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Good Time to Buy Gold

  • LJ
    queencitybuckeye;867506 wrote:Ammo would determine ownership far more than a deed.

    In which case my .50 BMG may buy me some more land in Coshocton county ;)
  • Belly35
    Myself and another old guy have been playing with $50,000 worth of gold for the past 2 years
    We have purchase gold as low as 750 oz and have to hold the gold for 2 or 3 weeks to get back our investment scary situation... it a gamble
    It has been a great ride lately howere lately..

    I look for gold to reach 1920 / 1980 before the stock market settles

    Low stocks, high gold and a mix of low oil can also swing gold pricing.
  • gut
    Cleveland Buck;867748 wrote:You are still talking about the price of gold in dollars like it has some bearing on its worth. Look at the price of oil in gold versus the dollar. Oil is just about the same price per ounce of gold now that it was 10 years ago and it is pretty much constant.
    I'm tellling you, you have to look longer term. Take a look at gold from the early 80's up until the late 90's - steadily straight down - it was one of the WORST buy and hold investment in that timeframe. Are you trying to tell me we had deflation then? Gold is just in another asset bubble like we've seen in Internet stocks, housing, oil...and on and on the past 10 years or so. At some point it's going to fall of a cliff just like it did back in the early 80's and just like every other bubble we've seen.
  • Cleveland Buck
    First of all obviously the price of gold is affected by speculators on the market, and if you are buying gold to get rich you could get burned if you buy too high, but that isn't even the issue right now. People are buying gold because it is always valuable, while paper dollars are not.

    The price of gold did not steadily decline from 1980-2000. It fell by about half when Volcker raised interest rates and stayed at that $350-450 level until the late 90s when it went down to a historical low of around $300.

    We are in the process of hyperinflating the currency right now. The CPI right now is over 10% and has been for the last several years if you calculate it the way they did before 1982. Jimmy Carter would be proud. In the 70s times were miserable, but we didn't have 0% interest rates, we weren't bailing out the world's banks, and we didn't have $15 trillion in debt. Now, incredibly, interest rates are at 0%, we are going to have a new round of QE, and surely another round of stimulus. I doubt our currency will survive it, which means people need to gold to hold their money, not necessarily to make money.
  • cruiser_96
    Cleveland Buck;868270 wrote:First of all obviously the price of gold is affected by speculators on the market, and if you are buying gold to get rich you could get burned if you buy too high, but that isn't even the issue right now. People are buying gold because it is always valuable, while paper dollars are not.

    ....

    Someone on the first page raised a question concerning this sentence.

    WHY!?!?!?! will gold always have value?

    I'm not arguing with you Cleveland Buck. At all. But I have thought about this since the question was raised... and I'm not sure I have an answer. So, again, WHY will gold always be valuable???
  • believer
    LJ;867950 wrote:In which case my .50 BMG may buy me some more land in Coshocton county ;)
    lol I lived most of my life in Coshocton County. I'd be happy to hook you up with a few local "investors." :D
  • Cleveland Buck
    cruiser_96;868648 wrote:Someone on the first page raised a question concerning this sentence.

    WHY!?!?!?! will gold always have value?

    I'm not arguing with you Cleveland Buck. At all. But I have thought about this since the question was raised... and I'm not sure I have an answer. So, again, WHY will gold always be valuable???

    Gold will always have value because it is a commodity (with uses other than being currency) and is rare. This is why it has been used as currency for thousands of years. People wouldn't accept paper money, because it wasn't worth anything. The fact that it has been used as a currency for thousands of years makes it more valuable, but even if that mentality changes you will never see the day where gold is worthless. We will all see the day where a dollar is worthless.
  • believer
    Cleveland Buck;868777 wrote:Gold will always have value because it is a commodity (with uses other than being currency) and is rare. This is why it has been used as currency for thousands of years. People wouldn't accept paper money, because it wasn't worth anything. The fact that it has been used as a currency for thousands of years makes it more valuable, but even if that mentality changes you will never see the day where gold is worthless. We will all see the day where a dollar is worthless.
    While I completely understand what you're saying and agree with you, it still begs the question: Why?

    In my mind gold is simply a rare metal. I suppose it has value because it is rare. But it basically serves no other useful purpose.

    I have a logical, common-sense view of this shiny hunk of rare metal.

    I marvel that we will spend billions of worthless paper currency (its own value backed only on good faith) to mine this rare metal from the bowels of the earth so we can melt it down, form it into bars, and store it away in costly high-security vaults simply to boast possession of it.

    Paper currency may not be rare but it's not the worth of the paper itself that's important. It's simply a symbolic device that - by consensus and legal mandate - we've agreed that represents the value of our labor and a mechanism for the reasonable exchange of that labor for one product or service or another.

    In other words the real value is not in the paper currency or even the gold. It's ourselves.

