar devaluation something else: quantitative easing. That way, you can claim to have a "strong dollar policy" while lowering the value of the dollar through QE.

You're mostly right, though it's not a 'mistaken belief'. Currency values are usually far more fluid than the pricing of goods and services, a reduction in the value of the exporters dollar to that of the importer makes it look much more competitive in the short run. Canadians should know this pretty well considering 75% of our exports go to the USA. :o

Also (and probably more importantly to the US right now) the devaluation of the currency makes your debt repayments easier.

MooneyFlyer

Oct 24, 2010, 10:03 PM

It's good to see this thread still going. I have since reversed my opinion because of the fact that we (as a country) do not value our currency... so, in the race to the bottom, the dollar is trying to win.

I've been in and out of gold and silver a few times since I posted earlier in the year (or maybe last year). Those that stuck it out -- good for you. After a fall, I'm guessing it starts the rise to $1500...

Desertrat

Oct 25, 2010, 01:25 PM

Raid

Oct 25, 2010, 02:02 PM

Anything that cost one dollar in 1971 now costs around five dollars--and it's worsening at a fairly rapid pace. Hmmm well I don't have data going back to 1971 handy for median household income; but in 1975 it was $11,800 and 2009's median income would be $49,777 (actually a decline from 2008). In 'real' (inflation adjusted terms) the median salary in 1975 would be equivalent to $42,936 in 2009.

So it's actually not really worsening according to these numbers... not a huge improvement over the 34 years but still an improvement (by the numbers).

MooneyFlyer

Oct 25, 2010, 03:14 PM

MooneyFlyer, where ya been, kid? Trying to fly VFR in the clouds? :D TPTB have been debasing the currency since at least 1933, and it's been getting worse since 1971.

Anything that cost one dollar in 1971 now costs around five dollars--and it's worsening at a fairly rapid pace. Odds are that it will worsen more as Turbo Timmy et all keep on digitizing.

Good to hear from you! Been flying United more than the Mooney unfortunately -- probably around 160k miles since we spoke last.

I bought and sold some of that gold stuff after we spoke. Now I'm just in the minors.

Mourning the death of dollar...

itcheroni

Oct 26, 2010, 02:04 AM

Anything that cost one dollar in 1971 now costs around five dollars--and it's worsening at a fairly rapid pace. Odds are that it will worsen more as Turbo Timmy et all keep on digitizing.

I think you've got your figures wrong. Anything that cost $1 in 1971 would cost a lot more than $5 today. Just look at Gold. It is almost 40X what it was worth in 1971 ($35 in 1971; $1340 today).

Pre-1971, a family could have lived decently on a single income. Now, a two income family can barely make ends meet.

lukester

Oct 27, 2010, 03:36 PM

gold will go to at least $5000 silver who knows,, $250?

iJohnHenry

Oct 27, 2010, 04:01 PM

gold will go to at least $5000 silver who knows,, $250?

Quick. You could be the next Hunt brother (http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt). LOL :p

lukester

Oct 27, 2010, 04:51 PM

Quick. You could be the next Hunt brother (http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt). LOL :p

it's that gold is going up in price, it's that the USD.. is going to go down, down, down..
Hyperinflation

Desertrat

Oct 27, 2010, 11:19 PM

On our honeymoon, Sweet Thing and I wanted to fly United.
.
.
.
.
.
.
Stewardess wouldn't let us.

itcheroni, I was thinking of cars, houses, hamburgers, lube oil--all that sort of stuff. :)

OutThere

Oct 27, 2010, 11:47 PM

I think you've got your figures wrong. Anything that cost $1 in 1971 would cost a lot more than $5 today. Just look at Gold. It is almost 40X what it was worth in 1971 ($35 in 1971; $1340 today).

Pre-1971, a family could have lived decently on a single income. Now, a two income family can barely make ends meet.

By many common metrics $1 in 1971 is roughly $5 today: http://www.measuringworth.com/uscompare/result.php?use%5B%5D=DOLLAR&use%5B%5D=GDPDEFLATION&use%5B%5D=VCB&use%5B%5D=UNSKILLED&use%5B%5D=MANCOMP&use%5B%5D=NOMGDPCP&use%5B%5D=NOMINALGDP&year_source=1971&amount=1&year_result=2010#

bobber205

Oct 28, 2010, 12:40 AM

By many common metrics $1 in 1971 is roughly $5 today: http://www.measuringworth.com/uscompare/result.php?use%5B%5D=DOLLAR&use%5B%5D=GDPDEFLATION&use%5B%5D=VCB&use%5B%5D=UNSKILLED&use%5B%5D=MANCOMP&use%5B%5D=NOMGDPCP&use%5B%5D=NOMINALGDP&year_source=1971&amount=1&year_result=2010#

I've always heard and read that, as a rule of thumb, money's value decreases by half every 20 years. So I guess it's about right.:D

flopticalcube

Nov 4, 2010, 03:50 PM

Well that was a nice day.

heehee

Nov 4, 2010, 03:57 PM

It sure was. My gold stocks are all up, 38%, 9.7%, 4%, 3.6%...etc. :D

MooneyFlyer

Nov 4, 2010, 04:12 PM

Yep - I picked up some NEM on the downgrade. Pretty good day to be in the commodities in general.

Desertrat

Nov 4, 2010, 05:45 PM

Thank the FOMC. Good for our billfolds, on paper for now, but bad for the public at large come next year's highly-probable increases in consumer price inflation.

It's not just the $600 billion, but the mortgage securities the Fed bought during QE1 are now reaching maturity and will continue to be rolled over into Treasuries, as they have been since August. That’s another $275 billion, give or take a few.

When in doubt, digitize!!!

fivepoint

Nov 4, 2010, 06:31 PM

mcrain

Nov 5, 2010, 09:42 AM

Desertrat,
Give us your top 5 ways to prepare for the coming dollar collapse.

Fivepoint

Is it a collapse if it is planned? The Fed is going to pump a lot of money into treasuries in an effort to stimulate the economy through lowering of interest rates and devaluation of the dollar. The natural side effect will be the increase in US dollar price of Gold. At least for a while.

However, if the economy continues to grow and the Fed is right (big if), and the stock markets pick up, corporations invest, people spend, and banks lend more, wouldn't the natural side effect be an increase in the strength of the dollar thus decreasing the US dollar price of Gold?

FP - are you predicting doom and gloom or just a temporary downturn that will correct itself?

fivepoint

Nov 5, 2010, 10:53 AM

Is it a collapse if it is planned? The Fed is going to pump a lot of money into treasuries in an effort to stimulate the economy through lowering of interest rates and devaluation of the dollar. The natural side effect will be the increase in US dollar price of Gold. At least for a while.

However, if the economy continues to grow and the Fed is right (big if), and the stock markets pick up, corporations invest, people spend, and banks lend more, wouldn't the natural side effect be an increase in the strength of the dollar thus decreasing the US dollar price of Gold?

FP - are you predicting doom and gloom or just a temporary downturn that will correct itself?

I fear that these unprecedented efforts by the FED will result in massive hyperinflation and the devaluation/collapse of the dollar's value. I'm asking for a list of to-do's which would benefit someone in the event that this comes to fruition. I hope it doesn't, but it makes sense to prepare for the worst.

flopticalcube

Nov 5, 2010, 10:58 AM

I fear that these unprecedented efforts by the FED will result in massive hyperinflation and the devaluation/collapse of the dollar's value. I'm asking for a list of to-do's which would benefit someone in the event that this comes to fruition. I hope it doesn't, but it makes sense to prepare for the worst.

Depends on whether you subscribe to solely economic collapse or you believe in a societal collapse (TEOTWAWKI).

mcrain

Nov 5, 2010, 12:15 PM

1. If you have a farm or the space, buy fuel. Oil prices are also expected to rise quickly.

2. Diversify. Gold might be a good hedge against hyperinflation, but then again, it may not. Speculation and markets have a funny way of biting you in the butt, so the best advice is to diversify.

