What do Rising Gold Prices Mean?
It means this guy may actually be of some worth...
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.
Some people do gardening for a hobby, so what's the big deal if someone look for gold as a hobby.
So it's got that goin' for it.
Which is nice.
The peak in 1980 was actually $898.
The great shiny storehouse of value is currently ~55% of its all-time high.
Don't remind me. That was the year I bought my class ring.
Could you run a chart for me for 26 years? Compare S&P to gold since 1980.
What do Rising Gold Prices Mean?
I must admit that I have my own small collection of same and as I'm concerned about shelf life (or so I tell myself) I make sure that I frequently enjoy it just so I can replenish it.
Gotta rotate that stock ya know....
Actually it's even worse - in inflation-adjusted dollars $898 in 1980 is equal to $2,107 today...so gold is still about 75% off of its all-time high.
Which in turn gives it room to run - although if it makes a serious run at $2,000 over the next few years it will be because the US dollar is collapsing. And shortly thereafter, there is a good chance that a man with a gun from the government will show up at your front door and demand that you hand over any $2,000 gold ounces in your possession or he'll give you an ounce of lead in exchange and take it anwyay. So physical gold isn't really a safe storehouse of value, IMHO. ;)
BTW, using the same inflation calculation, the Dow would need to get to around 12,300 to match its Year 2000 all-time high.
You would like me to compare the price performance of the S&P 500 to Gold from Gold's peak price in 1980? Sure, here it is... the S&P 500 monthly price has outperformed Gold by 1030% since Gold's peak price in 1980.
Comparing the S&P 500 price performance to Gold from the S&P 500's price peak in 2000 shows Gold has outperformed the S&P 500's price performance by 100%.
If you go back as far as you can to 1971 comparing Gold to S&P 500 price performance when neither was at its peak, you get Gold outperforming the price of the S&P 500 by 7%. 1971 is as far back as you can compare the two because prior to 1971, when Richard Nixon closed the Gold Window, Gold was Money.
Obviously picking performance comparisons by either the S&P 500 price peak or the gold peak skews the results. I do find it interesting though that for the past 1,2,3,4,5,6,7,and 8 years, the price of Gold has outperformed the price performance of the S&P 500.
or maybe it's got to do with North Korean printing US currency?
Umm, so I'll have to strongly disagree with you on the shelf left, it is definitely very, very short.
Seriously, only kidding, she enjoys it as much as I do.
Most of the S&P stocks pay a dividend much of the the time. What kind of dividends does gold pay?
Perhaps this is true historically. But not presently.
I believe the case is that the MSM, in its effort to attack Bush, has presented a false state of the economy. Many have bought into it, and choose to find stability in gold. But the reality is that we are in a Bush boom.
The slicks are luring the suckers.
If you had bought gold at its low in the 1990s, you'd have doubled your money. If you bought a basket of Nazdog stocks at the same time, you'd still be out money.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.