Daniel Harrison
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If you’ve been tempted recently to respond to one of the numerous advertisements from start-up pawn brokers offering to cash in your gold jewelry for a small commission, do it now. Gold is about to get a lot cheaper.
That’s not advice you’re likely to hear very much at the moment, however. Even as the price of gold has remained pretty stagnant in recent weeks, proponents of a long-term bull-market in the yellow metal haven’t lost any of their enthusiasm.
“Gold can back all [paper currency] at the right price if freely convertible on open markets. Most people will be happy to hold paper if they know it is freely convertible to something as tangible as gold,” points out one commenter on Seeking Alpha, in response to an article titled “How Does $9000 Gold Sound?”
That argument centers on all the liquidity the global governments are pumping into their economies right now. (Gold is typically used as a hedge vs. inflation). As that money supply continues to expand unchecked, claim gold bulls, inflation will hit hard when it comes.
Fortunately for most however, inflation on a big scale is a scenario consumers are unlikely to experience any time soon. In order to inflate prices, increasing money supply has to be playing catch-up with consumer demand. Right now, the opposite is true. While consumer spending admittedly rose slightly in the first quarter of 2009, and the U.S. economy is being stimulated by big bailout packages, that spending trailed off half-heartedly in March.
The extra liquidity being provided by the bailouts is not trickling down to the consumer or small-business level yet. In which case, what exactly is the extra cash inflating? Frustratingly for investors, the answer is - very little.
China: Not So Golden
Another cause for excitement over high gold prices has been a rising interest in the commodity from the Chinese government. April 24, China’s State Administration on Foreign Exchange announced that its national reserves rose 75% last year, to 1,054 tons. But when you consider how many U.S. dollars China accumulated in 2008, it’s hardly surprising the country accumulated something of a natural hedge.
Lately however, China is showing signs of willingness to let its currency appreciate a little bit, even as it slows down its accumulation of U.S. Treasuries. In the first quarter this year, China’s accumulation of U.S. Treasury bonds grew at the slowest rate in nearly 8 years, by $7.7 billion vs. $153.9 billion in the same period last year.
As a result of these actions, the Chinese yuan has risen 3.5% vs. the dollar, to 6.76 yuan over the past 12 months. Such events reduce the necessity for China to keep purchasing gold bars at the same rate. In other words, those who bought on the back of the recent announcement did so mistakenly assuming things would be the same this year as they were in the last. (The week of the announcement, gold dropped in value to around $887 an ounce).
Moreover, consumption growth - while higher than expected - continues to decline in emerging market countries. It’s hard to imagine consumers purchasing the same amount of gold at the retail level as they did in the heady boom-days of 2007 and 2008.
Predictably, the building pressure on the price of gold recently has been felt first by gold miners. While Barrick Gold (ABX) reported a 28% drop in earnings from the previous first quarter, rival Newmont Mining (NEM) saw a 48% plunge in profits in same period.
As for the argument that gold would be a suitable peg for international currencies, that doesn’t make much sense either. By effectively reintroducing the gold standard, volatility would become a nightmare as different countries struggled to coordinate their interest rate policies and growth rates with a finite resource. It’s worth remembering that much of the reason America was forced to abandon gold as a reserve currency was precisely because the asset was placing hard-to-manage constraints on the economy’s then-booming growth. The same is true today overseas.
High prices in a cheap market
With global consumption easing slightly from back when the yellow metal sold for $1000 an ounce, there simply isn’t a reasonable case to be made any more for sustainable higher prices. Added to that, many forget that gold is a very illiquid market, with a significantly lower average daily transaction volume than other commodities, such as oil. In other words, when gold prices fall, they fall fast.
Indexes are even lower now than they were a decade ago. Political stability is much higher than it was with a Democrat government in place in the U.S. and the Chinese showing signs of cooperation with Taiwan. It’s therefore not unreasonable to assume much cheaper prices for gold over the next few months than we have now: a price of $460 an ounce, which is around the ten year average, is a reasonable benchmark.
As a result, gold ETFs such as SPDR Gold Trust (GLD) may fall as much as 50% over the next few months, while heavily overbought goldminers such as Randgold Resources (GOLD) may see bigger declines. Randgold currently trades at a price to earnings ratio of 91. In the case of the miners, out-of-the-money September put options are an attractive speculative play in a broadly cheap market.