3. As part of your diversification strategy, consider real estate (or other hard appreciating assets) and possibly some offshore investments.

4. Join a union / keep a close eye on billing compared to inflation. If you are part of a collective agreement with your employer, you are far more likely to have your salary reflect inflationary and cost of living changes. If you can't join a union or are self-employed, keep a close eye on your costs and your billings related to inflation. You may have to increase your prices, and staying with the curve will help your customers/clients adjust, rather than falling behind and trying to make up for it all at once.

5. Don't panic. This country has gone through inflationary periods in the past and survived. When we all freaked out, we completely threw away every amount of sense and sensibility the country had and put into place "trickle down economics." Where has that gotten us except 12+ trillion in debt, and today's even bigger problems.

mstrze

Nov 5, 2010, 12:28 PM

Pre-1971, a family could have lived decently on a single income. Now, a two income family can barely make ends meet.

And why is that? We have much bigger houses than in 1971 with all the expense that comes along with AND multiple cars AND 'entertainment' expenses that would seem ludicrous to a 1971 family ($100+ for cable TV? Multiple phones for $150 or more? Internet connection...etc.) We eat out more...I'd guess most folks brown-bagged their lunch OR went home for lunch circa 1971...we pay $5 a day or more to Starbucks.

I do not believe at all that a 2-income family should have ANY trouble making ends meet. Live within your means.

I guarantee that a family can live on one income if they just cut back on unneeded expenses and downsize. My wife stays at home with our 3yo and while not everyone can do this I can't imagine having to pay for child care. Her entire salary would essentially have to be dedicated to this, so what would be the point other than getting her out of the house?

My family lives pretty frugally, but I think I could easily squeeze an extra $150 a month out of our budget. Most Americans at least could cut $500 to $1000 a month. If you sit down and REALLY see what you need to live, you will be pretty shocked. Guys I work with spend 6-10 bucks every workday buying lunch...that's $120-$200 monthly savings right there if they 'brown bag' it. It's really not that hard.

Sorry guys for the rant...

Desertrat

Nov 5, 2010, 01:32 PM

I don't see any "collapse" as being planned. Whatever severe decline happens will come about from a belief system of monetary pollicy which we've followed since the 1930s. No one single event has led to all this. It's the accumulation of many different actions by both politicians and the public at large. "The Grand Sweep Of History", if you will, although as usual, hindsight is 20/20. I damned sure didn't see it coming to the degree it is, for all that I expected hard times.

From a billfold standpoint of self-defense, ownership of assets which will hold value--such as gold and silver--and investments in certain commodities. Otherwise, investments in companies in those countries which are seeing actual growth in their economies. But definitely get out of dollar-denominated investments.

Our own growth in GDP comes mostly from government spending and it's really bad that much of that is deficit spending. The actual private-sector portion of GDP is still contracting.

I guess I worry more about social unrest than anything else, as our decay continues. I've done about all I can to deal with other potentials...

I don't have a clue as to how long this economic misery will last. Five years? Ten years? No idea. I just figure we're nowhere near the bottom...

heehee

Nov 8, 2010, 01:12 PM

Gold digging at the World Bank (http://www.ft.com/cms/s/0/e669c7dc-eb43-11df-811d-00144feab49a.html#axzz14igP9unO)

Another all time high, $1,400 :D:D:D

flopticalcube

Nov 8, 2010, 03:00 PM

:D The sun is shining today!

benzslrpee

Nov 8, 2010, 11:58 PM

why would there be a dollar collapse?

Desertrat,
Give us your top 5 ways to prepare for the coming dollar collapse.

Fivepoint

Desertrat

Nov 9, 2010, 12:21 AM

Oh, Lordy, benzslrpee, what you don't know about all this stuff would take pages and pages. But rest assured you're nowhere near being alone in not having followed fiscal/monetary stuff.

Easiest start is to say that the more there is of anything, the less any individual unit is worth. Grains of sand in the desert. Drops of water in the ocean. Fiat paper dollars. All the same.

Start off with the fact that governments have no money just by virtue of being governments. They can only get money from private sector producers of wealth. As long as whatever is used for money is backed by something with intrinsic worth, the government cannot do an unlimited running of the printing presses. So, the old gold standard was a self-limiting restraint on government spending.

Over a sixty-year period we divorced the dollar from gold, and got the printing presses running at wide open throttle to support all these social services and world-policing. We've created nearly $14 trillion in on-the-books debt, and have off-the-books obligations above $100 trillion (Social inSecurity, Medicare, etc.) (For 2010, just the interest on the $14 trillion was close to $400 billion--and that will rise as interest rates rise.)

Anyhow, we've had all this recent printing of "stimulus" money which is nothing but more paper-printing. And now with QE2 there will be more--plus more purchase of treasury debt via toxic mortgage paper.

Fiat money. Nothing backing it but the "full faith and credit" of the US government. Folks are losing faith and the government is running out of credit.

And so gold closed today at $1,412. I remember when it was $35 an ounce. Silver closed around $27; I remember it at $1.22 in the real silver coins I earned and spent in the years before Lyndon's Great Society. All hail the wisdom of government.

A clue for the future: The more paper that gets printed and eventually gets into circulation, the higher that all consumer prices will be. The "gurus" I'm reading are optimistically expecting no more than a 20% rate. Let's hope so; history has shown that things can be much worse--and that history goes all the way back to Rome in the 4th century. The history of fiat currencies is one of inevitable failure.

A minor amount of suggested reading would be "Gresham's Law". Probably reasonably-well explained in Wikipedia.

Until tomorrow night, nighty-bye...

itcheroni

Nov 9, 2010, 01:36 AM

Excellent short explanation, Desertrat. I always end up confusing people because there's so much Keynes in them to fix and I'm a bit long winded.

There's a lot of talk about the evil of free markets and the need for government, or someone, to look after the poor (because they certainly can't take care of themselves :rolleyes:). But I don't see anger over QE2, even though it will cause more suffering for the poor than tripling the taxes on the poor. Of course, I know it's because most people, especially those looking for the state to take care of all essential and desirable services, just don't understand what is happening.

So now the poorest 20% of us are looking at hard times because Ben Bernanke felt 1.5% inflation was too low. But, hey, it's going to stimulate our economy, right?

http://www.zerohedge.com/article/how-ben-bernanke-sentenced-poorest-20-population-cold-hungry-winter

flopticalcube

Nov 9, 2010, 08:49 AM

Let us also not forget the Creature from Jekyll Island. ;)

fivepoint

Nov 9, 2010, 09:01 AM

A few great thoughts on the topic from Ron Paul.

All government spending represents a tax. The inflation tax, while largely ignored, hurts middle-class and low-income Americans the most. Simply put, printing money to pay for federal spending dilutes the value of the dollar, which causes higher prices for goods and services. Inflation may be an indirect tax, but it is very real – the individuals who suffer most from cost of living increases certainly pay a “tax.”

Unfortunately no one in Washington, especially those who defend the poor and the middle class, cares about this subject. Instead, all we hear is that tax cuts for the rich are the source of every economic ill in the country. Anyone truly concerned about the middle class suffering from falling real wages, under-employment, a rising cost of living, and a decreasing standard of living should pay a lot more attention to monetary policy. Federal spending, deficits, and Federal Reserve mischief hurt the poor while transferring wealth to the already rich. This is the real problem, and raising taxes on those who produce wealth will only make conditions worse.

Borrowing money to cut the deficit is only marginally better than raising taxes. It may delay the pain for a while, but the cost of government eventually must be paid. Federal borrowing means the cost of interest is added, shifting the burden to a different group than those who benefited and possibly even to another generation. Eventually borrowing is always paid for through taxation.