    If we were to have a catastrophic economic meltdown, I'm going to place a much higher value on your unopened can of beans, your gun, and the tomatoes in your garden than that shiny hunk of gold you've buried in your back yard.
  • gut
    Cleveland Buck;868270 wrote: The price of gold did not steadily decline from 1980-2000. It fell by about half when Volcker raised interest rates and stayed at that $350-450 level until the late 90s when it went down to a historical low of around $300.
    Inflation averaged 3 or 4% annually in that time period, so in fact it failed miserably as an inflation hedge in that time frame. Indeed, you did much better in treasuries than you would have in gold. And depending on when you bought or sold, or even buy and hold, in that time period you DID NOT outperform the person stuffing money under their mattress. Only idiots hold cash, so to say "gold is always valuable" means absolutely nothing to me, and right now the market is set-up to make "gold is valuable" a self-fulfilling prophecy driven largely by market group think that it has value as a hedge/safety. That is the ONLY reasons the gold play works, because the market believes in it (I don't see that changing, but you never know).

    I would much rather invest in physical commodities (copper, oil, coal, etc..) that have REAL value because they have productive use so that whatever I need currency to buy something, I trade my physical commodities. Doesn't matter if speculators abandon whatever commodity as a hedging/speculative tool, the prices are still strongly driven by real demand and there is always a manufacturer who will buy it. That paper dollars are "not always valuable" is meaningless because I don't hold currency but for very short times to make purchases.
  • gut
    believer;868952 wrote: In other words the real value is not in the paper currency or even the gold. It's ourselves.

    Like gold, the paper only has value because it's generally accepted. You'll sell me a gallon of gas for $3 because you can use that $3 to buy something else. Yes, a currency crisis could wreck that equation, but gold is not really different because it also relies on two people agreeing it has value - again it only works because you buy an ounce for $1800 from me believing you can sell it to someone else for $1800. If that ceases to exist - and as you said, it's only on "good faith" - then it falls apart just as easily.

    Truthfully, gold is arguably inextricably linked with the USD. Because it's price is so driven by speculation/fear around the dollar, it makes it an excellent hedge for those purposes (hence a self-fulfilling prophecy). And with currency trading being the deepest and most liquid market out there, it holds its value in another currency that didn't collapse. Although truthfully if the USD collapsed, the imbalance of supply trying to sell gold for another currency would likely cause a pretty deep deflation in the non-USD price of gold, as well.
  • believer
    gut;869241 wrote:Although truthfully if the USD collapsed, the imbalance of supply trying to sell gold for another currency would likely cause a pretty deep deflation in the non-USD price of gold, as well.
    Exactly. Both gold and paper U.S. currency are only as good as we say it is.

    I fully understand that our monetary system has to be based on some agreed-upon system of value and that for literally thousands of years that value has been backed by the perceived value of gold.

    But in the end it's not the gold that has the real value...it's our faith and trust in each other.
  • Cleveland Buck
    For whatever reasons, gold is valued as money, and that isn't going to change, especially now. And for anyone worried about whether gold is a bubble ready to burst, many people flee to gold as a safe haven against economic turmoil and devalued paper money. In 1980 when the gold "bubble" burst, it was priced at a level that the United States gold reserves were worth 110% of the entire M1 money supply, so there was more than enough to gold to back the money if need be. Right now, the Treasury allegedly has 261,449,000 troy oz. of gold, and to back our $2.006 trillion M1 money supply, gold would have to reach $7,671 per ounce to be able to fully back it. I believe gold will get there, it will probably take a few years though, and by then, M1 could be double what it is now. Obviously some people will want to cash out some of their gold and buy back in at a lower price, and there will be little corrections, but there is no reason to believe that gold won't keep going up long term for the foreseeable future.
  • Cleveland Buck
    gut;869225 wrote:Inflation averaged 3 or 4% annually in that time period, so in fact it failed miserably as an inflation hedge in that time frame. Indeed, you did much better in treasuries than you would have in gold. And depending on when you bought or sold, or even buy and hold, in that time period you DID NOT outperform the person stuffing money under their mattress. Only idiots hold cash, so to say "gold is always valuable" means absolutely nothing to me, and right now the market is set-up to make "gold is valuable" a self-fulfilling prophecy driven largely by market group think that it has value as a hedge/safety. That is the ONLY reasons the gold play works, because the market believes in it (I don't see that changing, but you never know).

    I would much rather invest in physical commodities (copper, oil, coal, etc..) that have REAL value because they have productive use so that whatever I need currency to buy something, I trade my physical commodities. Doesn't matter if speculators abandon whatever commodity as a hedging/speculative tool, the prices are still strongly driven by real demand and there is always a manufacturer who will buy it. That paper dollars are "not always valuable" is meaningless because I don't hold currency but for very short times to make purchases.