Disclosure: No position
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This article has 77 comments:
Danny, Danny, Danny. The only thing that's about to get cheaper is the dinners you buy for your little girlfriend, assuming you have acted on the silly ruminations above.
dude, omg.
Even the new koolaid-drinking Paul Volcker had this to say just a few days ago:
"Volcker agreed with economists who say the expansion of the Fed’s balance sheet, to more than $2.2 trillion as of last week, might pose an inflation danger at some point."
“The inflation problem, which should be a real threat for the future, is not right on the doorstep,” he said. “But two or three years from now that may be the critical problem, how that’s handled. Because, given what the Federal Reserve has been doing, it’s going to be harder to retrace their steps, so to speak, than it ordinarily would be.”
The Fed is not finished at $2.2 Trillion. We are headed for $6 Trillion IMO. The Fed, by backstopping everything it views as "systemic", stands astride the entire global financial system. They have painted themselves into a corner, because they believed they had no choice; had they done nothing, the system would have collapsed and central banking would have been publicly revealed as the impotent fraud that it is.
There is probably no point in getting into the 'inflation/deflation' arguments, but maybe you could tell me what happens to the buying power of dollars when the Fed prints this many and then can't back out?
BTW, absent significant inflation, I view this stock market rally as unsustainable. It's the P/E thing.
I can buy gold falling 50%, but it's a disaster scenario where gold still outperforms other asset classes, i.e. the worst case scenario. There's no way the economy recovers and gold drops over the long-run. It may dip at first due to changing perceptions (safe haven buyers flee to equities and other commodites), but inflation will be back with a vengeance.
Maybe the old Wall of Worry will bring some momentum to the tiny Gold and Silver markets. On paper, both are underpriced, especially Silver.
And you see a declining currency as good reason to hold on to US dollars? Why would China buy US treasuries at low yields while their dollar continues to strengthen? It's just not a sound long-term investment.
As for the $460 an ounce prediction, it hasn't traded at those levels since 2005.
On May 04 08:52 AM rick12345 wrote:
> LOL???
> And you see a declining currency as good reason to hold on to US
> dollars? Why would China buy US treasuries at low yields while their
> dollar continues to strengthen? It's just not a sound long-term investment.
>
> As for the $460 an ounce prediction, it hasn't traded at those levels
> since 2005.
more CNN drivel....ugghh
Aren't they the idiots who never saw this coming???
Gold’s Percentage Rise in the Last Bull Market. What if gold in this bull market repeats the percentage rise in the last bull market? In the 1970s gold rose from $35 to $850, a factor of 24.28. Our low in 2001 was $255.95. Multiply that by 24.28 and you get a gold price of $6,214 per ounce.
U.S. Gold Holdings to Money Supply: The M1 money supply consists of currency and checkable deposits. The U.S. government currently holds 286.9 million ounces of gold. If the government were to make each dollar redeemable by the amount of gold it possesses, we’d arrive at the following price for gold: $1.569 trillion ÷ 286.9 million oz. = $5,468.80 per ounce
Gold/Dow Ratio: The ratio was about “1” when gold peaked in 1980, meaning the Dow and gold were the same price. To restore that relationship at today’s stock prices would mean when the Dow is at 6,626, gold should be at $6,626/oz. Of course, we think it likely that the Dow will get a lot lower before gold peaks. But even if it drops all the way to 4,000, that would imply a gold price of $4,000/oz.
All the Money in the World vs. Gold Reserves: If the public eventually sees the paper game being run by the central banks for what it is, governments will be forced to back their currencies with gold (and perhaps other tangibles like silver). Assuming they had to go into the market and buy the gold needed to restore faith in their currencies, the numbers might look like this: Total central banks reserves (including gold holdings) = $4.8 trillion, divided by 929.6 million ounces total gold reserves held by all official institutions that issue currency = $5,246 gold price.
U.S. Gold Holdings to U.S. Foreign Trade Deficit: The size of a country's deficit or surplus would be of no consequence if all currencies were convertible into a fixed amount of gold. However, the dollar is increasingly considered a hot potato, and when the trade balance reverses, as it must, dollars will flow back to the U.S. and fuel domestic price inflation. Based on the cumulative trade deficit of $9.13 trillion (up from $6 trillion since June ‘07!) and U.S. gold holdings of 286.9 million ounces, the corresponding price of gold would be $31,822 per ounce.
