I always failed to understand why it trades so high… still. And its finally come to the point where I’m shorting it. Can someone tell me why gold is trading 200% higher than in 2005? We are in recession which will get worse in reality, not necessarily in the markets, but isn’t jewelerry like 70-80% of gold demand. Who is buying all this gold? I mean, if I was going to spend $4000 on wedding bands in 2005, I now get 1/2 of that in gold, but in no way am I going to fork out $8000 to get the same thing I would’ve got in 2005. So with declining jewellery demand which should reach rock bottom and the fact that it isn’t a REAL store of value anymore, i.e. it cannot be directly exchanged for x amount of cash, why does it still trade so high? I mean, I am sure there are 10 alternative elements that can be used to replace gold in its industrial uses as well.
Gold is a currency. It’s the oldest currency in the land. One that can’t be replicated without substantial mining effort. What is your take on fiat currencies since the credit bubble burst?
Isn’t gold a currency as much as copper? I mean, I’d say that copper’s uses are far beyond that of gold. Gold is only a currency if it can be exchanged for cash on a relatively fixed basis. I agree that gold can be more of a real currency because of its portability versus copper, but then I propose platinum as a currency. But wait, I’d say that we can use copper much more than platinum as well, and it is much more rare than gold. I just don’t understand why gold’s value remains, but that of platinum and silver decline drastically. Is it because people are suspecting that fiat currency will collapse and that currency will be backed by gold again. Why not silver, why not platinum? Why does an element of little use and quite large abundance have such a high value relative to elements that are used in everything?
Why the disparity between the % platinum decline and gold?
I don’t know, thats what I’m asking.
I think there is a premium on gold because it is more or less universally accepted as a medium of exchange, whereas copper feels more like barter. Therefore there is a premium that comes from knowing that people will accept gold in exchange for currency, whereas if you show up with a boatload of copper, people don’t necessarily know what to do with it. A lot of gold is simply stored in bank vaults with people writing down in a book or database who owns which parts. We don’t necessarily have a system for doing that with copper, though we might have something like it with silver. Historically, gold was valued highly because it was desired, hard to get, and easily portable. Silver was less scarce and useful because some things were cheap enough that it was hard to pay in tiny tiny bits of gold (a bottle of wine was worth less than an ounce of gold, so it was helpful to have some silver). In fact, that’s why pennies were made out of copper. Same principle. I’m not sure what the story is on Platinum. My sense is that maybe it was too scarce to be used on a large scale. Or perhaps it was too easy to confuse platinum with silver.
I dont get the whole gold thing either. I would rather buy a precious metal that has an industrial use.
May it is not that that gold is worth twice as much now as it did back in 2005, but rather that the USD and other currencies are expected to be worth half as much?
MattLikesAnalysis Wrote: ------------------------------------------------------- > Isn’t gold a currency as much as copper? I mean, > I’d say that copper’s uses are far beyond that of > gold. Gold is only a currency if it can be > exchanged for cash on a relatively fixed basis. I > agree that gold can be more of a real currency > because of its portability versus copper, but then > I propose platinum as a currency. But wait, I’d > say that we can use copper much more than platinum > as well, and it is much more rare than gold. I > just don’t understand why gold’s value remains, > but that of platinum and silver decline > drastically. Is it because people are suspecting > that fiat currency will collapse and that currency > will be backed by gold again. Why not silver, why > not platinum? Why does an element of little use > and quite large abundance have such a high value > relative to elements that are used in everything? Gold was used as a currency, at least somewhere in the world, from the beginning of documented human history until the early 1970s. Why? Because it has a lot of moneyish qualities. Gold is scarce, easily transportable, cannot be manipulated by governments wishing to increase spending (without discovering and mining it). It has good electrical properties, it’s used in jewelry, it doesn’t rust, it doesn’t oxidize (under normal circumstances), and it’s very difficult to counterfeit. Why is it worth more now than it was in 2005? What has the money supply done since 2005? I assure you that gold discoveries since 2005 are a fraction of the increase in the U.S. (or global) money supply. In addition to the increase in the number of dollars outstanding, the fiscal irresponsibility that governments are displaying, demonstrate why a sound currency is necessary and it has created a lot more buyers. Why not copper, silver, or platinum? The scarcity of gold next to copper isn’t comparable, estimates of the total gold ever discovered vary, wiki estimates 158,000 tonnes http://en.wikipedia.org/wiki/Gold. Last year alone the U.S. alone mined 1.19MM tonnes of copper. Silver could be a part of a return to a sound currency and may be severely underpriced, but here’s the rub. Silver historically was used for smaller transactions because cutting a piece of gold down past a certain point didn’t make sense. Credit cards and electronic bank accounts could reduce and possibly even eliminate the need for a less scarce precious metal like silver if our currency was ever backed by gold because it would be a simple bookkeeping transaction. This site: http://www.gold-eagle.com/editorials_03/sanders030703.html talks about the historical ratios of gold to silver and also makes the claim that their naturally occurring scarcity is 17.5:1. Maybe silver is severely undervalued or maybe it’s valued the way that it is because it has lost it’s utility as a money. I can only assume that platinum has historically had less utility as a money because it looks so similar to silver. Perhaps if we ever get back to sound money, platinum will be a part of it. If Asian nations (our creditors) think that the government is not behaving responsibly and ever decide against rolling over their short term treasuries, what would happen? We don’t have the money to pay them back, we’d have to print it. It is my understanding that approximately 2/3 of all dollar money balances are oversees. Is it not possible that the citizens would revolt when the price of everything doubled or even tripled? I think it’s highly likely that we will return to a money backed by precious metals at some point in the future. If not, gold still has a number of uses that give it value.
