The Gold and Silver Thread

[sparky]

Ok USC

let's say the dollar tanks

you've got gold

i've got chicken

can you think of the scenario that might occur?

~S~

 

[Jos]

Lots of people have chickens, not many have gold

 

[uscitizen]

Ok USC

let's say the dollar tanks

you've got gold

i've got chicken

can you think of the scenario that might occur?

~S~

I have cattle, my neighbor has chickens, no problem.
We all have gardens around here and can stuff.

Gold will always be in demand and one can buy chickens with it, lots of chickens.

 

[TakeAStepBack]

Ok USC

let's say the dollar tanks

you've got gold

i've got chicken

can you think of the scenario that might occur?

~S~

Gold is only a medium of exchange (other than it's industrial/cosmetic/aesthetic uses). In the event that the dollar collapses, gold will not immediately become a mode of exchange (in most instances) as survival commodities will be worth more than an exchange mode in food riots, chaos, etc...

However, for the purposes of long term investment as the paper currencies of the world race to the bottom, economic law over thousands of years of human interaction dictates that gold and silver are real money if there are robust markets for exchange. it is what replaced barter and it happened naturally. Humans create economic markets, not bureaucrats who think they can quantify human action with natural sciences.

 

[Paulie]

I don't see that ever happening.

I don't know.

But a decade ago, when I first started buying gold, I didn't know anyone who thought it would be pushing $2000, me included.

In hindsight, it shouldn't be hard to realize why.

There's definitely been a hell of a lot more inflationary pressure on gold than deflationary, since then.

Runaway debt with no austerity in sight, currencies being devalued for the purpose of trade advantages, perpetual unfunded wars and entitlements...why should gold go down?

 

[Jos]

Ok USC

let's say the dollar tanks

you've got gold

i've got chicken

can you think of the scenario that might occur?

~S~

Gold is only a medium of exchange (other than it's industrial/cosmetic/aesthetic uses). In the event that the dollar collapses, gold will not immediately become a mode of exchange (in most instances) as survival commodities will be worth more than an exchange mode in food riots, chaos, etc...

However, for the purposes of long term investment as the paper currencies of the world race to the bottom, economic law over thousands of years of human interaction dictates that gold and silver are real money if there are robust markets for exchange. it is what replaced barter and it happened naturally. Humans create economic markets, not bureaucrats who think they can quantify human action with natural sciences.

British Gold Sovereign coins are given to the US air force pilots in their survival gear, if they crash in a hostile territory. British Gold Sovereign coins being preferred by the most powerful nation in the world shows the world wide acceptance that these coins have acquired. During World War II, Allied pilots carried British Gold Sovereign in their survival kits as well. Even in Operation ‘Desert Storm’ the American pilots and the British SAS troops carried British Gold Sovereigns in their survival kits as emergency money, in case of getting shot down over Iraq.

 

[TakeAStepBack]

Gold and silver seem to be on the mend in the market. The silver stocks I own were upp 4% yesterday. Gold up a few points after taking a nose dive.

 

[Toro]

I don't see that ever happening.

I don't know.

But a decade ago, when I first started buying gold, I didn't know anyone who thought it would be pushing $2000, me included.

In hindsight, it shouldn't be hard to realize why.

There's definitely been a hell of a lot more inflationary pressure on gold than deflationary, since then.

Runaway debt with no austerity in sight, currencies being devalued for the purpose of trade advantages, perpetual unfunded wars and entitlements...why should gold go down?

Hindsight is always 20/20.

I got a ton of pushback a decade ago on buying gold. Now, the pushback is always on the sell side.

Gold may go to $5000 first but it will one day be below $500. Remember, gold is a commodity.

 

[TakeAStepBack]

I don't know.

But a decade ago, when I first started buying gold, I didn't know anyone who thought it would be pushing $2000, me included.

In hindsight, it shouldn't be hard to realize why.

There's definitely been a hell of a lot more inflationary pressure on gold than deflationary, since then.

Runaway debt with no austerity in sight, currencies being devalued for the purpose of trade advantages, perpetual unfunded wars and entitlements...why should gold go down?

Hindsight is always 20/20.

I got a ton of pushback a decade ago on buying gold. Now, the pushback is always on the sell side.

Gold may go to $5000 first but it will one day be below $500. Remember, gold is a commodity.