U.S. Gold to U.S. Government Liabilities: Finally, the GAO (Government Accountability Office) calculates an income statement and balance sheet for the U.S. government. As you’d suspect, it is dominated by future liabilities for Medicare and Social Security. What if they had to be backed by the supply of gold? Official U.S. government liabilities now ring in at an incredible $55.2 trillion. To make good on that would require a $192,401 gold price.
No thank you, I will continue accumulating physical gold, like I did three weeks ago. And my GTU is up nicely today, thank you.
www.nytimes.com/2009/0...
"Fortunately for most however, inflation on a big scale is a scenario consumers are unlikely to experience any time soon. In order to inflate prices, increasing money supply has to be playing catch-up with consumer demand. Right now, the opposite is true."
Yes, right now the opposite is true. And what happens when the opposite is no longer true? Or when the ignorant masses start to realize something fishy is going on with prices?
The thing about inflation is, it's not apparent until it's all TOO apparent. And then, say the deflationists, the Fed will just sop up the extra liquidity. Bing, bango, bongo.
But what happened the last time the Fed did this? Volcker had to trigger one of the nastier recessions of recent history to fix the problem. And the current situation is exponentially worse, I would argue.
So lets see...we inflate massively to avoid a painful recession only to have to then initiate a recession to fix the the inflation? Ahh, the central banking 'circle of life.'
Quite productive.
MM
Why would Gold fall from 900 to 450 over the next few months? Nothing in the commentary supports such a statement. Declining or lack of profits in ABX and NEM are due to company issues, not the price of gold. Other miners saw big increases in profitability.
The Dollar price of gold is closely tied to the confidence of dollar holders in the economic health of the US and the US government. If confidence continues to erode, especially by international dollar holders, gold will continue to appreciate, regardless of the prognostications of the commentators.
This guy clearly has not read "The Creature from Jekyll Island".
I'll keep my mounds int he yard thanks. Like Jim Rogers said on the weekend - I ain't selling my gold for anything.
Pretty says it all.
I couldn't agree more. Yet the motives of many buyers has swung in the speculative direction these days. That points to a bubble-like characteristic.
On May 04 12:12 PM mtt04 wrote:
> What makes me laugh is people don't get this one fundamental point.
> "Physical Gold is not an investment" it is an insurance policy.
>
>
> I'll keep my mounds int he yard thanks. Like Jim Rogers said on the
> weekend - I ain't selling my gold for anything.
>
> Pretty says it all.
>
Theres no way to fundamentally value the stuff, other than gauging demand from jewelry or high-conductivity applications where silver just isnt good enough. So /who/ values it, and how ? It seems to me that with no fundamental means of valuing gold, the big holders (read governments) are free to decide the value at any time, in any place.
Doesnt the fact that Gold cant be fundamentally valued make it THE SAME as a paper currency for all intents and purposes, in that large governments can manipulate its supposed value ?
it is pretty stuff, but id prefer to reside in somethign like oil or other dollar-denominated commodities as a hedge against inflation.
The bottom line is that I think this lack of fundamental value is waht makes the stuff so volatile and easily gamed.
I just dont get (and please satisfy my ignorance if thats where im speaking from) why we would /depend/ on gold as a store of value, when its so impossible to /set a value/ for it.
And what's to stop them?? Nancy Pelosi's dream come true is an open checkbook and Obama's letting her buy a box of new pens to start writing checks.
Buy gold on dips.
Isn't it just a little bit telling that everyone on this post, save the author, is bullish gold?
I think that if you were in gold the last year you were smart. I think that if you were in cash you were smart. I think that with the mixed economic data coming out gold looks less certain. If the economic data coninues to be mixed. Then perhaps the economic data get's consistent (here I mean positive) an investment in gold today doesn't looks so good.
However, if you think that the world is going into a death spiral then gold is good.
The interestign thing is that I hear the same thing out of the same people: Buy gold, stockpile guns and ammo, get a generator and prepare for civil unrest.
I just don't buy it.
If you live in a country with a FIAT currency then yes gold. If you live a country that you might have to get out of then yes gold. If you live in a country where women don't have property rights (e.g. most of the middle east, india etc) then yes gold.
The deficit is scary. But, the economy is going to turn. When it does, do you want to be in gold with the smart money dumping out of it to go to just about anything else?
Jim Rogers made a pile of money in his day and we all provided the capital. The whole Quantum Fund and the breaking of the Bank of England with Soros! Jim Roger is a great guy! I want to be just like 'em. You don't think that guy, like his mentor Soros, knows how to influence thought patterns.
