Rule #1: Cardio - stay ahead of the zombie horde.
Rule #2: Double Tap - If you have to shoot, don't cheap out on bullets.
Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.
Posted on 10/10/2010 11:07:11 AM PDT by blam
When Will Gold Reach $10,000 An Ounce?
by: Wall St. Cheat Sheet
October 10, 2010
Gold bugs like gold because, unlike fiat money, gold has an inherent value to it. Its relative scarcity makes it more valuable than other things. It’s interesting, then, to list gold bugs’ arguments in favor of gold. Their main claim is that when governments devalue their currency, by letting inflation run rampant and taking on more debt than seems prudent, gold becomes an attractive investment vehicle. Never mind the problems with storing, moving, and securing gold, the gold bugs say: gold has inherent value that fiat currency does not.
That argument is fine as far as it goes: it is true that gold has an inherent value that paper-based money does not. And, indeed, since Nixon moved the US off the gold standard in 1971, our currency has not been tied to anything other than the the promise of the US government to make good on its debts. (Consider that every note you have in your wallet says on it “This note is legal tender for all debts public and private.”)
So, given all of this, yes, the gold bulls have a valid point that where paper currency derives its value from the potentially suspect promises of a profligate government, gold derives its value from its inherent scarcity.
But does it follow that gold will be a good investment in the future? Just because something is scarce doesn’t mean it’s a good investment.
Ken Rogoff, the Harvard economist, wrote recently about gold:
One successful gold investor recently explained to me that stock prices languished for a more than a decade before the Dow Jones index crossed the 1,000 mark in the early 1980’s. Since then, the index has climbed above 10,000. Now that gold has crossed the magic $1,000 barrier, why can’t it increase ten-fold, too?
Admittedly, getting to a much higher price for gold is not quite the leap of imagination that it seems. After adjusting for inflation, today’s price is nowhere near the all-time high of January 1980. Back then, gold hit $850, or well over $2,000 in today’s dollars. But January 1980 was arguably a “freak peak” during a period of heightened geo-political instability. At $1,300, today’s price is probably more than double very long-term, inflation-adjusted, average gold prices. So what could justify another huge increase in gold prices from here?
One answer, of course, is a complete collapse of the US dollar. With soaring deficits, and a rudderless fiscal policy, one does wonder whether a populist administration might recklessly turn to the printing press. And if you are really worried about that, gold might indeed be the most reliable hedge.
But he sounds a sensible note of caution: gold prices are inversely related to interest rates, and interest rates are at historic lows around the world.
Indeed, another critical fundamental factor that has been sustaining high gold prices might prove far more ephemeral than globalization. Gold prices are extremely sensitive to global interest-rate movements. After all, gold pays no interest and even costs something to store. Today, with interest rates near or at record lows in many countries, it is relatively cheap to speculate in gold instead of investing in bonds. But if real interest rates rise significantly, as well they might someday, gold prices could plummet.
The gold bugs make some interesting arguments about the difference between gold and fiat currency. And those arguments are valid. But they ignore the connection between interest rates and gold prices. Their case is not as convincing as they think it is.
Poor ol’ David lacks a proper historical perspective and his ignorance is showing.
He doesn’t realize that now and most of what he thinks he knows is anomaly. Gold is the way of the world for tens of thousands of years. The Bretton Woods arrangement and the current order is but 60 years old. Now is anomaly transitioning to the norm and gold as reference for valuation of all else.
Gold may not reach $10,000 an ounce. At some point in the future the Dow Jones Industrial Average will be equal to the price of an ounce of gold. It may well be $5,000. That will be the time to sell gold and buy stocks.
Rule #1: Cardio - stay ahead of the zombie horde.
Rule #2: Double Tap - If you have to shoot, don't cheap out on bullets.
When the median home price in the U.S. is $1,500,000.
So my question, how safe is my investment, in the coming global crisis, when I’m dead from the mob of starving desperate bandits?
But you are illogical to suggest that because there is an adverse scenario following from one (arguably prudent) course of action that that course is imprudent.
Your alternative is to BE a starving bandit, instead of having what they might want.
The better approach is to already have some food and water stored, so you’re not out fretting groceries when the predators are looking for conspicuous victims.
You must be in my age range or older to remember that one...
That’s why .22 will be king, no matter what anyone says.
Laughing my arse off. I saw Zombieland last weekend. Great movie but I cried when Bill “who cried when old yaller died” Murray was surprised.
History channel went through survival strategy. After watching that, I’m of the opinion that being the first casualty will be best than try to survive a year out. The dark ages were not fun and the average age of death was 25 yrs old, if you survived infancy, violence, starvation, plagues, and roaming bands of wandering warlords.
Gold is for starting over or to purchase real things, like land.
Silver, even old 90% silver coins, will have trade value. If you are down to your gold jewelry, the ring should be cut into pieces equal to a quarter or half oz of silver in value. A gram scale and a gold test kit will be essential to prove weight and karat if you need to trade gold.
But, if you were wise enough to store metals, you were wise enough to store food and medical supplies, tools, guns and ammo to deter thieves. You will have made certain to have skills that others will barter for with either their own skills or their own stores. Tobacco, alcohol, lip balm, toilet paper, skin lubricants, soaps, and other toiletries will have value, too.
There will be black markets and the necessary goods will no longer be at stores. The grape vine will be the source for finding supplies. Anyone actively trading will need to have their own security and so will everyone else.
By the time folks are down to their jewelry, everyone will be wise to the ways of the new normal and your scenario will be obsolete.
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