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.
"Do you know the North Koreans were printing US currency?"
Did you know that the Federal Reserve, through the Treasury Dept., is printing US currency with nothing at all backing it?
What is the difference?
Exactly. Buying at the top of most markets generally doesn't work out too well. See: NASDAQ = 5400.
"Unfortunately Father bought stocks on margin in 1929. When the crash came we had to move out of the city house onto the farm. If he hadn't had his gold I think we would have starved during the 30's."
Your Dad's gold was confiscated by FDR in 1933.
Gold is rebounding from a long period of being in the dumps. Gold should be at $750 or so. Doesn't mean there will be major crashes in the economy.
Yes, in hindsight you can make any investment look great.
Dear Willie Green,
"Yeah... your friend's dad was a johnny-come-lately boob..."
The gentleman was actually a genius, as measured by IQ. But you're right, he was a boob, just the same.
"...who should've bought in when it was < $40 in '70."
Sure, and if he'd have had $10,000, he could have bought 250 ounces at the price. And today, it'd be worth a cool $130,000. Pretty darned good!! That's about a 7.5% nominal return! That's almost as good as the stock market, with dividends reinvested, over the last 35 years!
Or he could have bought, in 1970, the property on which my neighborhood was built, at about $10,000 per acre. If he'd have kept it undeveloped until now, it would be worth north of $200,000 per acre, now. By the way, if he'd have bought just about any old developable raw land in the Washington, DC region in 1970, today, it'd easily be worth 15 - 20 times what it was in 1970. That's even better!
Or, he could have bought $10,000 of Intel in 1971. That would have bought enough shares that, after taking into account all the splits over the years, he'd have around 500,000 shares. Intel's hovering around twenty-five bucks a share. That's about $12.5 million! Even better!!
And, of course, right now, we're looking at a 25-year high in the price of gold.
And of course, you're starting from a low point which was artifactual, in that the price you're starting with was as the gold standard regime was coming to an end, and the price of gold was permitted to fluctuate. So, you're measuring from an artificially low point to a market top (at least so far).
The point is, gold has been a volatile investment over the last 35 years, and volatility is not exactly consonant with "great store of value."
As an investment, it's pretty much a dud. As a store of value, it's pretty much so-so.
If you'd have bought gold in 1970, and sold in 1980, at the top, you'd have made a small fortune in less than ten years! If you held on to it past 1980, and then sold, say, around 2000, you'd have done okay, if not quite striking it rich. On the other hand, if you'd have bought in 1935 and sold in 2000, you'd have underperformed by far most every other type of investment class.
So, sure, if you bought at the right time and sold at the right time, gold could have made you rich.
But in 1970, I was 10 years old, thus I personally lacked the opportunity to get gold at $40 per ounce. On the other hand, I was 18 or 19 at the top of the market, and was told by folks to take the money that I'd saved (I had a tidy bank balance at the time) and invest in gold. After all, the Russians were in Afghanistan! We were having another oil crisis! Iran had our hostages! Inflation looked like it might give way to hyperinflation! Interest rates were well into double digits! Unemployment was high!
What in the world would ever stop the price of gold?!?!?
If gold is a STORE of value, then it shouldn't matter too much when I buy it or when I sell it. I should get back approximately what I put in. STORES of value are not things that swing wildly in price in the relatively short term.
sitetest
PS: I thought it was illegal in the United States to own gold bullion from FDR's time until Mr. Nixon took us off the gold standard.
Uh yeah, right. Just like criminals turn in their guns after gun bans.
Wise, indeed. Great post!
Since gold is the thermometer of inflation, it has behooved the central bankers, through various methods, but particularly through dumping, to slap an ice-pack on the gold thermometer's bulb over the last 15 years.
This has worked fine until recently. A more appropriate level for gold may well be much closer to $1000/oz than seems possible now.
Although many arguments can be made as to what the price should be, according to mining economists a price around $700/oz would be necessary to balance the annual demand/supply ratio. Since the early '90s, around 1000T annually from Central Bank holdings(mostly Euro) has been dumped in the market. This process has been winding down, and we now have the new phenomena of Asian CB buying.
This can only be good news for gold stocks.
Physical gold is never an investment, but only an insurance. Gold stocks, otoh, pour out cash like an artesian well as margins fatten - look at Goldcorp, for instance.
The real bargains in the sector are now among the developers trading on Canadian exchanges.
IMHO. ;^)
P.S. My largest holding jumped 23% yesterday on news of a Quebec drilling program. I took a little profit this morning on another junior which had leapt over 60% in the last week. One of my two silver stocks has doubled in the last month - I'm not taking profit yet in this one.