The third option is for the Federal Reserve to create credit to pay the bills Congress runs up. Nobody objects, and most Members hope that deficits don’t really matter if the Fed accommodates Congress by creating more money. Besides, interest payments to the Fed are lower than they would be if funds were borrowed from the public, and payments can be delayed indefinitely merely by creating more credit out of thin air to buy U.S. treasuries. No need to soak the rich. A good deal, it seems, for everyone. But is it?

The “tax” is paid when prices rise as the result of a depreciating dollar. Savers and those living on fixed or low incomes are hardest hit as the cost of living rises. Low- and middle-incomes families suffer the most as they struggle to make ends meet while wealth is literally transferred from the middle class to the wealthy. Government officials stick to their claim that no significant inflation exists, even as certain necessary costs are skyrocketing and incomes are stagnating.

The transfer of wealth comes as savers and fixed-income families lose purchasing power, large banks benefit, and corporations receive plush contracts from the government – as is the case with military contractors. These companies use the newly printed money before it circulates, while the middle class is forced to accept it at face value later on. This becomes a huge hidden tax on the middle class, many of whom never object to government spending in hopes that the political promises will be fulfilled and they will receive some of the goodies. But surprise – it doesn’t happen. The result instead is higher prices for prescription drugs, energy, and other necessities. The freebies never come.

The moral of the story is that spending is always a tax. The inflation tax, though hidden, only makes things worse. Taxing, borrowing, and inflating to satisfy wealth transfers from the middle class to the rich in an effort to pay for profligate government spending, can never make a nation wealthier. But it certainly can make it poorer.

Dr. Ron Paul
Congressman, Texas

5 Tips.
Thank you. Interesting read. Desertrat, how would your list differ?

Raid

Nov 9, 2010, 09:36 AM

So, the old gold standard was a self-limiting restraint on government spending. Not quite spending, it was a self-limiting constraint placed upon government money supply. It set the value of the dollar at a certain ratio for gold. I think the end it was $35 USD to 1 troy oz of gold.

We've created nearly $14 trillion in on-the-books debt, and have off-the-books obligations above $100 trillion (Social inSecurity, Medicare, etc.) Which really has very little to do with the commodity or fiat basis of the currency, and more to do with the seemingly now institutional inability of American politicians to cut spending and raise taxes to an appropriate fiscally responsible level.

Excellent short explanation, Desertrat. I always end up confusing people because there's so much Keynes in them to fix and I'm a bit long winded. Please "educate" the Keynes out of me... I'm interested in other theories on economic mechanics.

... But first let me educate you.

The root of the last gold standard that was adopted by the US and other countries as a way of establishing market credibility in the latter years of WWII. This was a time where massive government spending was needed to produce for the demands of War, and simply printing more money could lead to hyper inflation (a lesson they learned from Germany after WWI). So gold was used to restrict the increase of monetary supply and assure other governments (and the populous) of what the dollar was worth. (Hmm ... fiscal uncertainty and large debts... sounds familiar right).

I think the whole reason why the gold standard is being discussed right now is mainly due to uncertainty regarding China's currency imbalances and America's tremendous debt. ... and lets face it, the problem of the economy out pacing production of gold really isn't a problem right now. That's why it looks attractive, but in the long run it's better to measure a currency on the fiscal power of the government and not on the amount of commodities it can collect in a building.

itcheroni

Nov 9, 2010, 11:43 AM

Thanks for the education, but I remember that perspective from econ classes at university. I'm guessing that's where you got it too?

I usually only try and convince people I care about, not strangers (by "convince" I mean changing their understanding of economics and their investments). If you are dead set on "proving me wrong," there will be no chance of convincing you, and I would get absolutely nothing out of it. So don't worry. You can keep Keynes all up inside you. :)

Raid

Nov 9, 2010, 12:58 PM

Thanks for the education, but I remember that perspective from econ classes at university. I'm guessing that's where you got it too? Yep, all four years of it, and the degree says Economics on it, the business card says something similar too. Curious though, what other 'perspectives' are you aware of concerning the rationale behind Bretton Woods agreement?

I usually only try and convince people I care about, not strangers (by "convince" I mean changing their understanding of economics and their investments). If you are dead set on "proving me wrong," there will be no chance of convincing you, and I would get absolutely nothing out of it. So don't worry. You can keep Keynes all up inside you. :) I'm not trying to prove anyone wrong, I'm merely pointing out that some of what's being said is not entirely correct or is inaccurate. The one item you have mentioned is your lack of faith in Keynesian (classical, neo-classical, New, or Post) economics. Fine, it has it's problems but at least it's evolving beyond laissez faire policies.

A little learning is a dangerous thing;
drink deep, or taste not the Pierian spring:
there shallow draughts intoxicate the brain,
and drinking largely sobers us again.

Desertrat

Nov 9, 2010, 11:16 PM

"Not quite spending, it was a self-limiting constraint placed upon government money supply." Yeah, better presentation than mine. However, in 1930 Hoover was limited as to "stimulus" by the controls on expenditures which stemmed from the inventory value of the government's gold. That's why FDR glommed onto your grandpa's gold coins and devalued the dollar.

"The root of the last gold standard that was adopted by the US and other countries as a way of establishing market credibility in the latter years of WWII. This was a time where massive government spending was needed to produce for the demands of War, and simply printing more money could lead to hyper inflation (a lesson they learned from Germany after WWI). So gold was used to restrict the increase of monetary supply and assure other governments (and the populous) of what the dollar was worth. (Hmm ... fiscal uncertainty and large debts... sounds familiar right)."

Well...I'd have to argue a bit, but to argue your time frame and reasoning would be far more complex than what I'd wanna do at this hour of night. :D

Keynes' idea of a 2% or 3% growth in the money supply as a cause of near-full employment was fine. But, coupled with fiat currency, governments were unrestrained to a mere 2% or 3%. Therein lay the problem: Jack up the money supply, create government programs, buy votes thereby. A helluva lot of us don't think that will change before the whole deal goes all to hell. You can kick the can down the road just so long. The only real way to restart a real economy is to get debts paid off--or at least under control, and we're a long danged way from doing that.

Aw, well, I still gotta chuckle at those folks who said I was nuts to buy silver at $4 per ounce and gold at $300. Every time the Monetary Mental Midgets do something else that's covered all over with stupid, my net worth goes up. The Mogambo Guru is right: "This investing stuff is easy!" Well, yeah, if you got started before the thundering herd came into the deal.

fivepoint, there's no "One size fits all" list of five. Depends on whether you want to sit back and watch, or ride trends toward a fatter billfold. For anybody, however, do whatever ya gotta do to minimize overhead and figure out some sort of reliable income. I started way early, so I'm mostly sitting back. Other folks are doing a mix of investing in growth stocks in growing economies and also doing rational speculation in currencies and commodities.

And watch Congress, the Administration and the regulatory agencies like unto a hawk. The basically anti-business climate therein can ruin what would otherwise be good investments. Idiocies like cap'n'trade, or some of the new EPA garbage.

FWIW, quite a few international investors claim that China has a more pro-business climate than the U.S. Go figure. The communists have gone capitalist and the capitalists have gone socialist. Compare relative growth in GDP. And compare the relative amounts of jingle in the jeans pockets.

mstrze

Nov 11, 2010, 08:06 AM

Aw, well, I still gotta chuckle at those folks who said I was nuts to buy silver at $4 per ounce and gold at $300. Every time the Monetary Mental Midgets do something else that's covered all over with stupid, my net worth goes up. The Mogambo Guru is right: "This investing stuff is easy!" Well, yeah, if you got started before the thundering herd came into the deal.

Also watch out for those thundering herds...when EVERYONE is on board that something is a great investment...that's usually the signal that you need to get out and find something new.

fivepoint

Nov 11, 2010, 08:30 AM

Great information as always, Desertrat. BTW, great new signature! :D
It's not true in all cases, but certainly fits the bill most of the time.

