Gold hits record high on debt fears and chance of more Fed stimulus

I like your phrase "metal mysticism".

Historically gold and silver, copper (the precious metal Roman coins were made of) and jewels have been the most durable convertible assets that existed. Portable, concealable, easy to transport, nearly universally fungible and with value insured by natural scarcity precious metals are a unique store of wealth.

There are better stores of wealth and more convertible instruments but national borders, institutions and land boundaries and titles can all change with little notice. Leaving paper money and land as different and often inferior assets.

Metals will have unique value until something else can provide the same economic utility that metals can.

I can't even imagine what that might be.

 

I would be cautious if I were you. You could be misreading the information you have received.

What if banks were buying gold for some other reason than merely because it was likely to increase in value. Like maybe they are buying it as a hedge, or because it is the least likely asset to lose half it's value, or because there simply is nothing else that isn't already overpriced, or because they expect the institutions that print money or bonds to be at risk of collapse or default. Or they fear hyperinflation.

And "technically speaking", nobody can predict the future, or the future price of anything.

Banks worldwide have been known to buy a LOT of really worthless assets in the last decade. Gold may just be their next boondoggle. Esp if they don't take delivery.

 

Oh, that was for Landru Guide Us. I think most central banks are a total waste of time.

But it is interesting that they are accumulating gold. That cannot bode well for the immediate future as gold is a haven for troubled times.

 

Let us also not forget inflation.

Since the last big boom in gold/silver - a 1980 US dollar is now worth about $2.50-$2.75 (depending on how you measure it).

Gold was over $800 in 1980 - that is about $2,000 in today's dollars (today it is just under $1,600).

And silver was just under $50 in 1980 - that is about $125 in today's dollars (today it is worth just over $39).

How many things do you know that are worth roughly 20% and 70% less (respectively) then they were 31 years ago?


I am NOT saying that is a reason to buy them...I am just sayin....

 

What that tell us is if you bought gold in 1980, even now is your investment has not caught up with inflation.

 

Anyone that did that with anything but the tinniest of fractions of their income, imo, did/does not know what they are doing when it comes to gold/silver.

It is a safe haven - not a blue chip stock. You don't buy and hold it.

You buy when inflation/currency uncertainty is rising.

You sell when it is falling/over.

And right now - it is definitely rising.

And Bernanke's QE3 comments the other day just accelerated it.

 

I'm not sure what you mean by "safe haven". I usually don't think of a safe have as something that can lose over 50% of its value in a year.

The problem is knowing when it will go up or down.

 

'Safe' is obviously a relative term.

Same problem with every investment that can make you a lot of money, fairly quickly - RISK.

Especially with gold and ESPECIALLY with silver. You have to keep your eyes and ears open and know when to get out.

Investing is for people that are prepared to take the risks and to spend the time and energy required to lessen those risks.

If you are not, don't.


At least that is what I think.

 

And btw, the DOW lost almost 50% of it's value in a year back in '08/'09.

http://www.theglobeandmail.com/globe-investor/markets/indexes/chart/?q=djia-I

 

And btw, the DOW lost almost 50% of it's value in a year back in '08/'09.

http://www.theglobeandmail.com/globe-investor/markets/indexes/chart/?q=djia-I

And the S&P 500 lost more then 50% of it's value in '08/'09.

http://www.theglobeandmail.com/globe-investor/markets/indexes/chart/?q=SPX-I

 

Gold is considered a safe haven when stocks, currencies and other investments are at risk of losing price. Gold has an inverse relationship to the dollar in most cases.

 

Nope, it's not that simple. It's like saying T-bills have an inverse to stocks. On the surface it appears that way, but analsys shows otherwise.

The complexity comes from the fact that when there is a lot of growth and lot of disposable income, people not only invest in stocks, but also in bonds and also in commodities. So there is a general rise. The inverse relationship only exists in the middle realm when either stocks and bond are doing badly, but not that badly or doing well or not that well.

Fairly complex economic analyses exist for this, and they are daunting.

 

idiocy.

Since the founding of the Fed the dollar has lost 97% of it's value while gold has increased in value 7500%.

THAT Is an inverse relationship if there ever was one.

Now just for (*)(*)(*)(*)s and grins lets check silver:

According to this source silver was priced at .65/oz in 1920, compared to $38.71 today. That is a 6000% increase in the price of silver over a 90 year span while the value of the dollar fell 97%.

Another inverse relationship. Uncanny.

http://en.wikipedia.org/wiki/Silver_as_an_investment

 

I agree there is a contrary relationship.

But I would personally not call something a "safe haven" when you can lose a lot of your principal quickly if you don't time things correctly.

 

Who said holding cash over the long term was a good investment?

If you are looking long term, stocks are the best bet. The Dow in 1913 was at about 80. It's 12,400 now. 15,400% return. But I wouldn't call stocks a "safe haven" either. http://www.scaruffi.com/politics/dow.html

 

Before '07 - I would have definitely agreed with you.

But not since '07.

Since Aug. '07, the DOW has dropped about 15%.

Since Aug. '07, gold has gone up over 140%. Silver over 300%.

http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm

http://silverprice.org/silver-price-history.html

http://www.goldprice.org/gold-price-history.html


Until the thread of inflation and/or monetary instability is over - gold and silver (imo) will generally continue to far outpace the DOW.

 

This is a classic bubble.

 

Agreed. I didn't say it WAS a safe haven, only that that is how it is treated.

The other safe havens are US dollars and US debt (bonds), also not what I call quality investment opportunities. Esp since our debt is getting downgraded almost daily now.

Copper, wheat and corn are today's hot options. Gold and silver are way over priced.

 

Just curious, how's your portfolio performed over the years?

 

extremely well since Sept of 2007. Volatility = opportunity.

 

Definitely. I made a little bit off of Citigroup last year.

What kind of investment vehicles have you been relying on mostly?

 

Not to me it isn't - not even close.

A classic bubble means 'everyone' owns it and/or is talking about it.

Right now, only a tiny fraction of people own gold. And, except for when it breaks a record, gold is almost never talked about in the media - whereas tech stocks and real estate were spoken of daily in the media during the dot.com/housing booms.

And the fundamental reason that people buy gold - as Ben Bernanke said himself - is economic uncertainty (and currency/inflation instability).

And I see zero evidence that that is on the wane anytime soon.

 

And gold set yet another record yesterday (and silver shot up also).

And the underlying reasons for gold/silver price rises are (as Ben Bernanke himself stated) economic uncertainty and inflation/monetary instability.

Rising unemployment and a stalled housing market despite huge government monetary inputs PLUS government default concerns points to great uncertainty and instability for the foreseeable future.

I put it to you that gold and silver are way under priced.


So you think that gold at $1600 and silver at $40 are 'way over priced'?

We shall see.

 

$5000 gold and $1000 silver!

Keep printing those greenbacks you morons!

 

Watch it crash like it did back in 1980 and then go cry to someone other than those of us who warned about this.