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Maybe gold isn't a commodity after all, Jeff Opdyke figures. Otherwise, why hasn't its price...
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Saturday, August 21, 2010, 8:30 AM ETMaybe gold isn't a commodity after all, Jeff Opdyke figures. Otherwise, why hasn't its price dropped as inflation numbers have grown tepid? No, data show it mirrors the dollar, making it more of a currency play than anything else.
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"Preventing Your Government From Stealing Your Gold"
www.bullionbullscanada...
Mahatma Ghandi punctured the balloon of the mighty British Empire through organized self interest.
Eventually when the dollar starts to seriously devalue gold will not drop along with it, it will rise. The relationship is a mindset, but fundamentally, as we QE to infinity (than you Jim Sinclair) there will come a time when people wise up. The dollar is not what it appears.
Four quarters from 1964 can be sold for about $15, so in 37 years the dollar's purchasing power has dropped by 93%. This will occur again, but it will be a time period of years, not decades. As in the late 70's it will be "stuff" that people will trust in, not dollars, and gold is at the top of the heap of "stuff."
I responded that it might be a good idea, but only if he buys his several thousand dollars in nickels.
Yes, in 1964 quarters, dimes, half dollars, and silver dollars all contained 90% silver. They were "real." Politicians could not fabricate new silver out of thin air as they do with dollars in absurd quantities. That our four cupro-nickel quarters buys only 7% of the quarters of 1964 is exactly the point.
So why did I tell Doc to keep cash in nickels? Because nickels are 75% copper and 25% nickel. In 2007-2008 at one time a nickle was worth more than a nickel (if you melted it, separated and sold the metals).
With our current deficit, current debt, with Fannie Mae and Freddie Mac 5 trillion in the hole, with Social Security and Medicare vastly unfunded do you not think that our dollar will drop in value against other currencies eventually?
Well, if not, a thousand dollars in nickels is still worth $1000. But if the dollar dropped in value by 50% nickels would disappear from banks. They will likely be replaced by plated steel, or plated zinc (as our copper pennies have done).
Should we truly move into a dollar currency crisis the dollar could drop (as it did in 37 years) to 7% purchasing power--thought this could happen in a year as it did in the Weimar Republic. If so a pound of copper will rise to ~$51 dollars. The nickel content also will rise in the same manner. Now it is illegal (new law 2007) to melt or export nickles, but if you raised chickens and the dollar dropped 97% in a year what would you want--a $20 bill (doomed to possibly drop in value another 97% over the next year) or a handful of nickels? Think about it.
By the way, laugh if you wish about a major currency debasement of 1964 if you missed that one, but did you miss a major US currency debasement in 1982 when our pennies went from copper to 99.75% zinc. Why? Today zinc is worth $0.95/lb, copper is worth $3.35/lb--need I say more.
America is like a teenager in debt with a dozen credit cards, and card L, is paying on cards a,b,c,d... The only difference with a teenager is that she knows she is in deep trouble--our politicians think that there is no problem and that this can continue to infinity.
Look in your wallet--imagine a $20 bill buying a single loaf of bread. Seems far fetched? Simply do some math, or go to usdebtclock dot org.
Positions held: Very large bottle filled with nickels.
We're holding nickels too.
Gold coins.
Gold has always been a currency.
Gold's commodity function increased with the industrial revolution and discoveries of it's usefulness in everything from electronics to dental crowns to shielding spacecraft and astronauts from gamma radiation.
Gold is still Gold, and one of the shrinking number of hedges against Big Brother.
"In a move applauded by some local Muslims, the state government of Kelantan said it was introducing a new monetary system featuring standardised gold and silver coins based on the traditional dinar and dirham coins once used by the Ottoman Empire."
blogs.ft.com/beyond-br.../