Desertrat

Nov 12, 2010, 09:47 AM

I usually use "some" or "most" when mentioning any group, but I figure Dr. Sowell does a darned good job in his commentaries. Better than most, for sure. :)

I figure that for now, gold is in a bull market. It's nowhere near a bubble. And for any bubble to end? A valuable and stable dollar would be needed. Anybody see that happening anytime soon?

iJohnHenry

Nov 12, 2010, 05:13 PM

Anybody see that happening anytime soon?

Are trees still standing??

Yes?

"Outlook is not good."

Desertrat

Nov 13, 2010, 10:27 PM

YouTube fun. Bunches more out there, mostly sneering at Bernanke et al.

http://www.youtube.com/watch?v=0TkFnL0HtL4

mcrain

Nov 15, 2010, 09:01 AM

Chart (http://upload.wikimedia.org/wikipedia/commons/e/e3/Gold_price_in_USD.png)(too big for page)

What happens when the economy improves? What happens if China allows its citizens to invest in other things? What happens if nothing happens? Will the price of gold continue to go up indefinately? If so, why? Not because of its use, just its perceived value, right? Is gold today's tulip?

fivepoint

Nov 15, 2010, 10:27 AM

YouTube fun. Bunches more out there, mostly sneering at Bernanke et al.

http://www.youtube.com/watch?v=0TkFnL0HtL4

Feel free to most a few more! Interesting stuff!

Desertrat

Nov 16, 2010, 08:43 AM

mcrain, there's no sign of improvement in the economy for the foreseeable future. The pertinent questions are about how bad will it get? How low is the bottom to be?

Government debt is out of control, particularly in the westernized nations. Way too high a percentage of GDP. We're second only to Japan, and far worse than the PIIGs. That has led to these currency wars, and the one coming as a result of the Seoul conference will likely be the worst. It's a race to the bottom for all fiat currencies, with QE2 leading the charge.

So, since paper is becoming worth less every day, intrinsic-value items are gaining in price--price as denominated in paper. Gold is worth no more, now, than it was a hundred years ago. Trouble is, paper money is heading toward equal value with used toilet paper. It's all about debt. Way too much debt.

SFAIK, the Chinese citizen can pretty much invest as he wishes. The government there has encouraged and is facilitating the buying of gold. I saw this morning that the amount of gold being imported to India is increasing. IIRC, Vietnam has changed to a positive view on gold transactions. And one area of Indonesia is actually minting gold coins for common usage. Various central banks are buying gold, including Russia's. And by the tonnes, not just small quantities.

Gold will possibly become "tulip" when the public at large is lined up at coin shops or is way back-ordered at major sales outlets. A tulip price? I don't know. Some envision numbers above $5,000 per ounce.

From the standpoint of "corrected for inflation", gold won't hit its 1980 price until it's around $2,500 per ounce. However, the 1980 peak was due in large part to the Hunt brothers' effort to take control of the world silver market. That's the only time I know of where the rise in the price of silver dragged gold upward with it. But I sold all my bullion at the peak, two days before the market crashed.

mcrain

Nov 16, 2010, 09:09 AM

mcrain, there's no sign of improvement in the economy for the foreseeable future. The pertinent questions are about how bad will it get? How low is the bottom to be?

There's no signs of improvement? Come on. Really? Are you really that bearish on America? Just about every economic indicator has shown that over the last year the economy bottomed out and is steadily, albiet slowly, improving. Jobs are being added, GDP is growing, tax revenues are increasing, manufacturing, home sales, industrial purchases, inventory, you name it.

I know the election of a bunch of Republicans and the inevitable stalemate will further the right-wing agenda, thus increasing the price of gold, but other than that, why should anyone buy gold now? Especially when the price is far above historical averages.

Desertrat

Nov 16, 2010, 09:32 AM

GDP growth is due to federal deficits. That's not a sign of a productive economy. That we need over a hundred thousand new jobs every month just to keep up with population growth is not factored in to the happy noises when there is any decline in the number of unemployment applications. Any increase in tax revenues is either time-oriented (such as April 15th) or is from new and higher taxes at local and state levels.

And, as consumer price inflation continues to increase, associated taxes from transactions will increase--but that doesn't help your billfold or the economy one iota. Au contraire, it hurts.

New home permit applications are at an all-time low. And don't forget that a foreclosure is counted as a home sale--so don't get your hopes up about those numbers.

Look: Politics may have something to do with decision-making about government spending, but it has zilch to do with arithmetic. And the simple arithmetic is showing negative trend lines, regardless of what happens in any one month or quarter.

Politics, for instance, may stop foreclosures, but there is still the mortgage debt which must either be paid or must be written off. Either way, the debt exists or shows up as a loss. Bummer.

A trend to watch: The percentage of your cost of living associated with food. It's on the rise, after decades of decline. Given what's going on with costs of production, the rise will become significant--and many shoppers are already bitching. (Don't talk groceries with my wife. :))

mcrain

Nov 16, 2010, 12:33 PM

Bubbles pop. They always do. It's just a matter of time.

There are a lot of analysists who say gold will continue to go up, but very few say so based on demand or scarcity. Instead, gold's rise seems to hinge on economic uncertainty.

What happens when things become more certain and there is suddenly low demand, far too much supply and far better investments?

Pop (http://money.cnn.com/2010/05/19/news/economy/gold.price.collapse.fortune/index.htm).

Buffet's (http://money.cnn.com/2010/10/18/pf/investing/buffett_ben_stein.fortune/index.htm)take.

Seriously, try to do a search on gold prices and analysis to try to find anyone that has an opinion that is NOT sponsored by goldline or something like that. Almost every "expert" opinion is on a page heavily advertised by buy gold sites.

Desertrat

Nov 16, 2010, 08:22 PM

Goldline is just another ad which I ignore--just as I ignore other advertising. I've read that their premiums are way too high, so why pay attention to them? :) But Goldline is in business because there is a real-world demand, even if their prices are rip-off.

I figure that the folks who run the Chinese central bank, along with Russia and India and a dozen others, aren't covered all over with stupid. They're buying gold by the multiple tonnes. The Chinese government is encouraging its people to buy gold, as well as buying its own domestic mine output.

Gold is a storehouse of wealth in times of uncertainty. Okay, fine. What with the financial problems of the PIIGs, the degradation of US currency by Bernanke et al, uncertain times will be here for a couple of more years at the very least.

As the dollar continues to go down when measured against food, transportation fuel and other commodities, gold will continue to go up. Not in a straight line, of course. Da Boyz are hammering down as hard as they can to deal with their tens of millions of ounces of short-position contracts. That's been going on for the past several years, and they're losing out.

Buy the dips.

Like I say, though, I don't really care. My average buy-in is right at $400 per ounce, which is about what it costs to get it out of the mine and to a mint.

I've been meddling in this game since around 1970 or thereabouts. I've always turned a profit. I figure that a track record of profit makes it kinda hard for me to pay attention to the newbies at the gold game. It's easy enough. Just get a handle on geopolitics and international monetary policies and it's all pretty obvious.

itcheroni

Nov 19, 2010, 06:15 PM

Seriously, try to do a search on gold prices and analysis to try to find anyone that has an opinion that is NOT sponsored by goldline or something like that. Almost every "expert" opinion is on a page heavily advertised by buy gold sites.

I could try and direct you to sites or books, but ultimately the market will tell us who is correct.

iJohnHenry

Nov 19, 2010, 06:44 PM

I could try and direct you to sites or books, but ultimately the market will tell us who is correct.

Yes, and cheer-leaders such as yourself.

itcheroni

Nov 19, 2010, 06:54 PM

Yes, and cheer-leaders such as yourself.

What am I cheerleading? Gold?

iJohnHenry

Nov 19, 2010, 06:57 PM

What am I cheerleading? Gold?

