Will Gold Fall or Continue to Rise?

[kerrywins]

Understand that gold is for preserving wealth, not creating wealth as an investment.

The overall pictures seems simple.

Governments print money, more money chasing same amount of goods means each dollar is worth less.

Eventually governments destroy themselves and destroy the wealth of their citizens by printing up too much money and money becomes worthless.

Gold increases in terms of how many worth less dollars its worth, but will always stay about the same in terms of actual goods it is worth.

[phantom power]

1. I think gold is going to continue trending higher.

Then again, I bought tech stocks in 2000.

[RUMMYisFROSTED]

2. Shout out for food and shelter!

Then we can talk gold... :think:

[kerrywins]

3. food/water and guns first

then silver and gold.

if you have no guns to protect your food and water, it might do you no good to collect them.

[RUMMYisFROSTED]

4. Don't forget ammunition.

Might as well have a rock in your hand.






:think:

[kerrywins]

6. true.

[Alameda]

5. Well you better be able to keep hold of your guns...

..........if not they can be used against you. Knowledge, practical knowledge is a better commodity.

[Jamastiene]

7. It will continue to go up.

As more and more people stupidly sell off all their gold, it will be in fewer and fewer hands. Rarity dictates value, usually. I think it will continue to go up as long as people keep selling their gold jewelry and such off. My mother is still kicking herself. She sold off all her gold, then another commercial came on that offered more for it than she got.

I'm nobody in terms of expertise, but it just seems like it would be smart to keep your gold and other precious metals not place so much value on paper money.

[murray hill farm]

8. Accumulation of gold...

seems like a good idea...especially if things go really, really bad....but, on the other hand, if things go really, really bad, who will buy the gold? Can you trade it for food? unlikely! Shelter? Still not likely! If you buy gold from a gold company, they will buy it back, but you get only about 60% of what is its worth. So, it has to increase in value at least 40% to even break even. Converting money to gold means that you have to have some way to sell it in order to convert it to buying or bartering value. Not going to be an easy thing to do. Better to convert your dollars to Booze....chances are better that it will have more barter value for locally available food.

[kerrywins]

9. Silver....then gold

Convert to Silver.....and if you are very rich....use any excess in gold.

You can trade things for silver....

people have used silver and gold for centuries....much more successfully then paper.

[pokercat999]

10. To answer your question................

Yes


To think gold will only go up is falling into the same trap that caught people in the real estate bubble.

Is gold a bubble? No one knows, but it will not go up forever and guessing when is the best time to buy and/or sell is not for the light hearted.

[kerrywins]

11. its not a bubble in terms of goods it can buy

gold buys the same amount of goods it always has been able to buy...because, throughout the centuries Gold has maintained its value.

Gold fluctuates in terms of how many fiat dollars it takes to purchase an ounce. This is due to how much the fiat currency has been counterfeited by the government that controls it.

[Statistical]

18. Except it hasn't not even close.

Dollar has declined about 10% this year (YTD). Gold up 35%.


Looking at an even longer trend dollar has declined 15% in last 5 years while gold has increased 159%.

When the gold bubble pops people will look backwards and say how can decline in dollar explain the massive explosion in price of gold. It can't.

Another way to look at it is if gold fell 40%. That right not 10%, not 20%, but 40% it would buy the same amount of goods as it did 10 years ago.

Still willing to say "its not a bubble in terms of value of goods it can buy"? What would you call an explosion in price that if it declined 40% would be fairly valued.

Last way to look at it. If dollar is weaker then all commodities rise. All commodities have rose as dollar was weakened however if oil rose at same rate as gold we would have $122 oil today. Is $122 oil "fairly valued" or would you consider it a speculative bubble?

[sendero]

21. Strange thing about trading..

... movement of commodities is based on expectations of the future, hence it's ludicrous to expect the dollar and any commodity to move in lockstep.

Let me translate what the price of gold is saying "the dollar is going down". And indeed it is.