Lemmings.
On May 04 12:52 PM djc wrote:
> I keep hearing that gold is a 'store of value'. How does that work
> ? How does it store value ?
>
> Theres no way to fundamentally value the stuff, other than gauging
> demand from jewelry or high-conductivity applications where silver
> just isnt good enough. So /who/ values it, and how ? It seems to
> me that with no fundamental means of valuing gold, the big holders
> (read governments) are free to decide the value at any time, in any
> place.
>
> Doesnt the fact that Gold cant be fundamentally valued make it THE
> SAME as a paper currency for all intents and purposes, in that large
> governments can manipulate its supposed value ?
>
> it is pretty stuff, but id prefer to reside in somethign like oil
> or other dollar-denominated commodities as a hedge against inflation.
>
>
> The bottom line is that I think this lack of fundamental value is
> waht makes the stuff so volatile and easily gamed.
>
> I just dont get (and please satisfy my ignorance if thats where im
> speaking from) why we would /depend/ on gold as a store of value,
> when its so impossible to /set a value/ for it.
Gold is MONEY, the main goal is to protect your value.
The US$ will be devaluated by approx. 10%, but when?
Everybody in the world know the US economy is in great danger except Daniel Harrisson and few of their influenced colleagues.
All this mean it is possible the market will be in correction and the Gold shares will be part of the correction. But the value of the Gold it is and will be the best thing for protection.
If the value of the Gold drop, let say $200.00 it is still a peanut compare the next value of Gold.
I which you the best (?) for you and you promoting colleagues.
MM
www.bullionbullscanada...
...There was also a tiny “improvement” in the pending sales of new homes. With U.S. foreclosures and repossessions still rapidly increasing, even with the U.S. banks only listing 1/3rd of these properties for sale, as long as foreclosures and repossessions continue to skyrocket, home sales can increase every month, without the U.S. housing market getting any closer to a bottom.
...Of course, you won't read these obvious facts in the coverage of any U.S. propaganda outlet. They were all too busy gushing about yet another “surprise”. While it's always possible that a small number of so-called “journalists” are actually stupid enough to see these statistics as “good news”, with U.S. propaganda being so absurd and transparent, most of these people are intentionally lying about these numbers.
...Trusting what comes out of the mouth of a U.S. “journalist” is just as foolish as trusting what comes out of the mouth of a U.S. banker, or one of their servants in the U.S. government...
On May 04 07:59 AM JD59 wrote:
> I would say that this analysis will be proven wrong.
Put it this way, No one here is saying sell your house spouse and dog and buy gold or silver. But they are saying that if you are smart, you put a percentage of precious metal in your portfolio, (Physical metal).. Not a lot, but enough to help just in case you are wrong.
I have real estate, annunities, stocks, (not many right now) and most are shorts put in today, but I also have precious metals in the "floor". Not everything, but about 8% of my net worth. I also have a gun for protection, but I did not hire an "Arnold" to be my hero if a bad guy attacks me. I have an insurance for everything you can imagine, my premiums stack up to over $25,000 annually, and I don't mean any that make an investment, I mean to protect my home, business etc.
So... If I am diversified, insured, low debt, and in fact pretty good shape but should financial armageddeon (sp) hit, where is my 'insurance' for that? Precious metals in the floor. Silver rounds that can be used as money, some gold coins for bigger purchases, or to get some silver for daily things, and some numismatics for the longer haul.
Go pick up any economics bood, [start with 101] and find out about spending a little less than you earn, then put it in "SAVINGS", look at the price of gold over the years since we came off the gold standard, and see if that is a livable increase, (I have been doing it for 18 years, and It is up over 6%. THAT is tolerable, and ask ANYONE who has had stocks recently an ask him if he would trade yields.
Hope that helps,, good luck, we are all gonna need it.
Capt Brian
Again Storm is comin'.. Batten down!
On May 04 12:52 PM djc wrote:
> I keep hearing that gold is a 'store of value'. How does that work
> ? How does it store value ?
>
> Theres no way to fundamentally value the stuff, other than gauging
> demand from jewelry or high-conductivity applications where silver
> just isnt good enough. So /who/ values it, and how ? It seems to
> me that with no fundamental means of valuing gold, the big holders
> (read governments) are free to decide the value at any time, in any
> place.