Why yes, I believe you have it. Well done.

itcheroni

Nov 19, 2010, 07:02 PM

Why yes, I believe you have it. Well done.

Thank you.

Desertrat

Nov 20, 2010, 11:02 PM

Can you believe those stupid Russians? They ran out and bought 600,000 ounces of gold in October! That's 18.7 tonnes! $810 million!

They're not nearly as smart as mcrain. You reckon the Russian central bank is being advised by Goldline? Or the Chinese, who've added over a thousand tonnes to their stash of gold in the last few years?

One thing for sure: Since Obama got his knuckles rapped bigtime at the G-20 and the world at large is screaming NO! at Bernanke and QE2, I'd say that "uncertainty" is gonna be a long-term player in all these money games. The currency speculators are behaving that way.

heehee

Nov 21, 2010, 06:28 PM

Can you believe those stupid Russians? They ran out and bought 600,000 ounces of gold in October! That's 18.7 tonnes! $810 million!

They're not nearly as smart as mcrain. You reckon the Russian central bank is being advised by Goldline? Or the Chinese, who've added over a thousand tonnes to their stash of gold in the last few years?

I regularly see multi-million dollar bids for gld, 3 weeks ago, we saw a $2 Billion bid. :eek: My boss had to wait 3 weeks when he bought $27 million worth of silver bullion.

fivepoint

Nov 22, 2010, 08:46 AM

Thought people who read this thread might find this article interesting:
http://gizmodo.com/5696149/why-is-gold-the-perfect-element-for-money

Peterkro

Nov 22, 2010, 09:18 AM

Can you believe those stupid Russians? They ran out and bought 600,000 ounces of gold in October! That's 18.7 tonnes! $810 million!

They're not nearly as smart as mcrain. You reckon the Russian central bank is being advised by Goldline? Or the Chinese, who've added over a thousand tonnes to their stash of gold in the last few years?

The BRIC countries and others are building up reserves of each others currency and gold,the reason for this is they know the $ is gone as a reserve currency and they are building towards launching another currency tied in some way to gold.(not a gold standard,there is not enough for that)

mcrain

Nov 22, 2010, 09:28 AM

Thought people who read this thread might find this article interesting:
http://gizmodo.com/5696149/why-is-gold-the-perfect-element-for-money

Gold makes good money or stable currency, but is it a good "investment?"

The demand for gold to be used in manufacturing has gone down. The demand for gold to be used as jewelry has gone down. The supply of gold available for purchase has gone up on both fronts, exploration and re-use.

The only area I see gold become more scarce is because of investors buying it to stick in a safe because it is a "safe" investment when other currencies are unstable.

When (not if) the various economies in the world are more stable, and the riskier investments (namely stocks and industry) start having higher rates of return, what's going to happen to all the money that's tied up in gold? My guess is that there will be some investors who choose to liquidate their gold in order to purchase other forms of investment. When that happens, who's going to buy their gold? Supply up, demand down, way down...

I don't doubt we are in a period of increasing gold prices, but it seems like almost everyone who analyzes gold as an investment or even mentions gold as an investment is seriously backed by companies like goldline. As we've seen with Beck and co., when they advertise, they expect a certain level of "pushing gold."

If there are any neutral experts on the subject, I'd like to see their take on the subject.

BTW, a nation state purchasing gold affects the price for investors, but their analysis and reason for doing so is quite different than yours or mine.

fivepoint

Nov 22, 2010, 10:42 AM

Gold makes good money or stable currency, but is it a good "investment?"

I wasn't arguing a point, mcrain. I thought this slightly off-topic link might be interesting to people reading and participating in this thread. It was interesting to me anyway.

That being said, to claim that the only people moving towards gold are just following the advice of companies like Goldline is just plain ridiculous. People buy things like Gold when the value of currencies is in jeopardy. It's a hedge against inflation, etc. All things many experts think are on the way. Until the global economy turns around, expect Gold to continue it's rise.

mcrain

Nov 22, 2010, 11:23 AM

I wasn't arguing a point, mcrain. I thought this slightly off-topic link might be interesting to people reading and participating in this thread. It was interesting to me anyway.

That being said, to claim that the only people moving towards gold are just following the advice of companies like Goldline is just plain ridiculous. People buy things like Gold when the value of currencies is in jeopardy. It's a hedge against inflation, etc. All things many experts think are on the way. Until the global economy turns around, expect Gold to continue it's rise.

It was interesting to me too, thanks for the link.

I don't think all people are just following the advice of goldline, but some may be. What I'm not sure about is what advice are people getting. Seriously, if you do a google search for gold analysis or anything like that, try to find legitimate, critical analysis. It's not easy.

All of your points about it being a good hedge aganist inflation are valid, for now. At least, I think so, but I'm not an expert on gold, and finding one is getting harder and harder with the pervasive expansion of the gold whores.

paddy

Nov 22, 2010, 12:25 PM

I know it's been posted but it's worth re-posting.

Look," he says, with his usual confident laugh. "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

Warren Buffett. Linksy (http://money.cnn.com/2010/10/18/pf/investing/buffett_ben_stein.fortune/index.htm).

kavika411

Nov 22, 2010, 12:33 PM

Which would you take?

Gold.

Ugg

Nov 22, 2010, 12:49 PM

I know it's been posted but it's worth re-posting.

Warren Buffett. Linksy (http://money.cnn.com/2010/10/18/pf/investing/buffett_ben_stein.fortune/index.htm).

I definitely put more faith in Warren Buffett than I do in the actions of the BRIC countries. His railroad purchase was a sure indication that the effects of peak oil are just around the corner. He's going to make a killing transporting freight and possibly people.

Desertrat

Nov 22, 2010, 02:53 PM

Ugg, I've never read commentaries from any of us Gold Bugs or "counter-culture" economic analysts who believe all this present mess will continure forever.

But for now and the next several years, the BRIC nations and some others are the ones which are showing growth and economic success, while the western nations and Japan are mostly in the toilet and seemingly working to remain that way. I have always concluded that one learns more from the successful than from those who fail.

In any rising trend of anything, buying in is a form of investing. Sure, it can be of a speculative nature, but nowhere is it written that there is no such thing as rational, intelligent speculation.

So, for now, buying gold and silver is indeed intelligent speculative investing. The simple arithmetic of the graphs of price vs. time shows that. The reasons are patently obvious; they are ongoing--so the runup will continue for some length of time.

Those of us who stocked up at $400/ounce or thereabouts are smiling in smug fashion, since that cost-of-production price is a floor. Regardless, for the next year or more, I see no reason why "storehouse of value" is not a rational conclusion. Bernanke and Geithner are making it so.

itcheroni

Nov 22, 2010, 04:24 PM

I definitely put more faith in Warren Buffett than I do in the actions of the BRIC countries. His railroad purchase was a sure indication that the effects of peak oil are just around the corner. He's going to make a killing transporting freight and possibly people.

Do you put more faith into his words or his actions? If Buffett were really a believer in the U.S. economy, he would buy T-bills. Instead he bought a railroad company with the expectation of progressively higher oil prices (i.e. a hedge against inflation). That is a great commodity play. Another commodity play would be to buy the oil itself. Another great commodity play would be to buy gold. So tell me where Buffett differs from the BRIC countries in this regard?

With his words and empty patriotic gestures, I believe Warren Buffett is concerned mainly with his legacy, not dispensing what he considers the best advice.

Ugg

Nov 22, 2010, 05:13 PM

Do you put more faith into his words or his actions? If Buffett were really a believer in the U.S. economy, he would buy T-bills. Instead he bought a railroad company with the expectation of progressively higher oil prices (i.e. a hedge against inflation). That is a great commodity play. Another commodity play would be to buy the oil itself. Another great commodity play would be to buy gold. So tell me where Buffett differs from the BRIC countries in this regard?