This is just it though. If gold’s value is based on scarcity, than platinum should not have dropped off as much. If gold’s value is based on usefulness, than silver should not have dropped off as much. This shows us that the only reason why gold’s value is still so high is because people invest in it as a currency. Think of how many people you know that are invested in gold and have been touting its necessity in a portfolio for years. Almost everyone I know. Then count how many people hold foreign currencies in their portfolio at all times. I know pretty much none. Do you get what I’m saying? You don’t invest in a currency whose value is propped up just by the fact that you’re invested in it. As of now, it is not a currency. Its value is based on a market, that if not made a currency, will collapse because its not worth $850/oz when it comes to usefulness or scarcity. I think gold is the largest bubble in history because WHAT IF we never go back to the hassle of a commodity backed monetary system, or WHAT IF that commodity is not gold.
MattLikesAnalysis Wrote: ------------------------------------------------------- > This is just it though. If gold’s value is based > on scarcity, than platinum should not have dropped > off as much. If gold’s value is based on > usefulness, than silver should not have dropped > off as much. This shows us that the only reason > why gold’s value is still so high is because > people invest in it as a currency. - Perhaps gold is overvalued or one (maybe both) of the other precious metals are undervalued. Possibly all three. Or maybe the price indicates a premium is being placed on gold because of the historical record. > Think of how many people you know that are > invested in gold and have been touting its > necessity in a portfolio for years. Almost > everyone I know. Then count how many people hold > foreign currencies in their portfolio at all > times. I know pretty much none. Do you get what > I’m saying? > You don’t invest in a currency whose value is > propped up just by the fact that you’re invested > in it. As of now, it is not a currency. Its value > is based on a market, that if not made a currency, > will collapse because its not worth $850/oz when > it comes to usefulness or scarcity. I agree that very few people are directly invested in foreign currencies, but I know a lot more people with international equity exposure than I do that hold gold. That is an indirect foreign currency bet. But to address your original point, gold is being still purchased at $850 per ounce for it’s use value, but if there were suddenly a massive influx of sellers because of fear that gold lost it’s time tested qualities as a store of value the price would definitely drop like a stone. I don’t think anyone would deny this, but I don’t see this happening. > I think gold is the largest bubble in history because WHAT IF > we never go back to the hassle of a commodity > backed monetary system, That’s definitely a possibility and if governments have their way we never will. But, even if we never go back, the possibility of going back will still be there so gold will still be traded at a premium. But, gold and to a lesser extent silver are time tested, throughout history civilizations have always gravitated towards them and if the funny money fiat fails I have no doubt that history will repeat itself. WHAT IF that commodity > is not gold. If we go back to a commodity based system gold will be a part of it. Gold will be the main part of it. Set aside the historical record and think about it from the government’s point of view. The people are no longer accepting their funny money and if they don’t do something about it they will be thrown out of power or worse. What would they go to? Well they have 147MM ounces of gold in the U.S. mint, talk about a vested interest. http://www.usmint.gov/about_the_mint/fun_facts/index.cfm?flash=yes&printer=yes&printer=yes&printer=yes&printer=yes&printer=yes&printer=no&action=fun_facts13
So what you’re saying is that you want to buy some land with me in northern Quebec and Nevada so that when the gold currency comes back, we’ll be able to make the smooth transition from equity analyst to gold miner? 
MattLikesAnalysis Wrote: ------------------------------------------------------- > So what you’re saying is that you want to buy some > land with me in northern Quebec and Nevada so that > when the gold currency comes back, we’ll be able > to make the smooth transition from equity analyst > to gold miner? > > Let’s do it. I’ll bring the beer.
are you guys shorting gold? I think it’s going to jump up… what do you think?
Long term, I think gold is good. The temptation to inflate our way out of this mess will be irresistible, in my opinion, and many countries may be coordinating monetary expansions simultaneously. I don’t know what’s likely to transpire in the short term (say next 3-6 months).
I KNOW WHY! Its because gold can only be created in a supernova explosion… Why wouldnt it be worth a ton?!
6000 years of civilization says gold is the best form of currency. platinum? sure. why not.try creating a 6000 yr pedigree and reverence for it in the minds of 3.5 billion asians towards it -it is more than just ordinary cash ;it is sacred. we forget that the dollar-only system is just over 37 years old. its not even been a lifetime. it is only since the advent of keynes that gold’s been a suspect currency (barbarous relic?). what wouldnt a statist do to further his propaganda.
A few things about gold: 1. Gold is a hedge for economic uncertainty / political uncertainty. A government cannot mess with the value of Gold. 2. Gold is a hedge for US dollar devaluation. Being priced in USD obviously means that gold has a strong negative correlation to USD. You can see from this graph http://bespokeinvest.typepad.com/photos/uncategorized/2007/12/06/dollargold1.png 3. Gold is a hedge for inflation (like all commodities) The last time there was high inflation and recession, the value of gold was at around $850. This was in 1980, so you can imagine how much that is in inflation adjusted terms. It is significantly higher than we are currently experiencing. See : http://www.usagold.com/reference/prices/gold-price-history.gif Now let me ask you three questions: 1. Is this a period of economic uncertaintly 2. Is the US Dollar at risk of devaluation? 3. Is inflation expected to rise in the near future? 4. Are you sure you want to be shorting gold NOW?? 
I don’t have figures in front of me, but I think your assertion that jewellery accounts for 70%-80% of end demand sounds too high. I’ll see if I can dig up some figures on it.
So, using the estimates on this page the U.S. Mint holds 2.907% of all gold discovered in human history? Seems high.