>
> Doesnt the fact that Gold cant be fundamentally valued make it THE
> SAME as a paper currency for all intents and purposes, in that large
> governments can manipulate its supposed value ?
>
> it is pretty stuff, but id prefer to reside in somethign like oil
> or other dollar-denominated commodities as a hedge against inflation.
>
>
> The bottom line is that I think this lack of fundamental value is
> waht makes the stuff so volatile and easily gamed.
>
> I just dont get (and please satisfy my ignorance if thats where im
> speaking from) why we would /depend/ on gold as a store of value,
> when its so impossible to /set a value/ for it.
Obamma has created a paradise and I just don't recognize it I guess. Good luck
Capt is not gonna stand down on his watch of the coming financial storm, IN fact I believe the eye has passed, and the winds are turning again to increase, watch out
On May 04 01:49 PM HardwoodFlooring wrote:
> If there was ever a time for $9000 gold the last year was it. All
> the stars were aligned for gold to go through the roof. You had the
> smart money front running the equity blow-up with a commodity run.
> You had the equity blow up. You had the relief program in late fall.
> All of it spelled out for a gold run.
>
> Isn't it just a little bit telling that everyone on this post, save
> the author, is bullish gold?
>
> I think that if you were in gold the last year you were smart. I
> think that if you were in cash you were smart. I think that with
> the mixed economic data coming out gold looks less certain. If the
> economic data coninues to be mixed. Then perhaps the economic data
> get's consistent (here I mean positive) an investment in gold today
> doesn't looks so good.
>
> However, if you think that the world is going into a death spiral
> then gold is good.
>
> The interestign thing is that I hear the same thing out of the same
> people: Buy gold, stockpile guns and ammo, get a generator and prepare
> for civil unrest.
>
> I just don't buy it.
>
> If you live in a country with a FIAT currency then yes gold. If you
> live a country that you might have to get out of then yes gold. If
> you live in a country where women don't have property rights (e.g.
> most of the middle east, india etc) then yes gold.
>
> The deficit is scary. But, the economy is going to turn. When it
> does, do you want to be in gold with the smart money dumping out
> of it to go to just about anything else?
Gold, among other things, is a confidence model. I'm glad to hear gold going to $450. Must mean the economy is going to be repaired and debt/spending will be under control. I don't think the author wants to imagine what the conditions in his neighbor are when gold sits above $2,000.
On May 04 08:20 PM capt Brian wrote:
> I really wish you were right, I would gladly dump my guns ammo gold
> silver and freeze dried food in the river, but not ready to do that
> JUST yet, but I pray you are correct..
>
> Obamma has created a paradise and I just don't recognize it I guess.
> Good luck
>
> Capt is not gonna stand down on his watch of the coming financial
> storm, IN fact I believe the eye has passed, and the winds are turning
> again to increase, watch out
you can value gold at a basic level by the cost of exploring, developing, digging andf refining to come up with a break even price and then add basic 15% ROE to reach a floor value. Right now my guess is $500 an ounce. HOWEVER, the easy finds of easy gold are mostly gone so the costs to get wahtever the big bang left us is gettign harder and harder. Add environmental rules and I see base price going to $1,000 in next 5 years. There is a true demand for gold, for jewerly ( tell your wife, girlfriend you got her a silver necklace because it is just as nice as gold and see what response you get. There is also true industrial demand, though small compared to jewerly. Gold will always be a rare metal and get rarer in future. Not sure what will happen in next year, but over next 5-10 yrs going no where but up.
Rick
On May 04 12:52 PM djc wrote:
> I keep hearing that gold is a 'store of value'. How does that work
> ? How does it store value ?
>
> Theres no way to fundamentally value the stuff, other than gauging
> demand from jewelry or high-conductivity applications where silver
> just isnt good enough. So /who/ values it, and how ? It seems to
> me that with no fundamental means of valuing gold, the big holders
> (read governments) are free to decide the value at any time, in any
> place.
>
> Doesnt the fact that Gold cant be fundamentally valued make it THE
> SAME as a paper currency for all intents and purposes, in that large
> governments can manipulate its supposed value ?
>
> it is pretty stuff, but id prefer to reside in somethign like oil
> or other dollar-denominated commodities as a hedge against inflation.
>
>
> The bottom line is that I think this lack of fundamental value is
> waht makes the stuff so volatile and easily gamed.