It's a commodity as of the end of the classical gold standard. Before that, it was a medium of exchange for thousands of years. There is no way gold will ever hit 5,000 FRNs and turn around and be be 500 FRNs unless a massive monetary policy shift happens. I don't see that shift ever occurring.

Maybe it will, my FRNs are not on that bet.

 

[Toro]

In hindsight, it shouldn't be hard to realize why.

There's definitely been a hell of a lot more inflationary pressure on gold than deflationary, since then.

Runaway debt with no austerity in sight, currencies being devalued for the purpose of trade advantages, perpetual unfunded wars and entitlements...why should gold go down?

Hindsight is always 20/20.

I got a ton of pushback a decade ago on buying gold. Now, the pushback is always on the sell side.

Gold may go to $5000 first but it will one day be below $500. Remember, gold is a commodity.

It's a commodity as of the end of the classical gold standard. Before that, it was a medium of exchange for thousands of years. There is no way gold will ever hit 5,000 FRNs and turn around and be be 500 FRNs unless a massive monetary policy shift happens. I don't see that shift ever occurring.

Maybe it will, my FRNs are not on that bet.

I have no idea what will happen, but the history of all commodities - gold included - is that they have a huge boom that eventually collapses. The reason for that is simple - eventually, the price leads to a huge supply response. There has been a decade of declining production, but we are starting to see gold production supply grow again. The marginal cost of lifting gold out of the ground is ~$900, nearly half the market price. Over time, the marginal price of commodities equals the marginal cost. That's why they are called "commodities." They are completely interchangible and fungible. Plus, virtually all new demand has come from investors. Gold is completely at the whim of sentiment. One day, sentiment will change, and the end game will be very ugly.

We are at all-time highs in nominal and inflation-adjusted price. Historically, buying commodities at all-time highs and holding for the long-term has been a disaster. I don't know why this time will be any different. Gold is a commodity. It is not a religion nor a political statement. There is a time and a place for everything. Now is the time for gold. But at some time, it will not be. Those who view gold as anything other than a commodity to be a traded will eventually get destroyed.

 

[TakeAStepBack]

That would be true of commodities that do not hold the historical intrinsic value that gold and silver do. CBs hoard gold for a very good reason. It is hard money and always has been. Paper fiat money in history, has never lasted the tests of time. They always end in ruin because the process is in part NOT in the equation (extraction, supply). This leads to inflation and round we go.

Will the world of banks today find a way to restore confidence or seamlessly change one currency in for another?

Time will tell. As for gold, as stated, a correction in the current monetary policy that is drastic, or the above would need to occur to bring the price away from the current ranges experienced with the dollar.
Gold will continue to be a good long term investment as long as it's up against the current financial and currency climates.

 

[TakeAStepBack]

Here is a history of the gold commodity in perspective.

http://www.nma.org/pdf/gold/his_gold_prices.pdf

Notice no inflation from 1850 to 1920.

From 1870 to 1907 before the panic, the world experienced some of the best prosperity and growth we ever saw. Gold was the standard and international trade was based on the hard back of gold voluntarily. Something changed......

 

[Toro]

That would be true of commodities that do not hold the historical intrinsic value that gold and silver do. CBs hoard gold for a very good reason. It is hard money and always has been. Paper fiat money in history, has never lasted the tests of time. They always end in ruin because the process is in part NOT in the equation (extraction, supply). This leads to inflation and round we go.

Will the world of banks today find a way to restore confidence or seamlessly change one currency in for another?

Time will tell. As for gold, as stated, a correction in the current monetary policy that is drastic, or the above would need to occur to bring the price away from the current ranges experienced with the dollar.
Gold will continue to be a good long term investment as long as it's up against the current financial and currency climates.

Though I'm neither short nor long gold at the moment, I agree that gold probably goes up a whole lot before it goes down a whole lot. The fundamentals for gold are still good. But here is a long term graph of the price of gold.

The history of gold prices is one of volatility. And despite the volatility, the price of gold in 2000 was the same as it was in 1805.

One day, gold will probably crash back down again. Maybe it won't, I don't know, but I doubt it won't. I'd rather buy land that has fallen 80%-90% and is dirt cheap as an inflation hedge rather than gold, which has already risen 650% and is extremely expensive based on historical prices. If I had to lock my money away for 10 years, I'd buy US land and US stocks rather than gold. In fact, I'd be willing to short gold if I knew it wouldn't get called away.