I've been in this market for 20 years, and I've never seen such a sceptical lag in the participation of the juniors relative to the senior producers - most of them are still inert. A bull market climbs a wall of fear.
Father had heard Gramps' stories about Bryan and silver all his life before he left for France in the Great War. When he got over there he saw that those who had survived four years of the Hun and the Krupp gun had done so by having gold. If you still had gold coins you could still eat.
Didn't matter whose royal face was on the gold coin, could be British, French, German or any other government that had once minted gold money -- it spent where paper didn't.
Well Father came back from the Great War with memories of the Belleau Wood that drove him to drink and a whole lot of gold coins. He said he got it from gambling but Gran used to say he had gotten it running black market liquor. Didn't really matter because Father had gold when he came back from the war and he just put it away. During the depression Gramps changed his opinion about gold in a big way and didn't mention Bryan much anymore.
When that thieving, lying, devil worshipper Roosevelt stole the country's gold, Father said his gold coins were "collectibles from the old world." Actually he said that much later. At the time he didn't let anybody know he had gold except a couple times a year when he went to the state capitol to sell a couple so we could eat another few months.
Now the Asians and Islamics are buying all the gold! Thank goodness all the smart people in the west who have all the money aren't doing that or else the price would go sky high. I guess if people in America want to have paper dollars and fancy stock certificates that is their right in a free society. I'm glad everybody in America is making lots of money trading pieces of paper.
But if America keeps sending all their paper dollars to Asia, then they are going to buy all the gold! Oh well -- if you've seen one Great Depression, then you've seen them all.
HG
That ol' Franklin was one prohibiting SOB.
On August 2nd, 1937, the Senate finally passed and President Franklin D. Roosevelt signed the Marijuana Act.
Sounds like FDR didn't get all your Daddy's weed either.
Pity your father's very dumb friend, who would buy something AFTER is has risen 2300% in 7 years.
Strange how Gold has gone up almost every day since the Fed made that M3 announcement and Bernanke (drop $ from helicopters) was confirmed. I guess the markets aren't dumb after all.
ROTFLMAO!
It's not so much when they happen, but where they happen. The threatened immolation of Israel might be a little closer to home than an instability in Sudan.
Sure, let's go back to a gold base stock market as well, then we can replicate the stock market crash.
Closed at $527 in NY.
That thieving dog Roosevelt didn't steal Father's gold although he got some of it.
Your father was lucky. I read where two brothers had an idea of what was coming and converted $20,000 into gold just before Roosevelt devalued. After the devaluation the Feds tracked them down and confiscated their gold, paying them $20,000 in paper. The case went all the way to the Supreme Court, who ruled against them, saying that they got their $20,000 back ("equal value" they called it) so the confiscation was legal. Up until the 70s, paper money had the notation that it was "redeemable in lawful money", admitting that the Federal Reserve Notes weren't real money. Some guy sent in a $20 bill, requesting redemption in gold or silver, as per the Note. The Feds sent back two $10 bills. The guy claimed he was just getting two IOUs for one and sued. The Court threw it out - it is money because the government says so. Look at your paper money now - it just says it is legal tender. By law you must take it in payment of goods or services.
When he got over there he saw that those who had survived four years of the Hun and the Krupp gun had done so by having gold. If you still had gold coins you could still eat.
I once worked in Asbury Park, N.J., which had a large Jewish population, including my landlady. I asked her why the Jews were preoccupied with gold and got an instant education. She said during the runaway inflation in 1930s Germany, she had two gold bracelets. She'd pawn one and get enough money to live on for a month or so. The next month she'd pawn the other one at a much higher price, then pay off the first one and pocket the difference. Went forquite a while like that. More ominously, she said gold kept her out of the camps for a while and when her luck ran out, she was able to bribe a guard and eventually buy her escape out of the country. (the number on her arm was still legible.) "Gold will buy you things that no amount of paper ever will" she counseled.
Gold stocks, otoh, pour out cash like an artesian well as margins fatten - look at Goldcorp, for instance.
Boy, that artesian well analogy is the truth. I got into some South African gold stocks during the run up and did quite well. (Friends were advising "safe" GM stock instead of those "wild speculations".) I laughed all the way to the bank. I ran across an interesting tidbit about gold mining companies. When prices were escalationg on a daily basis, they began mining the lower-yield veins profitably, saving the richer veins for when prices declined, as they inevitably did. Smart people.
I always got a kick out of the "can't use gold as money as it's too scarce" argument. Like any other natural resource, it was only scarce at the fixed price. One it was free to reach it's current value, it was amazing to see how much gold was found. The real reason is that the government can't print gold or tell you that the ounce you have now only weighs a half ounce.
I don't know, I lost all my money in the market in the 90s while they were running up like a rocket.
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