>
> I just dont get (and please satisfy my ignorance if thats where im
> speaking from) why we would /depend/ on gold as a store of value,
> when its so impossible to /set a value/ for it.
I know, they aren't investors.
1) equities are back
2) shorts have no money and scared to go to gold
3) no more buyers...you are either a goldbug or not and goldbugs already are all in
4) crude is back as the benchmark. China doesn't want gold, they want oil. Their manufacturing economy runs on crude not on gold.
but you can never ignore the last reason:
5) US Government/world central bankers want it that way
only lacking in common sense it's madnesss! If this country
had a decent educational system, the average person on the
street would have no problem comprehending that fact!
The "big bailout packages" you speak of will gorge the markets
with a continued superficial rally which could well extend past this summer into late fall, but will offer nothing of substance to an economy fundamentally weak!
It should be obvious that only production and savings produce an
economy inclined to wealth formation. I agree that the extra
liquidity injected into the economy has not yet reached the vast
majority of consumers and small business people, those on the
bottom of the "pecking" order economically. As the result, we will
continue no doubt to experience severe deflation for quite some
time to come. This cycle will be helped along with the banking
system's credit lending hesitancy and continued deleveraging in
all areas of financial investment and debt obligations.
Gold even in a raging bull market is bound to have periods of sharp
if not mild corrections and is no doubt due for such a period after
today's strong uptrend over $902.00 or so. An upswing in this area
of the markets will surely follow. Of course only time will tell as
nothing in life's cycles is written in stone; but some things do seem
to repeat, especially the very things we don't seem to learn!
The reason this country was taken off the gold standard was the
result of Mr. Nixon's decision to do so in response to the French
government under De Gaulle's insisting upon our physical gold
for their American Dollars! To have executed those requests
would have exhausted our physical gold reserves! It had nothing
to do with the "economy's then booming growth", though a gold
standard does put necessary restraints in place and maintains discipline that prevents excess inflation and devaluation of the
dollar.
Such a shame it is that in what claims to be a modern democracy
there is such an ignorance of the truth of all its history by such a
large segment of even the "educated" population!
In your spare time you might consider reading some of the works
of Jerome Smith, Ludwig Van Mises, and Lazlo Hazlitt for starters.
Enjoy!
EDT
Chicago, Illinois
Where do you get your info guy? By the way, hyperinflation always occurs when an economy is performing poorly, not well. Gold has put in a nice base at 865 with potential for 850...
Lets take a look at a few more bullish facts:
1. Easing to the tune of 2T and more to come
2. CRB index at an extreme low
3. China wants to continue to finance our debt, thats why the 10 yr has shot up over, LMFAO...
4. More cash ever in print mode
If you want to sell your gold I will gladly take it off your hands
In regards to our government...they cannot control gold prices forever...it is a currency, will be treated as one again...per China and Russia; both of which want gold included in the IMF's SDR.
Yep, stocks are back alright....until Thursday when stress tests are announced..probably wont be until next month, so more changes can be made...hell, give me trillions, Im sure I can make 2% and change my accounting methods to show a much greater return...
On May 05 01:47 AM Yoon Kim wrote:
> Gold is losing luster because:
>
> 1) equities are back
> 2) shorts have no money and scared to go to gold
> 3) no more buyers...you are either a goldbug or not and goldbugs
> already are all in
> 4) crude is back as the benchmark. China doesn't want gold, they
> want oil. Their manufacturing economy runs on crude not on gold.
>
>
> but you can never ignore the last reason:
> 5) US Government/world central bankers want it that way
Thanks for your considered - and balanced - analysis though.
On May 05 01:56 AM Erick Tippett wrote:
> No economy can ever be "stimulated" by consumption and increased
> debt to pay down previously incurred debt, it's not
> only lacking in common sense it's madnesss! If this country
> had a decent educational system, the average person on the
> street would have no problem comprehending that fact!
>
> The "big bailout packages" you speak of will gorge the markets <br/>with
> a continued superficial rally which could well extend past this summer
> into late fall, but will offer nothing of substance to an economy
> fundamentally weak!
>
> It should be obvious that only production and savings produce an
>
> economy inclined to wealth formation. I agree that the extra
> liquidity injected into the economy has not yet reached the vast
>
> majority of consumers and small business people, those on the
> bottom of the "pecking" order economically. As the result, we will
>
> continue no doubt to experience severe deflation for quite some<br/>time
> to come. This cycle will be helped along with the banking
> system's credit lending hesitancy and continued deleveraging in<br/>all
> areas of financial investment and debt obligations.