[Statistical]

22. However for the gains in gold to make sense on a fundamental basis the future decline

would need to be massive. Not 10%, not 30%, more like 70%. If that happens the entire world market will collapse and the recession we went through will look like a warmup run for Great Depression II.

That isn't going to happen. If it were every other commodity would be showing equal price increases. People would be locking in prices in dollars now before they become worthless. A corn 2012 contract would triple or quadruple under such a scenario and could be purchased at a tiny fraction of the premium gold is trading at. Yields on T-bonds would be through the roof (price down, yield up) because investors would be afraid to hold them (4% bond in 12% inflation environment is worse than worthless) yet yields are still at historical lows despite the US issuing record debt and coming out of a recession.

No Gold is in a bubble. Lots of people chasing "safe money". Generally when that happens they get burned. The idea that gold is magical and somehow not a fiat currency is laugable. Can gold feed your family? Can gold protect you from the elements? Can gold protect your wealth from bandits? No. Gold is simply another fiat currency just one not controlled by any govt. The supply of gold is increasing. We have still millions of ounces of gold in the ground.

The dollar is being weakened by carry trade as other banks (like Australia) are emerging from recession they are raising rate. It is easy to borrow dollars at low rate, exchange them for Aussie dollar and collect "high" (relatively speaking) rate on Aussie debt.
Eventually the Fed will raise US rates and that will strengthen the dollar. When gold market sees robust world recovery and lower risk in stock market that "safe money" will persue more risk and gold will tank.

Will it be tomorrow? Next month? Next qtr? Next year? No idea.
Will it top out at 1300? 1400? 1500? No idea.

However gold is a classic sign of bubble. Gold should have increased but not at 2x-3x the rate of other commodities.

If inflation risk long term is so high then why are long term US debt (10 yr/ 30 yr) trading at 3.2%/4.2%?
Long term rates tend to rise ahead of inflation concerns. Remember buying a 10 yr bond you are taking a bet that over next 10 years inflation will be <3.2%.

[MercutioATC]

12. Over what term?

Short term? Rise.

Medium term? Rise than fall (not crash, but fall)

When the bottom drops out? To the moon!

[pscot]

13. Pretty much unanimous

Must be time to get out.

[DonCoquixote]

14. It will rise for one reason

Because China is buying tons of it, because they are the only nation right now that could, if need be, go back to the Gold Standard. If they ever decide to push that button, EVERYBODY, from Wall Street to Moscow to the European Union, will all have to dance to their tune.

Unless we did something smart like base currency on Units of Energy, then we could have a chance to actually have an economy based on something useful and desires, but neither Wall Street nor their siblings in Europe would DARE allow for an idea that good to be listened to.

[westerebus]

15. Sri Lanka.

Just purchased 10 tons from the IMF. WTF? Sri Lanka? Yeah, Sri Lanka.

[Art_from_Ark]

16. I beg to differ

"Gold increases in terms of how many worth less dollars its worth, but will always stay about the same in terms of actual goods it is worth."

It all depends on your time of reference.

In 1968, gold was $35/ounce. $1 (plus 3 cents for tax) could buy 10 candy bars, 10 ten-ounce bottles of soda, 4 or 5 loaves of bread, 4 or 5 gallons of gasoline in Arkansas, and no doubt other places as well. $1 could mail 16 letters nationwide, and could make 10 local calls on a pay phone. A new car could be had for less than $2000, and a modest 3-bedroom home in my town, near schools and downtown shopping, could be bought for $10,000.

Today, gold is more than 50 times its 1968 price. But one candy bar doesn't cost $5.00, neither does a bottle of pop. A loaf of bread is nowhere near $10 in most places. Gasoline doesn't cost $12.50 a gallon, and it doesn't cost $3 to mail a letter or $5 to make a local telephone call. That $2000 car is nowhere near costing $100,000 today (unless, perhaps, it's a vintage '68 Mustang in perfect condition!) and that $10,000 house doesn't cost anywhere near $500,000 today.