 

[DSGE]

Haha. I love goldbugs.

OH MY GOD THERE'S A HOUSING BUBBLE. WE'RE ALL GONNA BE RUINED THEN THE CURRENCY WILL COLLAPSE!

Gold, however will stay strong because of its historical intrinsic value.

 

[KissMy]

Crude oil is going to be the new "Gold Rush" by 2040 due to population & its exploding energy consumption. There are 23,200 man hours of work energy in a barrel of oil. If you had to pay $1 per man hour of energy that stuff would cost you $23,200 per barrel or $552 a gallon.

The good thing about gold is it is the only currency other than US Dollars that can buy Crude Oil from foreign countries. Gas, Oil & Fuel have a short shelf life, is difficult to manage & store & cost a lot to store. Physical gold is free & easy to store, has a forever shelf life & has no capital gains or inventory tax.

As for the short term I think gold is going down some unless Bernanke starts QE3 soon, then it will make a new high. Looking at the debt clock over the past month, many of the largest government spending programs are decreasing. I am sure it is only a temporary spending slowdown & may only last couple years at best before the Boomer's suck the money out of the system. But it does seem to be putting pressure on gold.

 

[TakeAStepBack]

Haha. I love goldbugs.

OH MY GOD THERE'S A HOUSING BUBBLE. WE'RE ALL GONNA BE RUINED THEN THE CURRENCY WILL COLLAPSE!

Gold, however will stay strong because of its historical intrinsic value.

Time will tell if gold is in a bubble. My economic understanding says that the dollar is through QE, debt/deficit, and gold reactionary. A beer is on me if I'm wrong, but I don't believe I am.

We'll know in a few years or less....

 

[Paulie]

Haha. I love goldbugs.

OH MY GOD THERE'S A HOUSING BUBBLE. WE'RE ALL GONNA BE RUINED THEN THE CURRENCY WILL COLLAPSE!

Gold, however will stay strong because of its historical intrinsic value.

Time will tell if gold is in a bubble. My economic understanding says that the dollar is through QE, debt/deficit, and gold reactionary. A beer is on me if I'm wrong, but I don't believe I am.

We'll know in a few years or less....

The bottom line is, does the Fed exit from their enormous portfolio before that monetary base starts to multiply?

That will dictate what gold does, whether it's $5,000 or $500.

 

[DSGE]

Haha. I love goldbugs.

OH MY GOD THERE'S A HOUSING BUBBLE. WE'RE ALL GONNA BE RUINED THEN THE CURRENCY WILL COLLAPSE!

Gold, however will stay strong because of its historical intrinsic value.

Time will tell if gold is in a bubble. My economic understanding says that the dollar is through QE, debt/deficit, and gold reactionary. A beer is on me if I'm wrong, but I don't believe I am.

We'll know in a few years or less....

The bottom line is, does the Fed exit from their enormous portfolio before that monetary base starts to multiply?

That will dictate what gold does, whether it's $5,000 or $500.

I don't think that is the bottom line, since gold isn't an especially good inflation hedge.

 

[Toro]

The bottom line is, does the Fed exit from their enormous portfolio before that monetary base starts to multiply?

That will dictate what gold does, whether it's $5,000 or $500.

The plan is to inflate away the debt. Not all at once, but financial repression for some time like after WWII. That's when gold goes up to $5000. Then, they jack up interest rates and gold collapses to below $500.

 

[Toro]

Time will tell if gold is in a bubble. My economic understanding says that the dollar is through QE, debt/deficit, and gold reactionary. A beer is on me if I'm wrong, but I don't believe I am.

We'll know in a few years or less....

I don't know if gold is a bubble or not, but I suspect it is entering bubble territory. But bubbles generally don't end until monetary policy is tight. The gold bubble of the late 70s ended when long-term bond yields backed up from 8% to 11%. The juiciest part of the tech bubble occurred when the Fed was raising interest rates from 3.5% to 6.5% after LTCM. The housing bubble only stopped after the Fed had risen the funds rate from 1% to 5.25%. Right now, interest rates are 0%. CPI has been above zero for almost the entire time the Fund's rate has been at the zero bound. If history is any guide, there is still some time to go in the gold bull market.

But, as always, I may be wrong. And the precious metals market is either topping or consolidating. It's best to wait and confirm the uptrend IMHO, because if it is the top, people will lose a lot of money from here.