With his words and empty patriotic gestures, I believe Warren Buffett is concerned mainly with his legacy, not dispensing what he considers the best advice.

Why do you hate the guy so much? Second richest American, modest, very altruistic, has always been a big believer in the US...

Buffett doesn't buy companies, strip them of their assets and then run them in the ground leaving employees and stockholders in the lurch. He improves them and insists on efficiency, something I greatly admire.

Despite the vacuous and raucous minority tea partiers as well as the do nothings of the republican party, the reality is that the railroads are the future of transportation in the US. Anyone who bets against him is not going to come off well.

iJohnHenry

Nov 22, 2010, 05:23 PM

Why do you hate the guy so much? Second richest American, modest, very altruistic, has always been a big believer in the US...

Equate this with Sam Walton. :rolleyes:

itcheroni

Nov 22, 2010, 06:43 PM

Why do you hate the guy so much? Second richest American, modest, very altruistic, has always been a big believer in the US...

.... Anyone who bets against him is not going to come off well.

I don't hate him at all. I don't trust anyone's words if their actions say something else. That's all.

You're right that he's a very smart guy. Railroads are going to be a very important part of America's future, but that is primarily due to very high inflation and commodity prices. So Buffett's actions confirm my economic outlook while Buffett's rhetoric confirms yours.

Desertrat

Nov 23, 2010, 09:48 PM

Ugg

Nov 23, 2010, 11:48 PM

Buffet has pretty much always been a long-term investor. He's looking at the potential for railroads from the standpoint of high-cost transportation fuels making it more economical to ship by train than semi, and possibly some passenger traffic more realistic than AmTrak. He's not sweating the current situation of the notable reduction in haulage.

He did okay on his billion-or-so buy of silver at around $8, though. Physical delivery, in London.

That's the reason he's so rich, because he's in it for the long run. There's obviously a lot of money in short term investing, but Buffett's proved the long haul is where it's at. Too bad other CEOs haven't learned from him.

I've said it before, the US is in the mess it is because of the short termers who are constantly demanding instant profits instead of long term viability. VW always took a lot of heat because one of its major investors was the German state of Saxony. Saxony wasn't interested in turning a buck overnight, rather in having a large employer that paid its taxes on time. VW is mostly a roaring success while Detroit, which is in effect run by Wall Street has continually failed to keep its head above water.

Desertrat

Nov 24, 2010, 08:37 AM

No argument, Ugg. But what you're saying about short-termers applies equally to our government. It's short-term thinking to play the monetary-policy games to avoid pain, and just kick the can down the road into a future mess.

The result has been that we've avoided market-place realities--and are still trying to do so, even now. We're not alone in this idiocy, of course. Here's a morning article from the Guardian:

http://www.guardian.co.uk/business/2010/nov/22/90bn-irish-bailout-turmoil-europe

"Financial markets were thrown into turmoil today amid fears that an imminent collapse of Ireland's beleaguered government would have a knock-on effect across the eurozone."

Another squib: "U.S. banks will close 5,000 branches in the next 18 months as they face profit declines from decreased loan demand and lower fee revenue, said Meredith Whitney, the former Oppenheimer & Co. analyst who now runs her own firm. Whitney also said that she sees slower growth in investment banking. U.S. securities firms may cut as many as 80,000 jobs in the next 18 months as revenue growth slows."

5,000 branches at probably ten employees each, plus 80K investment bank jobs? Hey, good times, right? Wrong. And these are not minimum-wage jobs which are going away.

It just goes on and on, regardless of the spin at pMSNBC.

Gold? This month alone, to date, the US Mint has sold 83,000 ounces in gold Eagles.

I dunno. Like I've said before, that there would be some sort of serious mess was rather obvious, over twenty years back. I had no clue as to exact form, of course, but you can't get away with doing stupid forever. But Buffet is not the only one who takes a long view and looks to the future. I was doing that long before I ever heard of him...

Got gold? :D

mcrain

Dec 27, 2010, 01:02 PM

itcheroni

Dec 28, 2010, 05:03 PM

Over a span of the last 2 years, gold outperformed the S&P 500.
Over a span of the last 1 year, gold outperformed the S&P 500.
Over a span of the last 6 months, the S&P 500 outperformed gold.
Over a span of the last 3 months, the S&P 500 outperformed gold.
Over a span of the last 1 month, the S&P 500 outperformed gold.
Over a span of the last 1 day, the S&P 500 outperformed gold.

Link (http://caps.fool.com/Ticker/GLD.aspx)

For an interesting article about the manufactured demand for gold, take a look at this article from Bloomberg (http://www.bloomberg.com/news/2010-12-20/soros-gold-bubble-at-1-375-has-miners-push-every-button-in-tale-of-tears.html).

I think gold is a strong investment and a good hedge against continued market volitility, but anyone who uses it as their main investment strategy today is taking a massive risk (which is strange considering gold is supposed to be the hedge against risk). Just my opinion.

Got Stocks?

It's very difficult to predict anything in the short term, at least for me anyways. On the other hand, I believe long term economic results are very predictable.

The author of that article seemed to place too much emphasis on the creation of the ETF. Whether the ETF exists or not, it would not have effected this commodity bull market. As the article stated, gold had been in decline for 2 decades. It is merely a matter of time. We are now one decade into the bull market. And the use of an ETF forgets one crucial reason for having gold in the first place- avoiding counter party risk. I forget where I heard this but paper gold outnumbers physical gold 100 to 1. If everyone who had a promise for gold demanded delivery, it would send the price of gold into the stratosphere. I don't think the World Gold Council is as powerful as many of the nations in the world trying to suppress the gold price. China only has committed to buying several hundred tons of gold every year to build their reserves. Gold has been used primarily as money for about 6000 years. Only in the last 40 years has gold been relegated to only jewelry. From my perspective, the last 40 years of unbacked money has been the anomaly.

In my opinion, we are nowhere near bubble territory as much as some would love to call it right now. How can it when people believe the U.S. economy is turning around? As events unfold over the next 5-10 years, gold will probably reach somewhere around $8000+. People always mention the 1980 gold crash as a reason to be weary of gold. They forget that it was Volcker's rate hike that set the crash off. I pay attention to everything Bernanke says and does. Gold has a better footing at $1400 than at $1000 because of the economy policies implemented since then. But at this point, I believe it is too late to do what Volcker did. The economic pain of raising interest rates into the teens would kill us. It's like asking a 1000 lbs man to start an intense diet and exercise regime. There is the very real possibility that gold could reach billions and trillions in dollar terms.

This is the natural course in the rise and fall of empires.

Eraserhead

Dec 28, 2010, 05:48 PM

The Chinese had fiat money under some of their emperors - so its not the first time - though eventually they always printed too much money, so it collapsed.

itcheroni

Dec 28, 2010, 06:25 PM

The Chinese had fiat money under some of their emperors - so its not the first time - though eventually they always printed too much money, so it collapsed.

I meant the first time the whole world was on fiat currency because the U.S. dollar is the reserve currency. I actually don't know for sure it's the first time, but I'm guessing it is at least to this extent. I think it's very natural for at least a few major countries to eventually return to gold or something tangible to back their currencies. The euro will eventually split up and I'm sure a few of them will use gold or something like it. I think we have several more years to go in this economic crisis, so it'll take time for things to unfold.

Eraserhead

Dec 28, 2010, 06:44 PM

The euro will eventually split up and I'm sure a few of them will use gold or something like it.

Well some countries might leave, but I doubt it'll split up.

itcheroni

Apr 19, 2011, 12:42 PM

http://www.marketwatch.com/story/gold-wavers-copper-boosted-by-housing-2011-04-19?link=MW_latest_news

And it's still a bargain.

Joshuarocks

Apr 19, 2011, 12:48 PM

http://www.marketwatch.com/story/gold-wavers-copper-boosted-by-housing-2011-04-19?link=MW_latest_news

And it's still a bargain.

