Gold is doomed

Washington Post ^ | July 25, 2015 | Matt O'Brien

[expat_panama]

A little less than four years ago, the world looked like it was about to end and gold hit an all-time high of $1,895 an ounce.

The United States had manufactured a debt crisis, and Europe hadn't been able to manufacture a solution to its actual debt crisis, so panicky investors sought safety...

[snip]

That didn't mean, though, that gold wasn't a good short-term investment. It was. Just not for the reason goldbugs thought. Now, the problem with gold is it doesn't pay any interest or dividends, but it does cost money to store. So you have to pay up in the hope that it will pay off by going up in price. That usually makes it a pretty lousy investment. That calculus changes, though, when you're being paid to borrow—that is, when you're paying a negative real interest rate. But when does that happen? Well, when inflation is high but interest rates aren't quite as high, like in the 1970s, or when inflation is low but interest rates are lower still, like today. And that, as Paul Krugman and Larry Summers argued, is why gold prices were going up so much even though inflation wasn't.

It almost makes you feel bad for the goldbugs, until you remember that some substantial number of them are just trying to scare seniors out of their money. But the ones who aren't really thought the 1970s showed that gold went up when inflation did, so the fact that gold was going up now meant inflation couldn't be far behind.

[snip]

That sound you hear is goldbugs insisting that this is just a flesh wound.

[snip]

But don't feel too bad for the goldbugs. The best thing about predicting the apocalypse is you get to try again and again and again.

[SomeCallMeTim]

China is looking a little ruff this morning

China is sort of like a HUGE version of Texas... they do everything BIG over there.

They're new to this 'capitalism' stuff.... but, they've learned how to create a bubble. And, they've made a DOOZY! And, it's a poppin.

I still haven't figured out, for sure... if they're going to drag the rest of the world down with them. I'm not sure our financial connections are all that deep just yet... other than them owning a LOT of our debt.

Hard to believe we won't feel many side effects.

[central_va]

So can I buy an entire ghost city for cheap now?

[CodeToad]

“Anyone buying gold as an investment is a fool.”

And you are such a wealthy man we should take our investing advice from you? Gold is a commodity and subject to profits as much as any commodity.

[Stentor]

...so my bet is Rush lost a bundle on gold and is about to lose a bundle on silver.

My guess, which is as good as yours, is that Rush has people and that thoe people have heard of hedging strategies.

[Tripoli]

Rush does not have any GOLD ads and I listen almost every day.
I think it must be an ad sold by the local radio station.

Beck, however, does “hawk” for gold- which is why I don’t
have much of it.

[elcid1970]

I see your point.

Ammo in standard calibers will be traded like money if there’s a currency collapse.

The value of .22lr, 5.56mm, 30-06, 9mm, 7.62mm (NATO, Russian, AK-47) .38/.357 will be quickly established.

Time to buy more. Never owned gold, don’t plan to.

[expat_panama]

debt levels of America and most of the developed world are at 100%+ GDP levels and still growing. They will never be paid back with anything close to the value of the initial investment.

That's what we hear on these threads all the time 'cause it's what the idiot news gets paid to do --pander to the feelings crowd.  Real life info is easy to get and it turns out the world  average debt/gdp is 75% and the average of the top 30 gdp nations is 77%.   fwiw, here's the list of are the top 30:

gdp rank	country	debt/gdp
1	United States	102
2	China	22
3	Japan	230
4	Germany	75
5	United Kingdom	89
6	France	95
7	Brazil	59
8	Italy	132
9	India	66
10	Russia	18
11	Canada	87
12	Australia	29
13	South Korea	34
14	Spain	98
15	Mexico	31
16	Indonesia	25
17	Netherlands	69
18	Turkey	33
19	Saudi Arabia	2
20	Switzerland	34
21	Sweden	44
22	Nigeria	11
23	Poland	50
24	Argentina	46
25	Belgium	107
26	Venezuela	50
27	Norway	26
28	Taiwan	37
29	Austria	85
30	Iran	11

[2banana]

Looks like industrialized western nations average at least 100% debt to GDP ratios.

Those debts are insane and will never be paid back with anything close to the value of the initial investment.

[MrB]

A finer point on your point is that gold is a “wealth preservative” to “the other side” of the crisis.

If you want to preserve your spending power, silver is the deal.

[S.O.S121.500]

Better yet, buy .223 made out of gold..just a thought.

-—==+==-—
Talk about an impetus for selective fire.....

[dware]

Toilet paper will be gold in a SHTF scenario.

[skimbell]

Ammo will probably work as a form of money, so I've been putting some effort into stocking up on supplies for my "Money Machine".

[Lurkina.n.Learnin]

Looking at that list makes me wonder how good an indicator that is. Venezuela is at 50%. Can’t get toilet paper and now they are suffering a severe beer shortage. Hmmm

[expat_panama]

wonder how good an indicator that is.

Exactly.  Sure, it's important but so are lots of other things.  Combine that w/ the fact that most people just close their eyes and imagine seeing what they want to see anyway that we usually end up with a lot of heat and very little light.

[Georgia Girl 2]

You buy gold because its never worth nothing.

[uglybiker]

I thought that was werewolves.

[SomeCallMeTim]

So can I buy an entire ghost city for cheap now?

LOL... getting cheaper every day.

[BenLurkin]

There will be 1970s style inflation again.

It is part of the circle of economic life.

It’s overdue, in fact, and when it comes it will be a nasty surprise for millions of younger investors.

[aMorePerfectUnion]

I love stories like this! This is the kind of thing that must happen to build a base - shaking out weak hands until only strong hands are left.

Somewhere at $900-700 per oz is coming soon.

[Domangart]

Would you trust purchasing a gold bar from Hillary that she stored at her house?