    You are right that the only reason the gold play works is because people believe it. Gold is a currency, like the dollar, yen, euro, etc. The only reason to invest in gold is if it looks more stable than the other currencies. When Volcker raise interest rates in the 80s many people felt comfortable enough with the dollar to invest in Treasuries. Do you see Bernanke raising interest rates to 20%? Of course not. The fact that you can't print gold out of thin air makes it preferable while major currencies around the world are inflated and devalued. And as I mentioned, for those using this as a safe haven, there is a long way to go in the price before the United States owns enough gold to make them feel better.
  • Cleveland Buck
    Goldman Sachs and Bank of America are going down. Good thing we passed TARP to save the economy. Gold is over $1,900 now. Time for more bailouts, trillions of dollars of new credit from the Federal Reserve, and the swan song for the dollar.
  • BoatShoes
    Cleveland Buck;870543 wrote:...and the swan song for the dollar.

    Perhaps your version of reality is more fun but you're going to be wrong. Again. Your claims of dollar destruction are unfounded. Despite a tripling of the monetary base this is what actually happened, just as we'd expect in a liquidity trap; the exact opposite of your wild claims. Apologies for not continuing our discussion about more fiscal stimulus.

  • Cleveland Buck
    BoatShoes;870645 wrote:Perhaps your version of reality is more fun but you're going to be wrong. Again. Your claims of dollar destruction are unfounded. Despite a tripling of the monetary base this is what actually happened, just as we'd expect in a liquidity trap; the exact opposite of your wild claims. Apologies for not continuing our discussion about more fiscal stimulus.


    Your chart is using the watered down CPI the government came up with when they saw that the public couldn't stomach the inflation rates of the 70s. It severely understates real inflation. Also, price inflation happens after monetary inflation when that money makes its way through the economy. Much of that money is still on bank balance sheets because they are hesitant to lend when they can borrow from the Fed at 0.25% interest and make money in much safer investments than loans to consumers or businesses. Just because prices haven't risen at that same level yet doesn't mean they won't.
  • Paladin
    Gold discussion is correct so far. Just a commodity and only worth what the market sets the price to be. However, the better play has been the gold miner stocks ( which I have owned for years when prices where really low) and there, because they are leveraged to the price of gold, they have much farther to run. Many of mine have quadrupled or better. I like KGC now.The conventional trading wisdom has that the time to sell is when the Dow/gold ratio is 1 to 1 ( example Dow 5000/ gold $5000 oz.). But thats why there are markets...................................

    LOL !
  • Belly35
    From 1898 to 1762 now Ouch! so far today .....
  • Cleveland Buck
    http://www.businessinsider.com/former-goldman-sachs-trader-andrew-maguire-theres-an-unforseen-2011-7

    Those Chinese are up to it again. They know our paper money is worthless, and if they back their RMB with a vast gold reserve, who on Earth is going to want U.S. dollars?
  • believer
    Cleveland Buck;879579 wrote:http://www.businessinsider.com/former-goldman-sachs-trader-andrew-maguire-theres-an-unforseen-2011-7

    Those Chinese are up to it again. They know our paper money is worthless, and if they back their RMB with a vast gold reserve, who on Earth is going to want U.S. dollars?
    Don't worry about it. The Chicoms will prop us up enough to keep us buying their goods manufactured by cheap labor. It's a beautiful thing isn't it?
  • Belly35
    Gold when from 1830 to 1877 and the stock market is down .... WOW

    Gold will be back up to 1980 soon...
  • Cleveland Buck
    It is pointless to try and predict the short term fluctuations in gold. You have the big banks shorting gold to try to keep the prices down and the IMF will sell a bunch of gold every now and then to hold down the prices, so you will see it bounce up and down as it climbs upward. The thing is, with this new Chinese market the demand on physical gold is going to skyrocket and the big banks like J.P. Morgan where their gold reserves are leveraged 45-1 are going to go bankrupt and the shorts are going to have to buy gold to cover or they will go bankrupt. With all of this going on as the dollar falters, $5,000 gold wouldn't surprise me in the next few years.
  • believer
    Cleveland Buck;880315 wrote:With all of this going on as the dollar falters, $5,000 gold wouldn't surprise me in the next few years.
    We'll be pushing carts of cash around to purchase a loaf of bread. That happened in Wiemar Germany and we all should know what happened after that.
  • Footwedge
    Cleveland Buck;880315 wrote:It is pointless to try and predict the short term fluctuations in gold. You have the big banks shorting gold to try to keep the prices down and the IMF will sell a bunch of gold every now and then to hold down the prices, so you will see it bounce up and down as it climbs upward. The thing is, with this new Chinese market the demand on physical gold is going to skyrocket and the big banks like J.P. Morgan where their gold reserves are leveraged 45-1 are going to go bankrupt and the shorts are going to have to buy gold to cover or they will go bankrupt. With all of this going on as the dollar falters, $5,000 gold wouldn't surprise me in the next few years.
    Better hide it....they will be coming after it.

    http://www.blanchardonline.com/beru/confiscation_1933.php
  • Footwedge
    believer;880442 wrote:We'll be pushing carts of cash around to purchase a loaf of bread. That happened in Wiemar Germany and we all should know what happened after that.
    I stopped off at the friendly watering hole yeasterday and bought a Bud for 3 bucks. The second bottle cost me 6 bucks. I said "what's that all about?". His reply...."gold just went up 200 points".