>
> Gold even in a raging bull market is bound to have periods of sharp
>
> if not mild corrections and is no doubt due for such a period after
>
> today's strong uptrend over $902.00 or so. An upswing in this area
>
> of the markets will surely follow. Of course only time will tell
> as
> nothing in life's cycles is written in stone; but some things do
> seem
> to repeat, especially the very things we don't seem to learn! <br/>
>
> The reason this country was taken off the gold standard was the<br/>result
> of Mr. Nixon's decision to do so in response to the French
> government under De Gaulle's insisting upon our physical gold
> for their American Dollars! To have executed those requests
> would have exhausted our physical gold reserves! It had nothing<br/>to
> do with the "economy's then booming growth", though a gold
> standard does put necessary restraints in place and maintains discipline
> that prevents excess inflation and devaluation of the
> dollar.
>
> Such a shame it is that in what claims to be a modern democracy<br/>there
> is such an ignorance of the truth of all its history by such a<br/>large
> segment of even the "educated" population!
>
> In your spare time you might consider reading some of the works<br/>of
> Jerome Smith, Ludwig Van Mises, and Lazlo Hazlitt for starters.<br/>
>
> Enjoy!
>
> EDT
> Chicago, Illinois
Umm, no. Roosevelt got us off the gold standard domestically because it allowed him to cause 67% inflation overnight- in other words, he inflated us out of the depths of the depression- most of the fundamentals hadn't changed however and the markets took another 20 years to return to there 1925 (pre-bubble) levels sustainably.
Nixon took us off gold internationally (declaring Force Majeur) because the US couldn't simultaneously afford the Great Society programs and the Vietnam war. This was causing unnatural downward pressure on the price of gold and the French were threatening to convert their dollars for gold- which would have caused massive deflation. It had nothing to do with the economy's then-booming growth-- unless of course you considered the price controls he later imposed another effort to control "then-booming growth."
Also, China's past purchases doesn't tell us about future purchases. Do you think China likes to buy gold at $1000/oz? Why do you think China has been accumulating gold in secret but now all of sudden wants the world to know?
For western countries, it makes sense to sell gold when prices are relatively high.
When worse comes to worst, US can always send in the military to raid a foreign country's commodity reserves to back up our currency. Plenty of "bad" governments in Africa that need "liberation".
On May 05 07:41 AM dollar bull**** wrote:
> Do you know what your are talking about? China has added 75% more
> gold to their holdings since 2003...
>
> In regards to our government...they cannot control gold prices forever...it
> is a currency, will be treated as one again...per China and Russia;
> both of which want gold included in the IMF's SDR.
>
> Yep, stocks are back alright....until Thursday when stress tests
> are announced..probably wont be until next month, so more changes
> can be made...hell, give me trillions, Im sure I can make 2% and
> change my accounting methods to show a much greater return...
You may want to read some authors critical of fiat currencies. Mises.org has many.
While the price of gold is set in the margins (with 1-2% of the supply trading hands), I would expect it to fluxuate wildly.
But, the price of gold is set more and more by increasing demand as a result of currency devaluation (globally) and nations (like China) increasing reserves (I wonder, wonder why?).
It is possible for an item to be both an insurance policy and an investment. And don't forget that sometimes it is the insurance policy you want, not the investment.
Hold gold...hold it tight.
You may want to read some authors critical of fiat currencies. Mises.org has many.
While the price of gold is set in the margins (with 1-2% of the supply trading hands), I would expect it to fluxuate wildly.
But, the price of gold is set more and more by increasing demand as a result of currency devaluation (globally) and nations (like China) increasing reserves (I wonder, wonder why?).
It is possible for an item to be both an insurance policy and an investment. And don't forget that sometimes it is the insurance policy you want, not the investment.
Hold gold...hold it tight.
A: You can only Ponzi fiat currencies.
Now you went and did it!
You pissed off the GoldBuggers by telling them the truth!
Sure, you hear them grumbling "But, but, but what about inflation...?"
There is no inflation.
There is DEFLATION.
Who in their right mind holds gold in times of deflation?
Oh....I forgot--Goldbuggers!
Case in point.
You can print all the money you want but unless consumers demand the need for it other than what government dictates, you get no growth.
