Posted on 12/06/2005 11:25:43 PM PST by Capitalism2003
December 5, 2005
The market price for an ounce of gold rose to over $500 last week, a significant milestone for economists watching precious metals and commodities markets. The last time gold topped $500 was December 1987, in the wake of the “Black Monday” stock market collapse earlier that fall.
Gold prices historically rise when faith in paper currencies erodes, as investors seek the intrinsic value of gold to protect themselves from inflation. It’s interesting to note that while the U.S. dollar has regained some of its value relative to other paper currencies like the Euro, it continues to lose value relative to gold and other hard assets. This shows the folly of using one fiat currency to value another.
Gold is history’s oldest and most stable currency. Central bankers and politicians don’t want a gold-backed currency system, because it denies them the power to create money out of thin air. Governments by their very nature want to expand, whether to finance military intervention abroad or a welfare state at home. Expansion costs money, and politicians don’t want spending limited to the amounts they can tax or borrow. This is precisely why central banks now manage all of the world’s major currencies.
Yet while politicians favor central bank control of money, history and the laws of economics are on the side of gold. Even though central banks try to mask their inflationary policies and suppress the price of gold by surreptitiously selling it, the gold markets always cut through the smokescreen eventually. Rising gold prices like we see today historically signify trouble for paper currencies, and the dollar is no exception.
President Nixon finally severed the last tenuous links between the dollar and gold in 1971. Since 1971, the Federal Reserve and U.S. Treasury have employed a pure fiat money system, meaning government can create money whenever it decrees simply by printing more dollars. The "value" of each newly minted dollar is determined by the faith of the public, the money supply, and the financial markets. In other words, fiat dollars have no intrinsic value.
What does this mean for you and your family? Since your dollars have no intrinsic value, they are subject to currency market fluctuations and ruinous government policies, especially Fed inflationary policies. Every time new dollars are printed and the money supply increases, your income and savings are worth less. Even as you save for retirement, the Fed is working against you. Inflation is nothing more than government counterfeiting by the Fed printing presses.
As an aside, gold is used for NEW YEAR gifts in Japan; little gold bars and jewelry are the most popular gifts, followed by baskets of extremely expensive fruit.
Indians are HUGE gold jewelry buyers.
And yes, this is just like the Tulip Mania! It isn't any different than any other BUBBLE/MANIA...all of which burst; some sooner than others.
Oh yes, I well remember when hold was at $850 an oz.; too bad that the goldbugs here have no real feel for commodity history. LOL
Salt and pepper ( yes, pepper and many other spices ) were used to back currencies/as currency, for longer and in many more places, than gold.
Then you don't know the market, nor about cultural differences.
“The legal tender quality [of money] is only valuable for the purposes of dishonesty.” -Chief Justice of the Supreme Court, Salmon Chase.
The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. -Alan Greenspan
The markets always go up and down; it never has and never shall, just go up. Gold is no exception to this rule.
bttt
Do you remember the Hunt brothers and silver? LOL
I never give market "tips". As to advice, I don't hand that out either, willy nilly. What I do on FR, is to state facts; hard, cold, indisputable facts! Ignore them at your own risk.
GOD help anyone who takes your word for anything on these matters; they'll need it !
And FWIW, cold and silver coins were "shaved" and adulterated in other ways, in colonial America, as well ad after we became a nation. While America's currency was backed by gold and silver, there were panics and depressions and inflation beyond your ken. History doesn't back your opinion.
As did panics and depressions, but the goldbuggers and Paulites don't know any history or try to ignore it.
You got a problem with people buying and selling gold and silver?
I suggest that you read a lot of history. WW I and its aftermath was what caused world wide depressions. Do you think that America's GREAT DEPRESSION happened in a vacuum?
Name a commodity and/or a currency that has never been price manipulated. It doesn't matter if it's paper money or gold or silver or copper or salt or cowry shells...you can't do it! There is no set intrinsic value for anything.
What facts has he misstated? His original statement was that gold has surpassed the price it achieved in Dec. 1987 after the October Black Monday market meltdown (which, incidentally, led to increased Federal Reserve intervention into the markets).
What factual inaccuracies do you see in his statement? Please quote them. This is a sincere request.
Thanks.
What would be really intersting is to see how gold compared to the *original* Dow stocks over the last 100 years or so. Stocks might not look so good then.
Those are the same folks that purchased tech stocks in 1999. The masses always come in during the final, exponential, blow-off stage of a bull market. And they always lose their shirts in the process.
Very few folks perceive the beginning stages of a bull market. People weren't buying stocks in 1982. Joe Public only came on board during the final stage of the bull, which happened in the mid-90s. History repeats, and we'll see the same thing with the current bull market in gold and commodities.
There will come a day when sentiment is totally reversed on these threads. Most posters will be laughing at the "stock-bugs" and urging others to keep buying gold, silver, oil, hogs, and coffee. Then it will be time to start buying stocks again. Based on most of the posts here, we've got a long ways until we get there.
When someone suggests buying stocks or bonds, why aren't they called "stockbugs" or "bondbugs"?
But keep tossing the labels around. As long as a considerable portion of the population views those long in gold as "goldbugs", we'll still be in the bull market.
And what is the value of the dollar relative to it's all time high?
Another thing that is really interesting is that the Dow:gold ratio stayed between 3 and 5 from 1900 all the way to the early 1980s, except for during the bull markets of the 1920s and 1950-1960s. And then when the bull collapsed, the ratio fell back to the norm.
Right now, the Dow:gold ratio is about 20 (down from a peak of 40 or so). That tells me that gold has a long way to go before it peaks this time around.
Maybe, but not likely. If so, it will be a buying opportunity.
Don't quote me, but I think it means the price of gold is going up! I could be wrong though.
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