Once the US Dollar collapses(and it is on its way to doing so; The Fed can't print any more money as its not worth the paper its printed on), we might have to resort to gold as our currency.

All signs of a failed economy.

mcrain

Apr 19, 2011, 01:42 PM

All signs of a failed economy.

All signs are that a certain group of people believes that we are a failed country, and is standing in the way of doing the things we need to do in order to ensure the dream that we can be the best and we can do better for our people.

It's the difference between the "American Dream" and "Goodnight America."

(edit) The price of gold is still artificially high. Demand for use is actually way down. The second the market decides other investments are more profitable, the price is going to tank back down to more historically appropriate levels. It's inevitable.

(edit2) I could be wrong
http://www.commodityonline.com/ckfinder/userfiles/images/DRUS04-13-11-1.gif

itcheroni

Apr 19, 2011, 01:51 PM

mcrain

Apr 19, 2011, 02:04 PM

What makes you believe it's artificially high? It's still about 1/4th of the value it held when the dollar was last pegged to gold.

By the way, the chart doesn't seem to prove your point. It seems to say that gold isn't too high.

I believe it is artificially high for the reasons that are outlined already in this thread. The fractionalization of gold interests and marketing of those interests, along with unique market volitility... along with an emerging Asia market, have increased the demand for gold investment, but NOT gold usage. People, and governments, are buying gold as a hedge against the market, not because they are making more gold jewelry or electronics.

(edit -> Gold supply is up as well both from mining and from re-use. Supply is high, demand is low... but people are investing like crazy and driving up the price. What happens when investors choose to invest in something else?)

The second the market reverses itself, gold prices drop dramatically. It has happened in the last 6 months. Yes, gold is high right now, but then again, market volitility increased again (Libya, Japan, etc...), and the threats re: the debt limit have harmed the US Credit rating.

I know the chart doesn't prove my point, that's why I said I could be wrong. Plus, if you have information that is not beneficial to your argument, you can either hide it, or you can expose it, and explain why you believe what you do. I choose to utilize a debate method that reduced the impact of the information, while enhancing my credibility.

(edit) For some really good arguments why Gold prices may continue to go up, this is an interesting read. Fools (http://www.fool.com/investing/general/2010/06/14/ask-the-fool-is-gold-a-bubble.aspx)

itcheroni

Apr 19, 2011, 02:45 PM

mcrain

Apr 19, 2011, 03:05 PM

You're missing the most important use for gold: money. What you consider a short term investment is really a move towards adopting gold as money again. And what people are investing in isn't gold, it is a promise for gold. If only 5% of them asked for delivery of their gold, there wouldn't be any more gold available. So yes, the value of paper gold is artificially high (because you really haven't bought gold). The value of physical gold is incredibly low.

What has caused gold to knock on $1500?

http://www.zerohedge.com/article/golden-tipping-point-university-texas-takes-delivery-1-billion-physical-gold

I'm not missing that point, the article I linked to discusses that very issue. My point is that... well, I think you just made it for me. Physical gold demand is low, supply is high, and yet, there is this fake promise for gold that everyone is investing heavily in. It kind of sounds like U.S. Money before we dropped the gold standard.

I just don't see people buying bread with SPYDER shares; inevitably the market conditions will change, and gold as a currency will be overpriced. It already is as a commodity.

Joshuarocks

Apr 19, 2011, 03:41 PM

All signs are that a certain group of people believes that we are a failed country, and is standing in the way of doing the things we need to do in order to ensure the dream that we can be the best and we can do better for our people.

It's the difference between the "American Dream" and "Goodnight America."

(edit) The price of gold is still artificially high. Demand for use is actually way down. The second the market decides other investments are more profitable, the price is going to tank back down to more historically appropriate levels. It's inevitable.

(edit2) I could be wrong
http://www.commodityonline.com/ckfinder/userfiles/images/DRUS04-13-11-1.gif

We all know the dollar is dying.. and there is nothing that can be done about it.. Gold is one thing though.

mcrain

Apr 19, 2011, 04:12 PM

We all know the dollar is dying.. and there is nothing that can be done about it.. Gold is one thing though.

Oh BS. Do you really think the US is over? That's the problem with this country, a lack of patriotism. Ironic, considering the same people saying what you just did were accusing people like me of being unpatriotic. Un-freaking-believable. The dollar is only weak because we are in debt due to 30 years of an economic fallacy. It's time to get off our butts and fix the problem.

We could easily fix our trade problems (I'm tired of free market people insisting that we must compete with markets that are not free. Stop the race to the bottom, and start insisting that in order to sell here, you must compete on OUR terms), our revenue problems (increase taxes on people who can afford them; eliminate loopholes and preferential treatment), our spending problems (single payor health care for starters, cut military too), and our election problems (corporations are not people, and don't have constitutional rights; money is NOT speech; public funding for all elections - free airtime; make voting more compulsory - register everyone)

There are solutions to the problems if only the people who helped create the problems would just get out of the way.

Joshuarocks

Apr 19, 2011, 10:50 PM

Oh BS. Do you really think the US is over? That's the problem with this country, a lack of patriotism. Ironic, considering the same people saying what you just did were accusing people like me of being unpatriotic. Un-freaking-believable. The dollar is only weak because we are in debt due to 30 years of an economic fallacy. It's time to get off our butts and fix the problem.

We could easily fix our trade problems (I'm tired of free market people insisting that we must compete with markets that are not free. Stop the race to the bottom, and start insisting that in order to sell here, you must compete on OUR terms), our revenue problems (increase taxes on people who can afford them; eliminate loopholes and preferential treatment), our spending problems (single payor health care for starters, cut military too), and our election problems (corporations are not people, and don't have constitutional rights; money is NOT speech; public funding for all elections - free airtime; make voting more compulsory - register everyone)

There are solutions to the problems if only the people who helped create the problems would just get out of the way.

True, but our government doesn't seem to care.. the only way to reverse all of this is to let the system collapse and start all over again.. How do you plan on wiping 16 trillion dollars in debt which by 2020 will rise to about 20 trillion.. eventually its going to collapse, and the dollar is no exception.. And if you watch REAL MEDIA, and not corporate run media(what the GOVERNMENT wants you to know as truth, when it isn't), you will see that the picture of the problems in this country opens up a wider range of issues.

Republicans nor democrats are doing anything at all to stop all of this.. and neither is Obama or no one else for that matter.. And its only a matter of time before the AMERO replaces the dollar.. Amero is sort of like what the Euro is, but its a currency for the coming North American Union(US, Mexico, and Canada).

flopticalcube

Apr 19, 2011, 10:54 PM

And its only a matter of time before the AMERO replaces the dollar.. Amero is sort of like what the Euro is, but its a currency for the coming North American Union(US, Mexico, and Canada).

No thanks. There is no appetite up here for currency integration.

I'll revisit this thread when gold is at $1800. ;)

Desertrat

Apr 22, 2011, 12:59 PM

"The dollar is only weak because we are in debt due to 30 years of an economic fallacy."

Well, some say 98 years, with the FRB and fiat currency. The next group is equally accurate with 77 years and the beginning of the New Deal. After that come those who say 40 years and the closing of the gold window by Nixon.

One reason, right now, that the dollar is weak is that there are too many of them. Add to that the amount of debt which cannot be paid except via highly-inflated dollars--if then; many say that even Carter-era inflation won't help.

So once again gold and silver are quite rationally seen as storehouses of purchasing power. They are "worth" no more than they have ever been, but fiat money is losing its purchasing power by virtue of this neo-Keynesian monetary policy.

"...start insisting that in order to sell here, you must compete on OUR terms..."