Thanks, William Jennings Bryan, for that little bit of revisionist history. When FDR raped us of our gold in 1933, I forgot that the economy was "then-booming". Gold-backed currency restricted the government's power to manipulate and tax its fiefs-er, citizens. When the 16th Amendment proved to be insufficient to defraud Americans of their wealth, inflation was re-invented by the Keynes-worshipers as a better means to redistribute wealth from the proletariat-er, citizens- to its rightful owners (the government and banksters, of course.) Which of these limitations placed on growth in a gold-backed, naturally deflationary society was a BAD thing?
We couldn't deficit spend ad infinitum.
Prices dropped year over year as a result of technological and productivity advances, as well as natural deflation (GDP growing much faster than money supply).
Interest rates were stable, low, and real.
Housing prices were essentially flat.
Savings/investments did not have to earn 5-10% to stay at par.
Mankind was NOT crucifed on a cross of gold, as your proxy said so garishly 100 years ago. America is instead being sacrificed to the Masters of the Universe... the irony being with a trash currency labeled "In God We Trust".
In Hot Richard Land, deflation is a good thing. Because Hot Richard is a ruler that lives in reality.
On May 05 01:56 AM Erick Tippett wrote:
> No economy can ever be "stimulated" by consumption and increased
> debt to pay down previously incurred debt, it's not
> only lacking in common sense it's madnesss! If this country
> had a decent educational system, the average person on the
> street would have no problem comprehending that fact!
>
> The "big bailout packages" you speak of will gorge the markets <br/>with
> a continued superficial rally which could well extend past this summer
> into late fall, but will offer nothing of substance to an economy
> fundamentally weak!
>
> It should be obvious that only production and savings produce an
>
> economy inclined to wealth formation. I agree that the extra<br/>liquidity
> injected into the economy has not yet reached the vast
> majority of consumers and small business people, those on the<br/>bottom
> of the "pecking" order economically. As the result, we will
> continue no doubt to experience severe deflation for quite some<br/>time
> to come. This cycle will be helped along with the banking
> system's credit lending hesitancy and continued deleveraging in<br/>all
> areas of financial investment and debt obligations.
>
> Gold even in a raging bull market is bound to have periods of sharp
>
> if not mild corrections and is no doubt due for such a period after
>
> today's strong uptrend over $902.00 or so. An upswing in this area
>
> of the markets will surely follow. Of course only time will tell
> as
> nothing in life's cycles is written in stone; but some things do
> seem
> to repeat, especially the very things we don't seem to learn! <br/>
>
> The reason this country was taken off the gold standard was the<br/>result
> of Mr. Nixon's decision to do so in response to the French
> government under De Gaulle's insisting upon our physical gold
> for their American Dollars! To have executed those requests
> would have exhausted our physical gold reserves! It had nothing
>
> to do with the "economy's then booming growth", though a gold<br/>standard
> does put necessary restraints in place and maintains discipline that
> prevents excess inflation and devaluation of the
> dollar.
>
> Such a shame it is that in what claims to be a modern democracy<br/>there
> is such an ignorance of the truth of all its history by such a<br/>large
> segment of even the "educated" population!
>
> In your spare time you might consider reading some of the works<br/>of
> Jerome Smith, Ludwig Van Mises, and Lazlo Hazlitt for starters.<br/>
>
> Enjoy!
>
> EDT
> Chicago, Illinois
Internet is just a medium and not the content, so they can dish out more bull(WSJ, CNBC's cramer, celebrity news as headlines, swine flu news over stress test analysis) to obfuscate the truth (real unemployment rate, TARP allocations, Goldman Sach's DMM/SLP). I think internet saved some what involved investors such as SeekingAlpha readers, but majority of Americans use internet for entertainment.
On May 09 02:38 AM andypandy wrote:
>However, I think they let the internet
> get out of control. What is different this time around? I think
> communication via the internet saves us.
I did not realize that Treasury prices were declining though which they would be if they were "booming".
But then, you did not define Treasurys. 2 yr thru 30 yr? or are you referring to T-Bills?
With Possibility that the Boston Globe goes bellyup, raising a hue and cry on everything is going to be the Order of the day for the NYT.
Fed's Gold Stock is closer to 262 Million oz. if you believe the Fed.
It doesn't matter how this move ends, as long as you have made tons of dough.
On May 04 07:53 AM lark wrote:
> Do you think this is a cheap market? no way.