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

Gold closed at a record high Tuesday, surpassing its previous high set in May, as some investors ran back to the classic haven amid global financial markets’ latest turmoil.

The metal also got a boost as the minutes of the Federal Reserve’s last meeting showed some policymakers were willing to push for a new monetary stimulus program if the economy failed to show significant job growth.

That could mean a resumption of the Fed’s bond-buying program, which critics say has helped fuel inflation, particularly in commodities. Fears of higher inflation often drive more investors to gold as a hedge.

http://latimesblogs.latimes.com/mon...er-euro-debt-crisis-ceiling-ireland-junk.html

 

Gold has been hitting record highs for the past decade now. Nothing out of the ordinary here.

 

Gold is becoming, imo, extremely resilient.



Anyone that has a portfolio and does not own at least some gold (and silver) does, imo, not understand what is happening in the financial world.

Or has a portfolio manager that doesn't and/or has a corrupt agenda.

I don't care if your portfolio 'only' contains $100 - some of it better be in gold/silver; in my opinion.

 

The value of almost anything that is NOT truly scarce (INCLUDING gold) will FLUCTUATE, with varying levels of stability.

Gold tends to climb up in value and then crash, just like most commodities which are invested in (such as other precious metals, stocks, etc.). This is rather basic common knowledge.

Gold CRASHED around 1981, and it will crash in a few (or maybe couple) years. And then many of it's investors will lose everything.

 

I don't play commodities markets, but the old adage "buy low sell high" is time honored advice. And gold ain't low now.

 

Yes, and based on time charts of real value, if gold behaves anything like it did after the ~1980 crash, it's real value will gradually decline for several, in fact many, years. After it crashes again, it will therefore be unfavorable to invest in it until many years afterwards. Probably the year 2025 or in that rough ballpark.

 

Certainly a possibility.

I knew lots of folks who thought gold was a sure bet in '79 and they were in the bag for decades.

In fact, on an inflation adjusted level, I don't think that gold has *still* reached its 1980 level.

 

Gold crashed in 1980/81 mostly because (imo) the semi-runaway inflation that was in America was finally brought under control by the highest prime interest rates in U.S. history (to my knowledge). That and the fact that gold prices had gone parabolic. Virtually nothing that rises on a parabolic rate does not end up crashing down soon afterwards.
But the trigger for that crash (among other things) was the ending of huge inflation in America.

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

http://www.wsjprimerate.us/wall_street_journal_prime_rate_history.htm

http://www.usinflationcalculator.com/inflation/historical-inflation-rates/

It stated it right in the article what is common knowledge about gold:

'Fears of higher inflation often drive more investors to gold as a hedge.'

As long as the fear of inflation remains in America - gold WILL continue to climb (overall).

And those fears are not going away anytime soon.

Additionally, if the dollar ever loses it's reserve currency status - gold should REALLY skyrocket; in my opinion.



I personally believe that as long as the Fed keeps rates very low - buy/hold gold/silver.

But as soon as the Fed starts aggressively raising interest rates and/or is talking openly about fighting inflation above all else - then sell your gold/silver...because it will probably go way down.

NOTE: that is just my personal opinion. I am not quoting anyone else that I am aware of.

 

Value of anything is relative. That is IMO the number one rule of economics. When we talk about "real" (i.e. inflation adjusted) value, we're really talking about the relative value of something, with respect to all other things which are being bought and sold within the whole society. Just had to clear my thoughts on that up. (On an inflation adjusted level, gold would have to be more than $2,000 per ounce to be at it's 1980 level.)

All this being said, of course every market increasing it's relative ("real") value is unsustainable. There can't ever be anything with an infinite value because value is relative; i.e. in proportion to all other things with economic value in a society. Eventually, the value can't go up.

Does this mean the value can stay stable? No; in the case of, specifically, investments, value increases in the first place because people are buying it and then selling it for a higher price than they bought it for, quite simply. The only way for the value to stay the same would be if people bought it and never sold it, or if they did, sold it at the same price as they bought it for.

What realistically happens is that people panic and sell it as quickly as possible because of the expected future-which is the value of what they possess quickly decreasing. Such is exactly what happens, largely because of the supply of available said things being being pumped quickly into the market as a result of said panic.

Even if the said things of value are not solely investments but are actually desired by the people who own them (such as old cars and collector's items), values of things being relative still makes it impossible to avoid the value of things decreasing, or at least not increasing, over time (by the same reasoning described earlier). The values for these things won't necessarily crash, but will hit a plateau inevitably.