Yeah, Smoot/Hawley was a great success. Nice to ignore the fact that cheap imports have allowed a higher standard of living for the bottom third of our population than was available before "jobs were sent overseas". (I'm not pretending that I have a real-world politically viable answer for this particular problem--but nobody else has a workable solution, either.)

kavika411

Jul 18, 2011, 10:04 AM

Gold prices rallied to record highs above $1,600 an ounce in Europe on Monday as investors spooked by the euro zone debt crisis and the threat of a U.S. default bought into the metal as a haven from risk.

Risk aversion swept the markets after euro zone stress test results failed to address the potential for a Greek sovereign debt default before a summit in Brussels on Thursday, and as a deadline to raise the $14.3 trillion U.S. debt ceiling loomed.

Stock markets, peripheral euro zone debt, oil prices and the euro [EUR=X 1.4022 -0.0091 (-0.64%) ]came under pressure, while the Swiss franc [CHF=X 0.8181 0.0084 (+1.04%) ]—often seen as a safe haven—and precious metals climbed.

Spot gold [XAU= 1602.40 9.10 (+0.57%) ] rose as high as $1,602.86 an ounce and was up 0.4 percent at $1,600.26 an ounce. Gold rose more than 3 percent for a second straight week to Friday, a feat it has not achieved since February 2009.

"Gold has room to go up. The smouldering debt crisis in the euro zone peripheral countries and the uncertainty over the debt limit in the United States are currently supporting prices," said Commerzbank analyst Daniel Briesemann.

"It seems gold will stay well supported unless we get a real and convincing solution from the extraordinary EU summit that takes place on Thursday."

European shares fell sharply as long-awaited bank stress test results only intensified worries about the regional debt crisis, while U.S. stock index futures slumped.

Sovereign default fears are growing in both Europe and the United States. The United States is struggling with deficit reduction talks ahead of the White House's July 22 deadline on a deal to raise the $14.3 trillion debt ceiling.

Gold prices backed off from the $1,600 an ounce level only briefly after U.S. Treasury Secretary Tim Geithner expressed confidence that Congress would raise the debt ceiling and said Republicans had taken "default off the table."

On the foreign exchange markets, the euro slid 0.5 percent against the dollar. Gold rallied across a number of major currencies, also hitting record highs in euro, sterling, South African rand and Canadian dollar terms.

But while it has risen 12.5 percent in dollar terms this year and 7.2 percent in euros, gold has fallen 1.4 percent when priced in Swiss francs.

"Investors are increasingly looking to gold as a safe haven as the U.S. dollar, pound sterling and the euro continue to devalue against stronger currencies such as those of Canada, Australia, Norway and Switzerland," said chief executive of Sector Investment Managers.

Other precious metals tracked gold higher, with silver rising above $40 an ounce for the first time since early May.

The grey metal rallied to a record $49.51 an ounce in April before correcting sharply.

It has rallied more than 15 percent in the last two weeks, however, as gold prices have risen.

link (http://www.cnbc.com/id/43788734)

iJohnHenry

Jul 18, 2011, 10:14 AM

link (http://www.cnbc.com/id/43788734)

Is it time yet for a thread title edit? ;)

mcrain

Jul 18, 2011, 10:18 AM

flopticalcube

Jul 18, 2011, 11:34 AM

Funny, the people who own the most gold and are heavily invested in US Treasuries fully support the political party that is blocking efforts to raise the debt ceiling, thus causing gold prices to rise, and potentially higher interest rates (and resulting higher profits).

I wonder if there is a connection.

Raising the debt ceiling will just be a continuation of the current spending pattern which has so far been beneficial to gold. It looks like a situation of damned-if-you-do/don't. I'm personally short bonds.

It was my understanding that the US itself (supposedly ;)) owned the most gold.

barkomatic

Jul 18, 2011, 02:20 PM

I hope the world economy collapses. I'm tired of my desk job and I'd like to try my hand at raising chickens.

As for gold, I'm glad I bought some when it was $260 an ounce and everyone thought I was a fool -- and not hip to the "new economy".

I don't think precious metal is a good investment now. People are being hyped up on bad news just like they were being hyped up on housing some time ago. I love reading all of the impassioned posts about what we "need to do to fix the economy and pay down our debt". I recognize more than a few sound bites from the news. . .

Desertrat

Jul 18, 2011, 03:47 PM

Barkomatic, do you give thanks to Gordon Brown for his bottoming of the market? :D

All the fundamentals which have caused the rise in price of Au & Ag are still there. That doesn't make me eager to run out and buy more, though. :)

I'm less concerned about paying down the debt--although that would indeed be a good thing--as I am about not adding more to it. You don't get out of debt by borrowing, I've noticed.

Since there is nowhere near enough taxable money to come anywhere near any sort of balanced budget, we're in a cancer-surgeon situation: Cut or die.

itcheroni

Jul 18, 2011, 05:10 PM

Funny, the people who own the most gold and are heavily invested in US Treasuries fully support the political party that is blocking efforts to raise the debt ceiling, thus causing gold prices to rise, and potentially higher interest rates (and resulting higher profits).

I wonder if there is a connection.

Please elaborate and provide a link because I have no clue what you're talking about. If we don't raise the debt ceiling that would actually be bad for gold.

Rodimus Prime

Jul 18, 2011, 05:43 PM

Please elaborate and provide a link because I have no clue what you're talking about. If we don't raise the debt ceiling that would actually be bad for gold.
Umm what are you talking about. How would it be bad for gold.
If the debt ceiling is not raise the dollar will drop in value so that means gold would go up in value.

The people who own the most are gaming the system to cause gold to spike.

itcheroni

Jul 18, 2011, 06:10 PM

Umm what are you talking about. How would it be bad for gold.
If the debt ceiling is not raise the dollar will drop in value so that means gold would go up in value.

The people who own the most are gaming the system to cause gold to spike.

I could try my best to explain but I've already posted everything you need to know in this thread. The fact that you, along with most others Americans, don't understand is a sign that gold has much further to rise. Probably a few more years. When you do buy gold, please let us know so I can sell.

iJohnHenry

Jul 18, 2011, 06:19 PM

When you do buy gold, please let us know so I can sell.

Sell to who, and for what?

Fruit, vegetables, meat, fish, because they will be the real value.

Rodimus Prime

Jul 18, 2011, 06:21 PM

I could try my best to explain but I've already posted everything you need to know in this thread. The fact that you, along with most others Americans, don't understand is a sign that gold has much further to rise. Probably a few more years. When you do buy gold, please let us know so I can sell.

you failed to address the question.
How would not raising the debt ceiling would be bad for gold?

It would be bad for the stock market, bad for the dollar, bad for a lot of things but not bad for things like Gold.
Now gold like many other things has been over run by speculators which in itself is an issue because they are what have help drive up the price of oil and a lot of other produces.

senseless

Jul 18, 2011, 09:15 PM

When interest rates for savers rise to normal levels, the glitter of gold will fade. When you have a choice of a 2% CD, 1/10th% money market rate or risky bonds, why not choose gold?

Pachang

Jul 18, 2011, 11:05 PM

you failed to address the question.
How would not raising the debt ceiling would be bad for gold?

It would be bad for the stock market, bad for the dollar, bad for a lot of things but not bad for things like Gold.
Now gold like many other things has been over run by speculators which in itself is an issue because they are what have help drive up the price of oil and a lot of other produces.

Not raising the debt ceiling would be bad for gold and good for the dollar.
The reason gold keeps going up in terms of dollars is because the amount of gold in existence is steady but the amount of dollars is increasing.

Not going further into debt would mean the fed wouldn't be able to buy new bonds and to monetize the debt which is what is hurting the dollar right now (because it increases the money supply).

However what really happens to the dollar depends on how the idiotic traders interpret the situation which could make it go either way. But for the fundamentals not raising the debt ceiling is good for the dollar.

Btw there are more speculators in the forex market (trading currencies) than in the precious metals market.