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.
Gee..., such a novel idea. Obviously (but a REAL revelation to those who base their financial planning upon their knee-jerk political views), ANYTHING that you buy with the intention to profitably sell at a later date should be properly timed!
Obviously, I agree with you! There is a time to invest in any asset class and a time to sell. All the protestations via the internet or vocally will not change this fact!
Allocating a portion of one's portfolio to physical gold and gold mining stocks is prudent at anytime. At the present, 15-25% may very well be advisable!
The major fiat currencies are starting to run into problems, which is causing the smart money to move a little into gold. On top of this, we're in a commodities bull market.
The dumb money (Joe Q Citizen) is still thinking about stocks and real estate, as any trip to the finance section of a bookstore will prove
He probably brought tech stocks in 1999 and invested in real estate last summer.
The general public never gets on board until the final stage of a bull market, and then they hold on too long.
Silver hit $9 too. It didn't take long to go from $8 to $9.
I like your comment above! LOL! So true!
You would have had to be very quick to buy gold at over $800 an ounce. It was at that level for maybe two or three days.
So the proper growth of the money supply is zero? Forever?
If everyones' money strengthens and buys more goods from the farmer, the grocer, and the manufacturer how would one sector suffer over the others?
Would Americans be hurt if their houses dropped 3% in value every year? How about GM, would they be stronger or weaker if they had to drop prices 3% every year? Would they expand or reduce their production? Would they hire more or fewer workers? Would people delay purchases if they knew prices would drop next year? Might that cause the economy to slow down?
It expanded every year but 1930.
How much did it shrink in 1930?
You're right. If you have enough bullets you can just TAKE the gold. A lot of people don't think of that when they store up gold for those really hard times.
Shortages aren't about high prices, they are about availability.
I agree with you. There are many things which people will need and not be able to buy. Most of them are relatively cheap essentials. You only need to choose one and start buying.
But I thought you said "Inflation is an increase in the money supply and deflation is a decrease"? Why would the market want to bring inflation?
Why would it affect them one way or another if their suppliers lowered prices 3%. You are confusing profit margin with overall price.
So GM would have to reduce salaries every year? And their suppliers too?
Why? It's only a relative value. Replacement costs would drop, all goods are dropping.
So You buy a $300,000 house and the price drops 3% each year and you don't think that would cause a problem?
M1 dropped by 27%.
Was that good or bad?
LOL Gold at 522 is pretty funny.
522 dollars!
I should have invested in gold when it was 200 dollars.
So a GM worker makes $60,000 a year and deflation forces GM to drop his wage 3% each year. You think the UAW will cooperate? The mortgage on his $300,000 house doesn't shrink 3% but the value of the house does. How does his grocery bill shrinking by 3% help him again?
If he has to move after 10 years his house is only worth $221,000. His salary is now $44,245. Doesn't seem like he built any equity in the house. Does he have enough for a new down payment? You think people might be leery of making big purchases that drop in value every year?
Your debating has got to the point of pointing out the mote in gold's eye and ignoring the log in the Federal Reserve's.
I just can't get past your idea that deflation is no big deal.
Yes, gold would be mined every year. Do you think the gold supply will expand by 4% next year?
Besides, economic necessities have always trumped unions. Either that or the company goes under.
Yes, if a company can't cut costs quickly enough, they will go under. Do you think any new business will start up and borrow money under conditions of deflation? How did Japan thrive under deflation these last 15 years?
But replacement costs have gone down, so he is none the worse for wear.
Yes, replacement costs have gone down. He put $60,000 down on his original purchase and after 10 years he paid down $45,000 of the $240,000 mortgage. If the house is worth $221,000 he clears $26,000 before broker fees. Not very much for 10 years of payments. 5% broker fees brings his cash down to $15,000.
He should be able to put that down on a new $75,000 house. None the worse for wear?
The incentive for saving is certainly higher under an appreciating currency than a depreciating one
Yes, there is an economy slowing incentive under deflation.
But a gradual market based strengthening of a currency can be a benefit. It leads to high savings rates and high savings is the lifeblood of capital investment.
Capital investment is not very desirable in a deflationary environment.
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