Posted on 12/09/2005 6:01:51 AM PST by DebtAndDelusion
The price of gold has continued to rise in Asian trading, climbing to its highest level since 1981. Gains came despite concerns that the market may be set for a correction and some analysts are now predicting that prices have even higher to go.
Precious metals have been given a boost as investors look to protect themselves against higher inflation and weakening currencies such as the Japanese yen.
Gold climbed as high as $522.70 an ounce, before falling back.
It was hovering around the $521 mark during afternoon trading in Asia.
'Dizzy high'
"There's some profit-taking now, but look at where we are," said Darren Heathcote of NM Rothschild.
"It's broken $520, the target we had yesterday... and it looks like $525 is the next target."
One broker in Tokyo said that: "Gold has been drawing very strong interest from Japanese investors, and I don't think this boom will subside in the near term."
There are a number of factors pushing the price of gold higher.
Gold is seen as a haven from inflation and weakening currencies, although historically, once inflation is taken into account, gold has not proven to be a good investment.
There is also speculation that Asian and European central banks may cut US dollar holdings in favour of gold.
There also is the year-end increase in demand for jewellery, analysts said.
The price of gold has climbed almost 19% this year and has nearly doubled during the past five.
"It's a dizzy high," said Rothschild's Mr Heathcote, but warned that "we are looking at a very overbought market".
"We're looking for a correction. It has to come at some point," he said.
Debtors and holders of hard assets benefit from inflation.
Maybe the negative savings rate in the US answers that question.
The government method of calculating the savings rate leaves a lot to be desired.
I don't know what gold opened at but it closed at 527.00. So much for selling into the east.
almost had a heart attack when I misread the title as "oil surge past $522 level"
One way is to buy gold coins for your Roth IRA.
An exception was made in the original law which allowed for private ownership of gold coins which had numismatic value. I'm not certain of the criteria for what made a coin a collectible instead of plain bullion, but the fact is, you could hold any amount of gold coins if they met those criteria.
Maybe, but I can prove savings is understated easier than you can prove inflation is understated.
Why should the government favor debtors over creditors?(other than political expediency)
Measuring the money supply and rate of inflation isn't an exact science. If you had to choose between inflation and deflation, a low inflation rate is less destructive than deflation.
I wouldn't. Gold is in a bull market but corrections will occur as in any bull market. If it drops back to say 475 or so, I'd be looking at buying then.
The main thing about gold is it is not a "buy-and-hold" proposition. Gold spikes and then falls. It is a short to intermediate trade, and you should have a target in mind for when you want to take the money and run.
The situation is, though, that for both gold and silver, the contract exposure is great. I've heard, for instance, that it you added up all the silver contracts that exist, they exceeeeeeed the total amount of silver on the planet by like 10-1!
So if people hold contracts and want delivery and decide they will not accept cash settlement for the contract, the producer HAS to deliver. At WHATEVER PRICE NECESSARY.
Right now, I hope all the short dudes end up gettin it... right in the shorts!
(I got some real pretty silver half dollars!)
Soon having held gold over the last twenty years prehaps, will surpass the return of having held T bills. Anyone who has more than 5%, or 10%, in gold, or gold company shares, is a gold bug, and a true believer, and in my view, a nutter. The only reason to own gold, is to reduce the risk in a larger portfolio, since gold prices don't correlate with other assets. What is my portolio percentage in gold? Zero percent. It really isn't worth the candle.
Yeah, that Great Depression cleared out malinvestment real good. And the last 15 years in Japan did the same thing.
Why you think 12 men meeting in a room can better manage the money supply better than a commodity baffles me.
What's so magic about a commodity controlling the money supply?
But rest assured you share good company in that view with Krugman, Galbraith, and Keynes.
Krugman is politically ignorant, you are economically ignorant.
So if the economy grows at 4% next year will the gold supply grow by 4%?
A compliment coming from a Keynesian.
I'm a Keynesian because I think a gold standard won't work?
Yes, when your money buys more that's called deflation. Is deflation bad?
It's not. It's the SUDDEN contraction of credit after an inflationary boom that causes the unprofitable entities (malinvestment) to go under.
You can have deflation without having an inflationary boom first.
The contraction of credit is caused by bank failure.
You can have deflation without bank failures.
The bank failure is caused by runs on the bank after the market recognizes the unprofitable entities and depositors think that their deposits may have been loaned out foolishly. Since the inflation was caused by banks lessening their reserves(loans in excess of deposits on hand), they don't have enough to cover the run and they fold up shop leaving their depositors penniless.
You do know the evil Federal Reserve will be the lender of last resort to prevent a bank run from causing a bank to fold? And FDIC insurance will stop depositors from being left penniless.
Under the latter, though the loans will have to be paid back with "stronger" money, the strenghtened money will also purchase more goods in the market, offsetting the loss to the debtor. The mortgage will be harder to pay but the groceries will be easier to buy is the best way I can put it.
And is the supplier of the groceries harmed by the lower price he receives for his goods?
The Great Depression was just the grandaddy of all banks (the Fed) doing what little banks had done all along --issuing more paper than there was gold to back it.
The Fed issued too much money during the Great Depression?
Cheaper computers are caused by higher productivity. When every price declines, that's deflation.
Not unless the gold disappeared into the ether.
You can have deflation even when the gold supply increases.
That is assuming all loans and notes were 100% backed as they should be.
Under a gold standard not all the money supply is backed by gold.
You are confusing purchasing power in a static money supply with money supply contraction.
Do you even know what the definition of deflation is?
Hello, hyperinflation. I'll be glad I bought gold if that day ever comes.
How is preventing a deflationary bank failure hyperinflation?
No, because he pays lower prices to his supplier and on and on.
So farmers aren't hurt by deflation? How about manufacturers? Employees?
No, they issued too much in the 20s which lead to the Great Depression.
What happened to money supply during the Great Depression?
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