Gold As An Investment?

[Pot Odds RAC 23]

Over $1,600 right now.

[mtdesmoines 3]

Over $1,600 right now.

With the world's reserve currency being debauched by the spend-crazy politicians, gold has only one direction it can go. UP

[ahosang 0]

Over $1,600 right now.

And even though debt deals are supposedly done, the price in USD still rallying

[LongLiveYorke 38]

what types of things could happen to send gold down?

The sudden worldwide realization that gold is nothing more than a metal that is shiny and has very little actual value aside from some niche uses in circuitry...?

[Pot Odds RAC 23]

The sudden worldwide realization that gold is nothing more than a metal that is shiny and has very little actual value aside from some niche uses in circuitry...?

Shhhhhh...

[LongLiveYorke 38]

Shhhhhh...

And what's with all these green pieces of paper that everyone's always passing back and forth in exchange for goods...?

[mtdesmoines 3]

The sudden worldwide realization that gold is nothing more than a metal that is shiny and has very little actual value aside from some niche uses in circuitry...?

LOL @ concept of "sudden worldwide realization" on human-infested Earth

[ahosang 0]

The sudden worldwide realization that gold is nothing more than a metal that is shiny and has very little actual value aside from some niche uses in circuitry...?

And what's with all these green pieces of paper that everyone's always passing back and forth in exchange for goods...?

So, in the last 30 years or so, which of these two worthless items has enjoyed the greater inflation? Inflation in numerical/phyical terms, AND in credibility terms considering the equal initial worthlessness? Which is more likely to be in a bubble? Which has a longer track record as 'honest money'? Which is more desired by oil states in the Gulf? Which is more likely to end up as fuel for a fire in some distant future? Which of the two is used to line the world's most expensive super-yachts? Which would more likely be decoration for a college art student's room in the future? Which is more likely to disappear altogether and be replaced by digital representation(thereby confirming worthlessness)? Which is more likely to hold its purchasing power in 30 years? So how do you see the exchange between the two going in the long run??These and other questions can be asked. The answers are for the reader to decide for themselves, but maybe they can help to make a decision on what to do about investing in gold...

[Pot Odds RAC 23]

So, in the last 30 years or so, which of these two worthless items has enjoyed the greater inflation? Inflation in numerical/phyical terms, AND in credibility terms considering the equal initial worthlessness? Which is more likely to be in a bubble? Which has a longer track record as 'honest money'? Which is more desired by oil states in the Gulf? Which is more likely to end up as fuel for a fire in some distant future? Which of the two is used to line the world's most expensive super-yachts? Which would more likely be decoration for a college art student's room in the future? Which is more likely to disappear altogether and be replaced by digital representation(thereby confirming worthlessness)? Which is more likely to hold its purchasing power in 30 years? So how do you see the exchange between the two going in the long run??These and other questions can be asked. The answers are for the reader to decide for themselves, but maybe they can help to make a decision on what to do about investing in gold...

You're missing his point....but which would you rather have to try and spend in your local grocery store this afternoon - a little under 1/16th of an ounce of gold or a $100 bill?

[ahosang 0]

You're missing his point....but which would you rather have to try and spend in your local grocery store this afternoon - a little under 1/16th of an ounce of gold or a $100 bill?

It was not really an answer to LLY. Just using his posts. He speaks about the two types of money being essentially worthless, which they are. I just use the topic of thread(investment - which is obviously long run) and pose questions about what their exchange rates are likely to be in the long run. Dunno what his point was though, as forum conversations are f*cking difficult, which is why I don't bother with them much these days...Seriously though, yeh paper currency is best in any scenario for grocery shopping. Paper is better as a medium of exchange(spending), gold is better for savings(store of value).

[ahosang 0]

Gold's price has historically been associated as a hedge against inflation. By that standard it is currently an extremely poor investment. The current ratio of gold price/inflation is by far the highest it's ever been. To invest in gold today you would have to believe that the economy will collapse in the near future. You would also have to believe that unlike the great depression and unlike the current recession that this collapse would be inflationary. The only justification to invest in gold is if you think that the government is going to inflate away the deficit. But so far they have not done this. Any reduction of the deficit through increased taxes or spending cuts could be a disaster for gold prices. Maybe irrational demand for gold has created a permanent new plateau, but I certainly wouldn't count on it. This has been said for every other bubble in history. It's quite possible that people will start to realize that things that have inherent value(oil, farmland, rare industrial metals, etc) are truly valuable and move away from government currencies but also away from gold.

