Posted on 09/16/2009 7:35:54 AM PDT by SeekAndFind
Gold bullion just crossed $1,000 an ounce. But what's it really worth?
Bud Conrad, chief economist at Casey Research and a leading gold bug, says it's worth far more. Based on long-term analyses of macroeconomic trends such as the money supply, he says, "a lot of ratios… get you into the $4,000 to $5,000 level without any problem.
Congressman and former presidential candidate Ron Paul also a major gold bug likewise sees the price of bullion rising from today's levels. "It's trebled in the last ten years," he says. "There's no reason it can't triple in another ten years, that wouldn't surprise me." Congressman Paul says the government will erode the dollar's purchasing power, so gold will gain value however, he says this is a political opinion, and not investing advice.
Is it realistic to think gold could really go $3,000?
A long-standing rule of thumb among gold enthusiasts is that an ounce of gold should equal the cost of one high-quality man's suit. (A fund manager I know in London argues that this goes back to ancient Rome, when an ounce of gold allegedly was enough to purchase a top-of-the-line toga.)
That wisdom isn't particularly helpful today. At Saks Fifth Avenue you could pay $795 for a Hugo Boss suit, or $2,050 for Dior. When I last bought a suit on Savile Row in London some years back, it cost about $1,200, but one could have spent lots more.
Michael Narwani, a tailor and the owner of Custom Clothiers in Wellesley, Mass., says his suits vary from around $700 up to many thousands, but "$1,000 would buy you an excellent suit." By that measure, gold would be about the right price now.
A silly debate? Maybe. But this is the central issue any investor faces when dealing with gold.
(Excerpt) Read more at online.wsj.com ...
bubble
Augustus established a new gold goin, the “solidus” at 45 to the pound. By the time of Constantine it had been inflated to 72 to the pound. Mercenaries were paid with this coin, and this led to the term soldier.
Color me a barbarian. I figure my wages as an equivalent amount of gold, and my wages have been going down as I grow older.
I agree bubble,,,
UNLESS, China or Russia go to a partially gold backed currency as both are threatening (to protect their economies from our runaway fiscal policy). Then it could be creepy. And as with oil, they can mine all they want,,, but we get fought at every turn.
It’s too crazy for me to get my mind around a world where Russia and China balance their budgets, and think the USA cannot be trusted with banking policy. These are strange days.
And im way over my head here, but i read something recently that said that much of the “gold” bought in recent times, is actually a promise to deliver an ounce at a later date. Some kind of futures thing. The point of the article was that the people who brought us the subprime mortgage crisis, have a vested interest in the price going drastically down. That was they can deliver as they contracted, but at a much lower price.
I like gold, but there are shady things afoot i bet.
I agree. But it won’t happen. They love the hidden tax of inflation. They won’t ever give it up. And the fed would be pointless without government borrowing for deficit spending. Everyone benefits by no gold standard *except* for wage earners.
Very well put.
That’s very nice writing. Oil has halved from its highs, natural gas is very low too, to the point that drillers are not seeking new supplies at the moment.
Absolutely a bubble. As soon as you start seeing and hearing the adds to buy gold, it’s too late. Gold prices have trippled in the past 10 years but long term it is still averaging 3.5% a year, similar to inflation.
GOLD’S VALUE DOES NOT CHANGE! The value of the dollar, or any other currency that PURCHASES gold IS WHAT CHANGES! Why can’t people understand this and stop talking about the price of gold and start talking about the currency defining that price? In this case gold is at $1000, if it triples, it does not mean gold is three times more valuable, it means the dollar is then worth 30 cents! The DOLLAR Is the story, not GOLD!
Many years ago, I heard and economist say that historically one ounce of gold would buy 15/17 barrels of oil. Currently, that is about where we are. Last year the price was artificially inflated.
Thought this might suit your interests, Drumbo.
I’m on the second of Travis’s trio, and have been coming around to the notion that gold isn’t *such* a crappy investment after all. Even though I don’t particularly covet the stuff, it may be highly desirable to others who would accept it in exchange for items I do want.
Alas, dust does not buy gold! :-D
It doesn’t really make a difference, since currency is what we use to measure the “value”, to argue over whether gold is worth more, or the currency worth less.
However, you are wrong, in that gold prices to include in them a supply/demand component. Note that Oil for example has dropped almost in half while gold went up 30%. Obviously the currency didn’t devalue 30% and rise 100% at the same time; Oil really did get “less valuable”, and gold really did get “more valuable”.
The gold bugs would like to argue that gold’s value does not change. But in fact, as we saw in the 1979-1981 timeframe, gold values do in fact swing wildly, and are subject to market fluctuations and speculatory bubbles.
Measured by the basket of things you could purchase with dollars, the dollar volatility has been MUCH LESS than the volatility of gold prices.
But what’s it really worth?
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Pick ME!! Pick MEEE!!!
A:) It’s worth what people are willing to pay for it...
(damn, I wish every question was this easy)
No, actually YOU are wrong sir. What is the “price” of gold? As soon as you tell me that, you are using a currency value. Gold, you see, is the standard, everything else is in motion. So do not try to tell me that printing money in the USA is not going to “increase” the price of gold ... IN DOLLARS! Its not like they can go “print” gold is it?
Well, since I bought my gold at 400 and my silver at 7, I’m not too worried.
On the other hand, there is a risk the US dollar will go the way of the Zibabwean dollar.
But gold will always be gold.
But my books are pure fiction! Really!
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