Gold at $2,500 Looks More Likely Than Ever (Who do you trust better, Gold or Government Fiat?)

Daily Finance ^ | 06/03/2010 | Dan Burrows

[stephenjohnbanker]

You buy the apples...my oranges are doing just fine ;-)

[MadJack]

Sorry. I see this as manipulation, fear mongering, etc.

[TIElniff]

If the yellow metal is only going to increase in value, and green paper is only going to lose value, why would anyone sell the yellow metal for the green paper?

Because, for some reason, the seller needs the green paper more than he needs the yellow metal. But remember, he is not selling all the yellow metal in the world, nor buying all the green paper, or selling all of his yellow metal (maybe). He is one individual in the market, and every individual in the market has his own personal and subjective reasons for buying or selling. It’s all relative to the individual’s unique situation and desires.

[jpsb]

Me too, but I don’t like silver a 18, I like silver at 12-14.

[Jack Black]

I have a guide to buying gold and sliver cheap that I wrote on my home page here at FR. It might be useful to you if you are interested in the PMs and haven't figured it all out yet. It includes a few charts. I'm not hawing anything and the guide should let you get a good price from any dealer you choose to use.

Jack Black's Home Page on Free Republic

[jim_trent]

I bought 2-1/2lbs at $390 an ounce. I greatly regret not cashing in my stocks and buying more at the time.

[steve0]

Oh yeah!! If I would have, as Beck joked, sold my house and bought all gold I would have been able to retire now. How can Beck and Palin be allowed to direct and control people like me, and leaving me liking it?

[Nervous Tick]

>> remember what gold was selling for in the beginning of the 1980’s? Then what was it selling for a couple years later?

Oh yeah, gold in the ‘80s. Silver too. And equities, in the late ‘90s. And tulips back in the 1500s. THOSE were all speculative BUBBLES.

But it’s DIFFERENT this time! Seriously! Ignore all the history of previous bubbles! Gold is NOT in a bubble! Its. Different. This. Time!

;-)

[stephenjohnbanker]

LOL!!

Good one.

[Jack Black]

Are we in a Coca-Cola bubble? It was nickle in my childhood. You expecting the Coca-Cola bubble to pop sometime soon, and the price to go back to a nickle a bottle.

No. You are not.

Hmmm. So, is Gold like Coca-Cola circa 1965 or tulips in 17th century Holland?

The answer is that our fiat currency is continuously debased via inflation. Gold is mostly a hedge against infaltion.

What you see as a bubble is at least in part merely a very easy to measure general inflation. Unlike most other things that change over time an oz of gold today is the same as an oz of gold in 1935.

Of course gold and the dollar were linked 1 to 1 until FDR ended the gold standard for ordinary citizens with an executive order in 1939. And the last connection was severed by Nixon when he ended the ability of foreign central banks to turn in dollars for gold in 1971.

Here is a food timeline that shows price increases on things that have stayed the same like Hershey's chocolate bars. Food Time Line

Using the Herseys' example:
So, in 1937 1.5oz cost 5 cents
Today it same size costs 95 cents

If you had one dollar in 1937 you could have bought 20 Hershy bars, today you can buy one. If you had one dollar in gold in 1937, which was defined as 1/10th of an OZ as it had been for 50 years at that time, you could have bought 20 hershey bars with it.

That same 1/10 of an oz of gold today is worth $120. So you could buy 125 bars.

The silver dollar is now worth about $18.00. It's almost a perfect hedge.

So some significant percent of the gold price is merely reflecting it inflating, like everything else. Some percent may be bubble, or it may be a permaant re-valuation of Gold upward.

The Gold-Silver ratio in an interesting tool.