Posted on 06/28/2002 3:00:46 PM PDT by Lazamataz
Well, 'the new spoosman' and many like him have told me for months that the 'fiat' currency is worthless, and gold is the only valuable currency out there. Disregarding for a second the fact that these gold bugs are so ready to part with their gold for those 'worthless fiat notes', I would like to point out that since the height of their caterwalling, Jun 01 2002, gold is down from 326$ an ounce to 314$ an ounce today. That is a 4 percent drop in less than a month.
The 'fiat currency' people are out to lunch. I don't expect gold to do any better than index with inflation in the long run, and today managed to show a savage loss of $5 an ounce.
The Euro is outcompeting the dollar bedcause the dollar is in the midst of a serious inflation that began in the Fall of 2000. When the US trashes its currency by pushing too much liquidity into the system that currency falls in value relative to another currency whose government is not engaging so heavily in inflation. The Euro is not "improving" due to any inherent trait of its own. Its producing government has not yet grabbed the tiger's tail.
Production was 2600 metric tons in 2000.
The actual quantity of gold used in industry is actually quite small relative the amount in existence and does not affect noticeably the price of gold. It does affect it and may be more noticeable in the future if a superior-cheaper substitute is found for it that has the effect of ending suddenly those uses of gold. But, like the Spanish American gold 350 yeass ago the effect will be once and complete, it will not come as repeated fluctuation. Silver fluctuates much more than gold because the rate of addition to the world stock has been more erratic throughout history than gold.
Make the pants first!
Thank you! Gold has no intrinsic monetary worth, except what some guy is willing to pay me in usable paper currency for it. If we were two cave men and you wanted to trade me that block of yellow mass in your hand for the brilliantly red ruby in my hand ... are you f'n NUTS???? My stout little hairy woman would leave me after that display of genetic unsuitablility.
Why is Gold worth even $314 an ounce? I say it is worth $10 a pound. If men stopped outrageously overpaying for wedding rings - the market would crash.
Cumulative world production of gold is about 140,000 Metric tons, half since 1960. Production has doubled since early 1980s. A few percent added supply per year may not seem like much, but gold is thinly traded compared to the amount out there (that is to say much gold is held for life).
Technology has made the world a different place. Leach piles can make all the gold you need.
Gold Bugbears - A sucker's rally?
From the 5/30/2002 Economist
GOLD bugs rejoice. The patience of those who stand by gold through thick and thin has been rewarded recently with a rising price. Gold has now risen to near its most recent peak of $330 in 1999, when central banks announced a moratorium on new sales of their bullion stocks, though the price then fell back to earth again. The current rally is especially surprising, since gold barely moved after September 11th, when it might have been expected to rise. Trot out some new suspects: a weak dollar, tension in Israel, India and Pakistan, and the desire of Japanese savers for a safe haven.
Gold's new strength has even made bulls of some ex-bears. One of these, Andrew Smith of Mitsui Global Precious Metals, who expects the price to hit $355 an ounce by December, has turned bullish for none of the usual reasons. He ascribes gold's present good fortune to a broad shift out of American shares and bonds—because of an Enron-induced malaise—rather than to any revival in gold's role as the ultimate store of value. Gold's rise merely follows that of other commodities, keeping pace with platinum and silver, but with none of nickel's panache. Gold has, in effect, become just another form of alternative investment, like property, hedge funds or art.
Some bulls, though, take heart from a decline of hedging by gold companies. Such companies chose to protect the price of their future gold production by forward sales or by fancy financial options. These tactics were weighing prices down, it is argued. Nowadays, low lending rates have made the forward price less attractive. Companies that do not hedge have taken over some that did: for example, Newmont's buyout of Normandy. And a new push for accounting transparency has made many wary of the complex derivatives used by some hedgers.
Yet declining amounts of hedging may not be enough to keep the gold price up. The world's central banks hold some 30,000 tonnes of gold in their vaults. Mr Smith notes that AngloGold is trimming its hedging only at the same pace that the Swiss National Bank, owners of a massive hoard, is selling. Who will prevail in such a contest? “Place your bets,” he says.
Indeed, the long-term outlook for gold might mirror the fate of silver. A century ago, central banks hoarded silver as they do gold today, and it had a similar status befitting its role as a monetary metal. But now that central banks no longer keep silver reserves, the metal's purchasing power is back where it was at the beginning of the 19th century. By this measure, if central banks were to abandon gold, it would be worth around $68, says Mr Smith. Enjoy the run while it lasts.
Both metals are amazing when you think about it. Gold with it's non-corrosive properties, and silver solutions dropped into the eyes of newborns to sanitize them as two examples. About the only thing that interacts with gold is cyanide, and what destroys cyanide?...Sunlight. Amazing combination of symbology and science. Like the amazing coincidence that the disk of the golden sun and the disk of the silver moon are exactly the same size looking into the sky. The odds of this coincidence are astronomical.
Very true. Gold mining is a dangerous investment because governments that issue fiat currency hate gold, and environmentalists hate mining. But when it's right, it's right as rain, such as in the depression.
In what product or process can I use gold to create a unique benefit that would return more that the $314 per ounce I paid?
Buy it and keep it for the rest of your life, making it a one-time charge. If and when catastrophy strikes, the increase in price will make the costs of buying it insignificant. It will always be worth a lot compared to it's volume. People pay a year's income to drive a new car when a used car will get them around just as well for years and at half the cost, so .5% is small. Besides, you lose ~4% per year in dollars due to inflation. And buying and selling stocks is no cheap venture either, especially when you're getting false earnings reports and you end up on the wrong side of the volatility spikes. :^)
Invest in paper if you want to make money. Buy gold and keep it on hand if you want financial security. It's the only thing that has survived every time of discord for thousands of years. It has always had a high value to volume ratio. Governments, try as they might, can't make it worthless, and that's why they hate it.
A very expensive industrial product.
Modern mining/refining techniques can produce any amount you need for about $300/oz.
That's, what, thousands of times higher than steel.
When gold is cheap mines and leach fields shut down. When gold is expensive they turn nice profits. Unless the gold producers price structure changes it will be hard to maintain a price much above the $300 inflation adjusted price (obviously the inflation adjusted cost of mining and refining the gold).
Yep. That's why I make money trading currencies, not trading gold. Some places allow for 200 to 1 margin. Many times a year the currencies will move 1% in ten minutes against each other. Therefore at 200 to 1, $10,000 will be worth $30,000 with one of these ten minute moves. Triple your money in ten minutes. Now that's trading. Of course if you're on the wrong side of these moves, the margin calls can be devastating. I trade 20 to 1 myself. You can go on a losing streak and still survive at 20 to 1 with the proper stops.
Gold mining companies might be a good investment at some times. Guns might be a better investment for the only scenarios were gold looks good to me.
There's always going to be someone who can outshoot you.
If the currency is deliberately and by law stable there is really no reason to hold more than a minimum of gold-there could be an economy destroying nuke strike- because there are low risk investments that will increase in value and will allow you to buy moore gold when things get shaky again. I have gold coins of the bullion variety but I do choose the more interesting ones, especially the turkish coins rather than the American or South African ones. They are pretier and have no collector value so the markup is no more than the Krugerrands.
All things being equal, the Dollar is still losing ground against the Euro.
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