Posted on 01/10/2009 11:08:04 AM PST by An Old Man
Gold is unique among commodities as it is perceived as a principal store of wealth. It is an element that does not chemically combine with other elements, does not tarnish, is highly malleable, easy to melt, can be subdivided indefinitely, and can’t be counterfeited.
I believe gold’s economics to be comparatively straightforward:
• gold is the ultimate competitor to the U.S. dollar;
• in the current environment of increasing global competition and military conflict anyone with an interest in building or maintaining wealth who ignores the gold market – and by inference both gold bullion and gold stocks - does so at their peril; and,
• a ‘gold standard’ forces governments to be fiscally responsible and provides a stable economic environment and that the adoption of a ‘non-gold standard environment’ operated with fiat currencies (i.e. currencies not backed by gold) will never do,
• of the 125 million kilograms of gold estimated to have been mined from prehistory to 2001, humans still possessed 106 million kilograms, or roughly 85% of it;
• of that total of 106 million kilograms, roughly 34 million kilograms were held by central banks, and 72 million kilograms were held by private citizens;
• the gold market is not subject to the vicissitudes of either supply or demand in the same manner as other markets. For most commodities production and supply are nearly synonymous, whereas annual gold production from mining is a tiny fraction of the total supply; and,
• gold production is spread throughout the world, making a dramatic rise or drop in production due to political factors unlikely.
(Excerpt) Read more at stockresearchportalblog.com ...
A book I strongly recommend to anyone concerned about current economic conditions, prospects, and wealth growth and preservation, and who is a disbeliever in the efficacy of fiat currencies is Gold, The Once and Future Money, Nathan Lewis, John Wiley & Sons, Inc., 2007. This book is available at most bookstores and at Amazon.com.
The book quotes Alan Greenspan in 1999 as saying:
“Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted.”
This statement was made before the serious loss in manufacturing jobs (simplistically over 21% from 2000 to 2007) and enormous escalation in the cumulative U.S. net trade deficits that has subsequently occurred (approximately U.S.$2 trillion from 1999 to U.S.$6.5 trillion by December, 2007 and growing) – see the Economic Research tab of StockResearchPortal.com for detailed charts reflecting these statistics.
In view of the current state of the US Dollar, I thought reviewing some of the points made by the author would be appropriate.
Can’t eat it. Spam is a better investment. I was able to get a couple cases yesterday.
Great.
Everyone buys gold, driving up the price. Then news is released that the economy is improving and gold prices tank.
So, what we did for the housing market bubble, the hucksters are doing for the gold market.
a ‘gold standard’ forces governments to be fiscally responsible and provides a stable economic environment and that the adoption of a ‘non-gold standard environment’ operated with fiat currencies (i.e. currencies not backed by gold) will never do,
Gold has had its day ~ more recently the discovery of “super atoms” suggests that gold can and will be counterfeited successfully ~ in large quantities.
It is gonna be so bad Spam will be worth more.
Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies.
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Spam is better. You can eat it. If you were on a desert island would you rather have Spam or Gold?
True but the hucksters only want to sell you a piece of paper saying you own part of a gold fund. Sort of like Madoffs cash, cow, you know who makes the money!!! Be happy keep your money say out of FUNDs.
Pure gold does not tarnish. The "grade" depends on the amount of alloy metals like silver, copper, nickel, zinc mixed with the gold which do tarnish. 10 karat gold, for instance, is only .4167 % gold, so tarnishing of the alloys is quick and obvious. 18K gold is 75% pure gold and the alloys will tarnish more slowly over time. In neither case does the gold tarnish.
T’pol
Glenn Beck is always screaming to “buy gold”. I called the Gold place he endorses and got the hard sell. I made a “verbal” purchase, and said I’d back it up with the cash or decide against the purchase within 24 hours. When I said no the guy went ballistic! Said I was the 1st guy ever to bow out of a deal. Nothing on paper and no actual obligation was made verbally. I’ll take the Spam an earlier post suggested. Great nuked with mayo and wonder bread!
I don't have to make a choice, I have both. I bought Krugerrands in 1993 at $382.00-$402.00 each.
At today’s prices, gold is still a good piece of the puzzle. I would never put all my options into any single basket, not even spam. However, disasters are not instant and do not happen in a single step.
Three things gold does. First, it has always been the mark against which currencies measured, therefore in the event of hyperinflation, gold will keep pace. Second, it is a compact, alibi heavy commodity. Third, gold has no shelf life.
On the negative, gold does not have much value in a total collapse, until some order gets reestablished. It temporarily looses value in deflation (emphasis on temporarily).
No doubt. But I feel the bad vibes. We are going down like the Titanic.
Perhaps tarnish is incorrect...let’s go with patina.
It is pretty hard to tarnish pure gold.
Bear in mind that gold used in jewelry is far from pure. Pure gold is 24-karat, American-made jewelry is usually 14K (which means 14/24 Au). European jewelry is 18/24 Au. That means that even European jewelry is at best normally only two-thirds gold.
I still advocate USPS “Forever” stamps as a good hedge. They will always be worth the mailing of one first-class letter. I recommended putting about 1/100,000 of your portfolio in “Forever” stamps.
Some people recommend 10-20% of your savings should be in gold. Another portion should be in guns and ammo.
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