Your assertions are in the process of being proved incorrect. During the 'debt deal saga', and in the immediate aftermath, gold soared to new highs despite the spending cuts and revenue committees being announced. Also no intention to introduce inflationary measures was announced. So there was no disaster for gold prices as you suggested.In the last 12 hours, systemic uncertainty gripped Europe as the euro architecture looks strained. Global stock dip follows. Gold takes a dip from record highs in tandem with this plunge. An economic crash is NOT needed(or wanted) for gold to rise, as I stated before, although there are those who are confident that gold would surge after a waiting period in that scenario.I put it to you that the textbook mainstream economics you are following is not able to explain current events regarding gold...

[Don Giovanni 0]

The sudden worldwide realization that gold is nothing more than a metal that is shiny and has very little actual value aside from some niche uses in circuitry...?

this is a common understatement. gold has immense value because of its unique properties, mentioned by Aristotle over 2000 years ago by the way, that make it perfect as a medium of exchange. you need to realize that something being perfect for a medium of exchange (doesn't corrode, scarce, homogeneous, malleable, ect) makes it hugely valuable to humans. its aesthetic and electrical purposes are added bonuses.we know that gold is in fact universally valuable to humans because its been in use as a medium of exchange and other things by every culture who could get it as far back as we can see. this is not some coincidence for people to awake from. gold is indeed much more than a "metal that is shiny"

[LongLiveYorke 38]

this is a common understatement. gold has immense value because of its unique properties, mentioned by Aristotle over 2000 years ago by the way, that make it perfect as a medium of exchange. you need to realize that something being perfect for a medium of exchange (doesn't corrode, scarce, homogeneous, malleable, ect) makes it hugely valuable to humans. its aesthetic and electrical purposes are added bonuses.

But being valuable as a medium for exchange isn't worth as much these days since most transactions are electronic. Gold's present value isn't justified by it's capacity to be molded or to avoid corrosion. If your arguments were true, you would expect it's price to decrease as the use of physical exchange became less necessary.

gold is indeed much more than a "metal that is shiny"

Right. It's "metal that is shiny and can be exchanged for other things," just like money is "paper that is green and can be exchanged for other things." It's only worth as much as someone is willing to give you for it. For some reason, people are willing to pay a lot for it. It's a collective agreement.

[Balloon guy 158]

Right. It's "metal that is shiny and can be exchanged for other things," just like money is "paper that is green and can be exchanged for other things." It's only worth as much as someone is willing to give you for it. For some reason, people are willing to pay a lot for it. It's a collective agreement.

Some money is pink, and other effeminate colors, like in Canada

[mrdannyg 274]

Some money is pink, and other effeminate colors, like in Canada

That's fair, but some is also blue, red and brown, which are cool colours.

[hblask 1]

But being valuable as a medium for exchange isn't worth as much these days since most transactions are electronic. Gold's present value isn't justified by it's capacity to be molded or to avoid corrosion. If your arguments were true, you would expect it's price to decrease as the use of physical exchange became less necessary.

I think you've got the tail wagging the dog here. The paper, or electrons, are valuable because they represent something in the real world. That could be wheat (too bulky, rots), it could be houses (non-standard, non-moveable), cars (break down, not divisible), or any other physical world object. Gold has been the intermediary for all of these, including paper money, for a very long time because of it's physical properties, as DG mentioned above.Without a tie to some real world property, no money is worthwhile, not electronic, not paper, not IOUs. Gold is valuable because a barter system is impractical, so we need something to store value for us. When that something is tied to real world properties, the money system works. When it is not tied to real world properties, it doesn't work.Fiat currency works fine when the amount printed (or generated electronically) represents the real world production of the producer of that money. When that tie breaks down, people will always go back to something that has persistent, convenient real-world properties.

[iZuma 764]

plus, I mean, it's shiny

[mrdannyg 274]

Pretty sure no one is arguing that gold is totally without value, just that either:i) given other mediums of exchange available, its non-intrinsic value does not exceed its intrinsic value, therefore its price should represent its usefulness, or,ii) it does have additional value above its usefulness, but the current price likely reflects a significant amount of the perception of safety, consistency and usefulness which are all being exaggerated by the terror US currency has attached to it these days.Both of those things would contribute to a significant price correction in the future for gold.Personally, I follow the old logic that if a buy is being recommended by your dentist or barber, then it is time to sell. And gold is definitely a dentist recommendation.And that is accounting for the important fact that it is pretty shiny.

[vbnautilus 48]

I can't wait till alchemy comes of age and finally obsoletes this whole gold standard nonsense.

[Pot Odds RAC 23]

What is Gold going to do on Monday?

[ahosang 0]

What is Gold going to do on Monday?

