And an average of 14% per year for the last 5 years.
And that's just plain old ugly yellow physical that does nothing but sit there.
Gold mining stocks have averaged 37% per year for the last 5 years.
And the bull market has yet to begin.
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.
http://woodrow.mpls.frb.fed.us/research/data/us/calc/hist1800.cfm
The discipline of the market has prevented serious inflation in serious countries for two decades. Central Bankers in free economies cannot merely fire up the printing presses and have their way with their country's currency any more - only the pathetic Zimbabwes, Burmas, and Cubas of this world can do that.
This discipline has had the effect of motivating CBs in Europe to liquidate their gold holdings over the last decade. This process is unlikely to continue; almost impossible, in fact, since the CBs involved have expressed no interest in further large sales. Meanwhile, Russia, India, and China are clearly moving towards enlarging their bullion holdings.
In round figures, annual demand for gold is 4000T, while annual mined production is only 3000T. The 1000T shortfall has been met by CB liquidation over the last term. That's disappearing as a damper. The price of gold in dollars should rise to about $700/oz to balance annual supply/demand, according to mining economists.
Just as with oil, new gold production is expensive and time-consuming. I've been involved with mining stocks, and their promotion and finance for twenty years, and I'm still surprised at how long it takes from discovery to production - almost a decade, in most cases. Gold production is still dropping year on year, because the artificially low prices in the late '90s discouraged investment in both exploration and development. Production cannot materially increase for several years, no matter the price of gold - that's why we'll get a speculative blow-off peak at some absurd price point when the bubble attracts broad participation, but that's a long way down the road from here, imho.
This is still early days.
This is becoming quite a popular refrain from the chorus of doom and gloomer's on FR. On one hand you've got people like this guy telling us that he doesn't need any statistics, since they all lie, to tell him things are bad. All he needs to do is look around.
On the other hand we've got quakeroats linking us to sites like the Labor Research Association who tell us that real wages have contracted since 1973. This is not surprising since the LRA was founded in 1927 by Robert Dunn, a researcher and advocate for labor, who, after graduating from Yale in 1918, worked in New England for the Amalgamated Textile Workers Unions as an organizer and economic researcher.
In 1920 Dunn helped established the New England Civil Liberties Union. A close friend of Roger Baldwin,he also served on the national American Civil Liberties Union Executive Committee from 1923-1941. Nope. No agenda here.
It's a wonder that anyone can look around themselves today, compare that to what surrounded them in 1975, and think that real incomes have contracted. None of these pundits of pessimism can manage to explain how, if real wages have shrunk since 1973, real per capita consumption has increased at an average annual rate of 2.3% during that same 30 year period.
Let's look at what some Conservative sources have to say on the subject. From Alan Reynolds: Unreal Wages:
Attempting to compare today's price index with one from 1973 would require comparing computers with typewriters, digital TiVo with rooftop antennas, and contemporary cars with Chevy Vegas and Ford Pintos.
Despite the problems price indexes have in coping with new and better products, measured real consumption per capita has nonetheless doubled since 1973. Unless the rich could somehow consume unlimited numbers of houses, cars, shirts and steaks, it is difficult to imagine how each American's real consumption could have doubled if real salaries had actually been unchanged
Real compensation per hour, for example, has risen 43.6 percent since 1973. So how could the real wages of 80 percent of the workforce have "fallen in most years" since then? They didn't. Wage stagnation is an old statistical hoax whose time is coming to an end.
From Stephen Moore. Wages of Prosperity
...a large share of worker compensation is in the form of non-wage income....The real cost-driver is, of course, health care. Over the past 20 years, employer medical insurance costs have doubled relative to the average wage.
Another reason that workers today have made substantially greater economic gains than the wage data may suggest is that more Americans than ever derive income and wealth not purely from labor, but from ownership. Between 1980 and 2005 the share of Americans who are workers/stock owners has doubled from 25% to 52%. Since 1980, shareholder wealth has increased by about $15 trillion. Those wealth gains used to be hoarded by the wealthy, but thanks to innovations like 401(k) plans and IRAs, the wealth gains from the American bull market have been further democratized and the dividends have been spread more widely to middle-class America.
...one of the most significant boosts in take-home pay over the past five years has come from the very Bush tax cut that the left so abhors. For the median family of four the Bush tax cut has increased take-home pay after taxes by about $1,450 a year.
If quakeroats can be this misguided about wages, why should we buy into anything he has to say about deflation or gold?
You should be amazed. It was a terrific call in Mar. '01. Unlike most others who can only claim such, I actually have proof of my calls from back then. Check these pages:
http://finance.groups.yahoo.com/group/alittleta/message/25 http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=4687860&tid=irf&sid=4687860&mid=26982 http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=4687860&tid=irf&sid=4687860&mid=26891
And an average of 14% per year for the last 5 years.
And that's just plain old ugly yellow physical that does nothing but sit there.