Thus, the crash of each and every investment, and, more generally, the crash OR the plateau or decline of each and every commodity, is inevitable.

 

Very good points. In my previous post I mention why I think even without those factors, the real value of any commodity must either plateau or gradually decrease or crash, eventually. One of those three possibilities. (As far as investments specifically, I'd say crashing is an inevitability).

 

Thanks and I agree that gold/silver will (imo) crash eventually.

I am DEFINITELY NOT looking at it as a long-term, buy-and-hold strategy.



BTW - this is for everyone who reads this and does not know (not that I am an expert myself) - I mentioned silver.

It is INCREDIBLY volatile - far more so then gold. Many investors refer to it as a 'roller coaster'.

So, personally, I would keep an especially keen lookout for the Fed's chit chat about inflation and what it does with it's rates if I were to own a lot of silver.
Because, as we saw earlier this year, she can go up fast and down FAST.
Just last week it went up almost 10% in just 3 days - after going down about 10% in 3 days two weeks earlier.

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

 

In uncertain financial times there is NOTHING like a make believe metal.

 

The trick is unloading it before most folks think the times have gotten more certain.

 

The trick is unloading before people come to their senses. We all know gold is going to crater and hit $400/oz. What causes people to come to their senses is anyone's guess.

 

As I was saying yesterday - right now silver is up over 6 3/4% just so far today!

Roller coaster indeed.

 

You would be far better off over the next 48 months to liquidate all your gold and silver and buy copper instead.

 

Why copper?

Personally, I had to have a commodity other then a precious metal - it would be sugar...but I am not expert.

 

Copper is a precious metal, but it is also a highly in demand industrial metal (like silver), and it's demand is going to skyrocket since it's use as an antibacterial serface has been proven to eliminate 90% of bacteria from hospital surfaces:

http://www.google.com/#hl=en&xhr=t&...gc.r_pw.&fp=5d435bc05725fe97&biw=1280&bih=777

Copper began rising the day these stories broke, while gold and silver may well be a bubble already.

 

To my knowledge, copper is not an official precious metal - though it maybe one day.

I don't know about the hospital thing - but you maybe right.

As I typed above, I do not believe silver/gold are in a bubble because they go up with inflation/inflation fears.
And those fears have not dissipated yet.

Bubbles grow so long as new money is poured into it. Once the money stops - the bubble collapses.
That is why the housing bubble had to explode. There was just so many new home owners that could be found to buy a house.
But gold/silver are different (imo). Anyone can own them - though not anyone can buy a house.
Someone that has $100 in the bank can buy gold/silver instead if they feel the currency is devaluing too fast as a hedge against inflation.

And bubbles also (imo) are when almost everyone you know has bought into it or is talking about it.
Most people I know are not talking about gold/silver - and certainly do not own much. Most own none.
If you watch the news and it is rarely a story unto itself - but during the dot.com boom or the housing boom there were stories almost daily about them.
Gold/silver are so easy to buy and hold (at least now they are). If inflation and currency devaluation fears continue, more and more money will probably go into gold/silver.
And with so few people actually doing so now - the relative sky is the limit.

Yes, once these fears end - so will the gold/silver boom (imo).

But so long as central bankers like Bernanke are around and talking about more and more quantitative easing; plus federal governments whose deficits keep rising and more and more countries talking of defaulting...those fears will continue to rise...and gold/silver should rise with them.

 

^^ Pay attention to this guy, folks. He knows what's going on.

 

you have never heard of the copper penny?

First you say that S&G are not in a bubble then you describe the evidence that they are.

Very odd. But they are and the fact that people buy gold when they get nervous is only more reason to call inflated gold prices a bubble.

The proof of course only comes after the prices collapse and then everybody agrees that "YES, THAT was a bubble".

 

So why would owners of cooper sell without taking into consider the (purported) likely rise in value based on knowledge that everybody now has?

Your premise is that sellers are stupid and buyers smart. It's not a good premise.

 

BINGO!

Gold Bugs are a study in confirmation bias. Like casino goers they notice every time they win, and forget all the times they lose.

I never heard a slot machine gambler ever say they ever lost money. Same with gold bugs.

Funny thing: the casinos and gold mongers keep racking in the dough so SOMEBODY's losing.

 

Um..because you never know when it will decrease, so what they do is buy it for a certain amount, then sell it later for higher. When the person who then bought it buys it, they wait for a while and hope it doesn't decrease (much) before they sell it. Etc.

 

Yep -- so in fact it isn't certain that the price will rise, just like any other commodity from pork bellies to tulip bulbs. Nothing special about copper or gold or iridium.

Funny that.