I'd expect the Asian markets to send gold up first thing as investors go long on the weekend developments. Maybe a fall when London market opens due to euro-system fears and liquidation. But it could continue to soar. ECB meeting being held in an hour will show more intention.The bullion seller that I use in the UK - Bullion by Post has just stopped taking orders (never seen this before). I think they would like to see what happens before offering prices; I doubt that they're out of gold, lol.Not sure about when the American markets open, as that downgrade thing might not matter by that time - it is a minor credibility insult. The USTreasuries are still desired, and no serious damage done. It is the system's existence that is of concern, not numerical details within the system.

[ahosang 0]

The important thing is that Monday will be difficult to predict, but by the end of the week, gold should be way up.

[AmScray 355]

Not sure about when the American markets open, as that downgrade thing might not matter by that time - it is a minor credibility insult. The USTreasuries are still desired, and no serious damage done. It is the system's existence that is of concern, not numerical details within the system.

I don't know. I think it might be the bellwether event that we all look back on and identify as the turning point- when the global paradigm shifted away from US monetary supremacy. I mean, world sentiment has already been there for quite some time.S&P has their ratings for sovereign debt on their site. http://goo.gl/BbKJQCountries that have higher ratings than us:Australia (w)Austria (w)Canada (w)Denmark (w)Finland (w)France (w)Germany (w)Guernsey (w)Hong Kong (nw)IOM (w)Liechtenstein (w)Netherlands (w)New Zeland (w)Norway (w)Singapore (nw)Sweden (w)Switzerland (w)UK (w)The US is now rated in the AA range with the following countries:Abu Dhabi (nw)Belgium (w)Chile (nw)China (nw)Israel (+/-)Japan (nw)Kuwait (nw)Qatar (nw)Saudi Arabia (nw)Slovenia (w)Spain (+/-)Taiwan (nw)

[ahosang 0]

I don't know. I think it might be the bellwether event that we all look back on and identify as the turning point- when the global paradigm shifted away from US monetary supremacy. I mean, world sentiment has already been there for quite some time.S&P has their ratings for sovereign debt on their site. http://goo.gl/BbKJQCountries that have higher ratings than us:Australia (w)Austria (w)Canada (w)Denmark (w)Finland (w)France (w)Germany (w)Guernsey (w)Hong Kong (nw)IOM (w)Liechtenstein (w)Netherlands (w)New Zeland (w)Norway (w)Singapore (nw)Sweden (w)Switzerland (w)UK (w)The US is now rated in the AA range with the following countries:Abu Dhabi (nw)Belgium (w)Chile (nw)China (nw)Israel (+/-)Japan (nw)Kuwait (nw)Qatar (nw)Saudi Arabia (nw)Slovenia (w)Spain (+/-)Taiwan (nw)

Maybe you're right. There's some that say it's disastrous and some say it's minor. I guess deep down I feel credibility of the US system is better than the euro-system and there is no other vehicle to take on the role of investment store right now(OK I can think of one - gold, LIKE DUH OBVIOUSLY). Currency basket is not ready to be implemented, financial investments are a no-no in this time, and cash/UST is king right now.But I could be wrong of course, and looking back, maybe exaggerating the irrelevance of the downgrade. I just think that gold gains, but there is no immediate artificial construct to take on the role of US dollar right now. I take your point though that it could just be the catalyst for change. As for the bolded, yeh this has been the case for a while, and its just a testament to the hegemony of the US that it still remains a dollar system.

[hblask 1]

Maybe you're right. There's some that say it's disastrous and some say it's minor. I guess deep down I feel credibility of the US system is better than the euro-system and there is no other vehicle to take on the role of investment store right now(OK I can think of one - gold, LIKE DUH OBVIOUSLY). Currency basket is not ready to be implemented, financial investments are a no-no in this time, and cash/UST is king right now.But I could be wrong of course, and looking back, maybe exaggerating the irrelevance of the downgrade. I just think that gold gains, but there is no immediate artificial construct to take on the role of US dollar right now. I take your point though that it could just be the catalyst for change. As for the bolded, yeh this has been the case for a while, and its just a testament to the hegemony of the US that it still remains a dollar system.

The thing that scares me most about the situation is that the people who predicted the S&L crisis are the same people who predicted the mortgage crisis are the same people who predicting rapid gold price increases are the same people who said this downgrade is coming and that it will get much much worse. I'm not generally pessimistic about the economy, I always believe free people will find a way, but when people with very long histories of being right start making very scary predictions, that's a bit tough to ignore. I'm still convincing myself this will all seem like a blip in 10 years, but I've heard a lot of convincing reasons that is not true.