Posted on 12/01/2005 10:40:52 AM PST by .cnI redruM
NOTHING swells the breast so much as the thought that you have been proved right at last. After riding high at the start of the 1980s, gold bugs had a miserable couple of decades. The price declined relentlessly, mocking their credo that the security of the financial system ultimately depends upon the yellow metal. Lately, though, the faithful have enjoyed their reward. In the past five years the price of gold has doubled. This week in Asian trading it briefly surpassed $500 a troy ounce—a level last breached in 1987. You can almost feel the bugs' excitement as the message sinks in: gold is back.
This being gold, the resurgence has brought forth all manner of alarming prophecies. The price is an omen of rampant inflation; bonds are doomed; the dollar is about to fall prey to the United States' reckless deficits; the euro will shortly be revealed as a worthless creation of bureaucrats.
The world is an unpredictable place. But, with the possible exception of a fall in the dollar, not much of the above catalogue of doom looks likely; and none of it has much to do with gold's good run. The dull truth is much less bullish for gold. Investors have put money into a wide range of metals, and precious metals' prices, including gold's, have risen with the base. Meanwhile, gold remains fundamentally unattractive. It yields nothing and central banks are sitting on vaultfuls of the stuff that they want eventually to sell. Gold bugs hope that $500 is the threshold at which mainstream investors will start once again to take an interest in the metal. Caveat emptor.
Advertisement The fascination of gold lies in its being not only a commodity but also a store of value and means of exchange. The glamour and the mystique lie in the latter, monetary part. This is what draws gold bugs, but their story doesn't quite add up. The unbalanced world economy still faces risks. But the most recent rises in the gold price have come against a strong dollar, which is normally a sign of weaker gold and continues to confound warnings of a collapse in the greenback. Oil prices are plainly far higher than they were, but they have come off their peaks. Moreover, there have been few signs so far that oil prices are feeding through to a 1970s-style stagflation. Nothing in either bond or stockmarkets suggests that investors see much danger of such a thing happening.
Bear on bullion Gold's renewed shine is best explained by thinking of the metal not as money but as a commodity dug out of the ground. In the past few years the price has climbed because mining companies stopped locking in prices by selling gold in advance—in effect, withdrawing a huge source of supply. Even then, gold has captured only 40% of the gains of other metals in The Economist's metals index, which has almost doubled since the start of 2003 thanks partly to fundamental demand from emerging markets and partly to investors in search of better returns than those from other assets. Gold would have done better had Chinese demand risen as fast as some expected; in fact, figures from GFMS, a consultancy, suggest it has been flat, even falling, over the past 20 years. Chinese investors now have other places to put their money.
Gold is still cheap compared with its peak of $850 in 1980. Today, adjusting for changes in American consumer prices, it is worth only a quarter as much. Gold bugs might see that as a chance to buy; others as a reminder of gold's enduring capacity to disappoint.
No how did you get the idea that economists control the world? Gold is incapable of expanding fast enough to provide a sufficient money supply. That is why there never has been a true Gold Standard in the developed world which lasted more than a few years.
Over the last 500 years Gold supplies have increaded at a yearly rate, under 2%, and that included the massive amounts taken from the New World.
Thus it would mean chronic deflation and massive impoverishment for the bulk of mankind. As well as tremendous inconvenience.
Gold will never be a monetary instrument again for very good reason.
Neither do you if you believe the Gold Standard prevented it. Check what happened in Spain when massive new gold supplies were stolen from the New World (where is was not money.)
Keynes predicted what would happen to the English economy when it went back on the Gold standard. He had no emotional concerns about gold just knew it was no longer viable as a money supply. Actually it had NEVER been viable unless permanent recession was the goal.
False, the "government" cannot do that.
Something in that *ballpark* is realistic, yes. Much higher than today, iow.
What's the historic average ounce versus barrel? Yellow versus black? What maybe 20 bbl/oz?
A hoard of horny guys could wreck the monetary system.
That's DC ohms at STD. A bit different for AC, especially in radio, microwave frequencies.
"Let's see....
$850/ Troy Oz. in 1980 dollars. Even discounting that last year of Carter-flation, that would require a spot price of $2,073.2/ Troy Oz. today to break even if you bought"
Well, I didn't buy at 850, I bought at 290 in 2000. It was easy for me to see that gold was a good buy then. It's not Google, but I take a double every 5 years.
"Remember the lines of people buying silver at $38 an ounce? It was going to $100. No, it topped at a little over $38. Silver just hit an 18 year high, at about $8.30 an ounce."
Gold has value because it is used in high end electronics, jewelry and coinage. It is also very rare. In the last three months the entire world has only mined about 800 tons of gold, the vast majority going into jewelry. Gold also does not tarnish, almost a unique feature.
All the gold ever mined would only form a cube about 64ft to a side.
Silver is not all that rare, it is like diamonds, there is a lot of it. I believe the current price for silver is low, but only by a couple of bucks.
IF, and I do say if, gold begins to be actualy bought in China, where is was only made legal a few months ago, then all bets are off.
Gold is way underpriced. Remember, government cannot simply create more gold as they can paper money.
I believe the price of gold is rising in spite of a growing economy because the worlds currency balance is way out of kilter with the value of the goods and services that back the paper.
Also, all you need is for people to begin questioning the paper stuff (and people can be a government) and the entire house of cards is in jeopardy. Look what happened last year when it looked like the Euro was a good deal against the dollar and this year when the Euro was shown to be way overvalued.
The gold will still be there. The silver will still have value. People do not use iron, nickle or copper coins for serious transactions. No one has a safe deposit box full of zink. The value of most of this stuff is measured in tons, not lbs or ounces. While the raw commodities have value, the value is only to traders, companies and nations. People simply do not use it as a medium of exchange. Gold and silver...yep, people take that, always.
What, exactly, has been viable for any length of time as a money supply? Old pesos or new pesos? Tulip bulbs? Tonnes of coal?
Plus, even at DC gold has advantages over silver and copper for circuitry. It's soft and doesn't tarnish or oxidize. Gold contacts stay good contacts.
All that is necessary to believe that is to ignore the REAL history of the Gold Standard and just PRETEND. It has NEVER been a stable regime and has ALWAYS been ended whenever war broke out.
In fact, there have been very few periods when that regime worked and every time it was left in place it dragged the economy down. It has too since it cannot expand fast enough to fuel economic expansion.
Gold will never be a monetary instrument again.
The dollar and the pound for two.
Well, at least you have what sounds like a good Italian name, like mine, it ends in a vowel. So, it sounds like you are buying gold. I wish you good luck. Seems hard to buy the actual article without a ridiculous markup, so will you be buying gold mining stocks?
The financial industry is the true source of wealth since Adam Smith's already obsolete Wealth rolled off the presses over a century ago. That industry is based on collateral, which is mainly recorded property deeds.
You are very correct.
One Christmas, after spending all summer in a tent on a sandbar placer mining on the 40 mile, I made gold filled bezels for the ladies presents.
One of the ladies asked me how much gold was worth? I replied, that I knew how much it cost, but I was d@mned if I knew what it was worth.
Gold fever is a real, and often a terrible, thing.
Its easier to buy a Army with Gold then with fiat.
Gold has been exchangeable longer and in more places than the US dollar or British pound. I'm somewhat sure (with some periods of exception, like from when FDR froze the gold window until when Nixon busted it) that gold has been the better or nearly equivalent *store* of value, as dollars or pounds kept in the most reliably quickly-liquid stores.
You think that being on a gold standard is the cause of war????
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