So since 1968, at least, gold has outpaced the inflation rate. If I had been able to load up on gold sovereigns when they were selling for $12 each back then, and sold them now, I could have gotten a nearly 2500% return on my investment. $10,000 invested in sovereigns then, would be worth $250,000 now, enough for me to buy 3 or 4 houses like my old one, at current prices.

[Statistical]

19. Exactly.

Classic sign of a bubble.

Has the purchasing power of dollar declined? Of course. It has declined by rougly 15% of last 12 months. However gold has surged 35%. Gold has gold up a rate that far exceeds (and in some places doubles or triples) any metric used to judge purchasing power (dollar index, exchange rates, purchasing power, consumer price index, inflation, or simply pricing a basket of goods).

In the housing bubble the issue wasn't that houses were going down in value it was the real value (based on fundamentals) was going up but the sticker price was going up far far faster (sometimes double or triple).

It is entirely possible for dollar to continue to fall modestly and gold to crash.

[Art_from_Ark]

20. It does exhibit theclassic signs of a bubble.

The last time I witnessed this was back in 1979-80. Gold went up to $850 (on paper, at least-- no one was buying at that level), and then it fell, stabilized a bit, and then floundered around a bit, eventually dipping down below the $300 level while everyone was being mesmerized by the stock market.

The thing is, today there is a new world. The dollar looks like it is going to be pushed off the top of the hill, but there is nothing that can really take its place. As noted by another poster, the dollar supply has really shot up in the past few years, and while inflation may be "under control" for the time being (and that is debatable), the influx of so many new paper (and electronic) dollars is going to have to lead to inflation at some point.

Therein lies the problem. The end of dollar hegemony seems to be fast approaching. Countries that could rely on dollar reserves in the past are getting nervous. The history of fiat money always points to inflation, and currency revaluation and/or demonetization has been a common occurrence in countries where trust in the local fiat currency has been lost. At the same time, countries that used to manipulate the gold market (buying low and selling high practically whenever they wanted to) have now pledged to limit their gold sales, and some are even buying gold to keep as reserves. In addition, new players like China and India are getting into the game, and China, after recently lifting its ban on private gold ownership, is now apparently encouraging its citizens to buy gold.

Personally, I don't trust these new players, any more than I trusted the old manipulators. They could yank the rug out from under the gold market and make it a pariah for another 20 years, like what happened in the 1980s. Instead of European central banks playing the manipulation game, China could dump gold for dollars, and then buy back even more gold when the price was low enough. India could, too, as far as that goes.

[diamidue]

23. Sometimes I wonder if the game is not to

raise (through manipulation) the price of gold high enough to get people to sell the gold they have. Get the gold out of the hands of the people. Making it too expensive is another way to eliminate buyers.

Whatever game is going on - or whether it is just the death of the dollar we are seeing, I think it is important to own some metals. Gold will always be worth something somewhere in the world. Dollars - who knows?

[AtheistCrusader]

24. Hmmmm..

"Today, gold is more than 50 times its 1968 price. But one candy bar doesn't cost $5.00, neither does a bottle of pop. A loaf of bread is nowhere near $10 in most places. Gasoline doesn't cost $12.50 a gallon, and it doesn't cost $3 to mail a letter or $5 to make a local telephone call. That $2000 car is nowhere near costing $100,000 today (unless, perhaps, it's a vintage '68 Mustang in perfect condition!) and that $10,000 house doesn't cost anywhere near $500,000 today."


"yet"

[Art_from_Ark]

26. "Yet" does seem to be the key word here

Inflation is a fact of life for all fiat monetary systems. We have been fortunate in that the dollar's status as the world's reserve currency has helped to protect us from the hyperflation that so many other countries have experienced. But how long that will continue is anybody's guess.

[roamer65]

17. M1 money supply has gone from around $700B to nearly $2.1T...

in the past few years. What do you think?

We are in a classic monetary inflation scenario.

[trof]

25. Bloomberg gold spot price increased $19.10 to $1,215.70 per ounce.

12/2/09