Gold mining stocks have averaged 37% per year for the last 5 years.
And the bull market has yet to begin.
Ummmm....uhhhhhh....the Fed won't report M3 anymore, it's the PPT all over again!!!
If quakeroats can be this misguided about wages, why should we buy into anything he has to say about deflation or gold?
Just another confused goldbug. He is unique in his attitude toward deflation but otherwise just another doom-n-gloomer posting stats from lefty websites.
Sorry, but I do not believe that this is correct. Money growth since Nixon's closing of the gold window in '73 has been huge. And we are certainly not the only country.
http://www.economagic.com/gif/g1920770198012135113364138227001428.gif
Wow!! That much? Impressive. LOL!
What I am saying is not that the Central Banks are NOT inflating, but that the inflation in each currency is judicious and measured, held in check by the money markets. The end of currency controls means an end to an arbitrary policy by governments.
In any event, the more important point is that new participants in world markets want to build their finances as strong as the West, and that includes fortifying their Foreign Reserve holdings with gold, as the US and Europe have done long ago.
All imo.
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Let's be fair now.
We need to remember that all this time while they've been getting huge tax write-offs on all the fees they've been paying, and you and I have been paying big time taxes on our stock dividends!
It would have been far better for all had this been literally true.
The amount of gold in existence only controls the reserve backing, but the money supply is a function of interest rates, inflation, and economic activity. Even with the gold standard people could loan borrowed money and thus expand the money supply. It's true that over the centuries the price of gold would eventually return to a norm, and that's why some people can suggest that there was no inflation.
They lie. You can see on your link that what really happened was that inflation would soar way into the double digits, only to plunge without warning into double digit deflation. This presented a hellacious environment for business and untold unspeakable suffering for the people as a whole.
It is rather impressive that an inert chunk of metal could outperform the top American companies in the Dow Jones and S&P or that a anachronistic sector such as mining could yield 5X your initial investment in 5 years.
The monetary panics were precipated by the banks themselves. Fractional reserve banking is fraud, period. Earning interest on a loan of a non-existant assest is fraudulent and should be illegal. That is what caused the wild economic swings. Start by loaning more money than really exists and then laugh and foreclose when there isn't enough to pay back the loans. Of course there isn't, couldn't possibly be, it never existed. Fractional reserve banking is not part of a sound monetary system, whether gold backed or not. It works much better in a fiat system as bank runs are no longer a problem as money can be printed at will. However, the debt pyramid it creates does have its limits and we may be approaching that boundary.
Sorry, but I don't see this either. IMO, the boom of the 80-90's was credit and inflation fueled. Sure there was plenty of solid growth, but not the misallocation of funds has been huge. The inflation did not manifest it self in higher prices for retail goods, but instead funneled into stocks, bonds, real estate and financial instruments. It wasn't mesured by the CPI, but it was just as real, nonetheless. "Judicious and measured" are the last terms I would use to describe recent monetary policies.
Yeah, I'm impressed.
I agree generally with what you state, but I consider the avoidance of hyper-inflation to be evidence of 'judicious and measured' inflation.
I'm not denying that inflation is still destructive, I'm just asserting that active economic players have not been damaged by 2-3% inflation, because thay can pass through the extra costs to others.
The inflation is still real enough, and the price of gold is rising to more accurately indicate the actual level of devaluation in world currencies. Gold may hit $1000 within a couple of years, but that would simply be a bubble blow-off.
In terms of a long-term price, the industry seems to think that a price of about $700/oz would balance supply with demand.
Ah, nothing gives of peace of mind like a cigarette company or
an Asian economy.
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It's good that we at least agree that the gold standard is worthless for controlling inflation during times of war. Maybe we can also agree that it's no good between the wars either.
Compare the last two decades of inflation to that of the two decades before WWI. Inflation went higher with the gold standard -- over 5%. That's bad enough, but what was truly unacceptable was the fact that it could just as well plunge without warning into an even worse rate of deflation. The peace time gold standard gave us a price growth range of 11 percent versus our recent spread of just 3 percent. Gold standard insanity versus Federal Reserve success.
Earning interest on a loan of a non-existant assest is fraudulent and should be illegal.
What I was referring to is what happens when you go to the bank, and you see the gold lettering (one of the few sensible uses for gold) that says "Assets of more than $10,000,000". When you deposit $100, you have not increased the bank's assets --the bank now owes you money. You have given the bank a liability. This is why they want to loan out your $100 to someone else. When this happens you still have $100 in your bank account. After all, it's your money isn't it? What's different is that there's this new guy that borrows the $100 and now he has $100. The bank has created additional money and the nation's money supply has just increased.
Wait a second (I hear you interject). That guy has $100 money and he also owes $100. Nobody is saying that wealth was created. Wealth is what happens when the new guy goes out and invests the money and makes twice the rate of return that the bank is charging. This kind of wealth creation happens with or without the gold standard. The only difference is that there's more wealth creation now than there was then.
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