I didn't think anyone thought about that one.
Posted on 12/09/2005 6:01:51 AM PST by DebtAndDelusion
The price of gold has continued to rise in Asian trading, climbing to its highest level since 1981. Gains came despite concerns that the market may be set for a correction and some analysts are now predicting that prices have even higher to go.
Precious metals have been given a boost as investors look to protect themselves against higher inflation and weakening currencies such as the Japanese yen.
Gold climbed as high as $522.70 an ounce, before falling back.
It was hovering around the $521 mark during afternoon trading in Asia.
'Dizzy high'
"There's some profit-taking now, but look at where we are," said Darren Heathcote of NM Rothschild.
"It's broken $520, the target we had yesterday... and it looks like $525 is the next target."
One broker in Tokyo said that: "Gold has been drawing very strong interest from Japanese investors, and I don't think this boom will subside in the near term."
There are a number of factors pushing the price of gold higher.
Gold is seen as a haven from inflation and weakening currencies, although historically, once inflation is taken into account, gold has not proven to be a good investment.
There is also speculation that Asian and European central banks may cut US dollar holdings in favour of gold.
There also is the year-end increase in demand for jewellery, analysts said.
The price of gold has climbed almost 19% this year and has nearly doubled during the past five.
"It's a dizzy high," said Rothschild's Mr Heathcote, but warned that "we are looking at a very overbought market".
"We're looking for a correction. It has to come at some point," he said.
One might think there was a big war or major crash coming. Oh well, wars and crashes happen all the time. And gold just keeps sitting there. It might not gain any interest or have fancy paper appreciation but it sure does store wealth in hard times.
Of course the smart money says, "it's different this time." Those are the four most dangerous words in the English language -- it's different this time. Gramps used to hear it all the time in the 20's.
Those darn Asians and Islamics. What are they trying to do -- ruin us all?
HG
But inflation is still low, and the depreciation of the yen should not impact the value of gold, as denominated in dollars. Personally, I think it's more the case of investors not being satisfied with the meager gains on the stock market, and being afraid to put more money into real estate. Gold is the only thing left, but I predict that gold will ultimately demonstrate that it's not a safe haven either.
Do you know the North Koreans were printing US currency?
I believe the FED has decided to stop releasing money supply figures which are presumed to be way over the top. Inflation is a direct result of to many dollars in the economy. Gold is a hedge against printing money (inflation) and I belive this is the cause for the run-up.
My father had a friend who put all his money into gold in the late 1970s. I think it cost him something like $800 per ounce.
Great store of value.
'Those darn Asians and Islamics. What are they trying to do -- ruin us all?'
Probably. The islamics esp would like nothing more than to ruin the U.S.
Gold is a GREAT investment. If I had invested all my money in Gold when I first graduated from High School over 25 years ago, by now I would have ----
Less money than I had when I graduated High School.
(Gold was over $800 an ounce back then).
BTW, My HOUSE has appreciated in value MORE than gold in the last 5 years. So I guess you could have bought gold, but you would have been better buying your neighbor's house.
Your father's friend might as well have painted a target on the crack of his butt. Look at a chart of that bull market: gold went from a leisurely $200 almost straight up to the $800s, in the course of one year. Anyone who jumped in at those levels was taking a considerable risk.
Father and Gramps used to have some terrible arguments about gold. Gramps was an old Bryan supporter and made the cross of gold argument all the time with Father. Father said he would keep his gold just the same.
Unfortunately Father bought stocks on margin in 1929. When the crash came we had to move out of the city house onto the farm. If he hadn't had his gold I think we would have starved during the 30's.
Of course that experience taught some lessons about the goodness of the land and gold's ability to keep folks solvent during the depression.
Darn Islamics and Asians buying all the gold, and the government hiding the M-3 money supply figures from the public so they can print all the money they want to. The working man in this country is getting it from every end.
Oh well. Still got the farm, still got the gold and still have most of my teeth.
HG
fuel and food are not entirely removed from the inflation numbers, they just aren't useful in the monthly numbers because they are too volitile.
In the past 30 years, fuel prices have risen by just about the same amount as the underlying inflation.
IN the past 30 years, food prices have risen by much less than the amount of inflation.
College costs have shot up. So has medical costs.
But Gold wouldn't have been a good way to invest your kids college fund.
Yeah... your friend's dad was a johnny-come-lately boob who should've bought in when it was < $40 in '70.
This recent non-stop gold launch began almost immediately after the M-3 announcement. There's a possibility that the new Dubai gold exchange, online as of last week or the week before, is having some impact. Whatever the case, it's starting to feel like someone somewhere knows of a critical impending change in world economics.
And note that the government hasn't even started "hiding" the M3 numbers. They won't be "HIDING" them at all, but they don't stop reporting them until march of next year.
They official position is that M3 won't be reported anymore because it is a useless piece of information.
I'm not sure how not knowing the extra value of large CDs and repurchase agreements allows the government to print more money (which is covered under the M0 number) or relaxing credit (covered under M1/M2)
Hmmmmmm... looks like I have a dyslexic keyboard this morning...
"friend's dad" should be "dad's friend"
Darn... I almost made it for a full year without a single typo...
Now I'm gonna have to wait unti 2006 to try it again.
As a matter of fact, I would argue that .22 bullets would be a better store of value in a general economic crash than gold. You can at least get some squirrels for supper with bullets.
If he would have bought in 1972 instead of 1979 he would be rich. What's your point, buy high - sell low?
1972 High 70.00 Low 44.00
1973 126.00 64.00
1974 195.00 117.00
1975 185.00 135.00
1976 142.00 102.00
1977 168.00 177.00
1978 243.65 165.70
1979 524.00 216.55
1980 850.00 474.00
1981 599.25 391.25
1982 488.50 296.75
1983 511.50 374.25
1984 406.85 303.25
1985 340.90 284.25
2000 325.50 264.10
2001 291.45 256.65
2002 342.75 277.75
2003 417.25 319.90
2004 454.20 375.00
2005 524.10 ???.??
I have both :^)
Look for the "smart guys" to get out shortly leaving the novices, who actually believe this or any other market only goes up, holding the bag. The huge spike up in the past several weeks is imo, the last surge before the bottom falls out.
If you take an average of the high and low for each of the years and adjust them for inflation adjust those figures for inflation you will see just how bad an investment gold really is relative to equities.
Father and Gramps used to have some terrible arguments about gold. Gramps was an old Bryan supporter and made the cross of gold argument all the time with Father.
Insanity does run in some families. It's a miracle Grandma didn't take the side by side to the both of 'em.
Unfortunately Father bought stocks on margin in 1929.
I guess he can't claim to be an economist either.
Darn Islamics and Asians buying all the gold
I guess only aryans should have the bling.
The working man in this country is getting it from every end.
Gee, that's new, different, and original.
Still got the farm, still got the gold and still have most of my teeth.
How could Maslow miss these in his hierarchy of needs?
Sheesh....
(Tax free) :^)
If you were half as bright as a bar of gold, you'd be ok.
have most recoved what they lost from the markets post 911?
what if you bought at $250.00 during the mid 90's?
I didn't think anyone thought about that one.
Only becuase I couldn't fit him in to and of the stages of Piaget’s Theory of Development. Although, Louis Terman would have to dig a new basement for this guy.
What the hell and I typing?
Right, but I was comparing them to equities and was looking at the long term. You will find many stocks that will have done far, far better then gold over the same period of time. Gold is a haven for safety and not growth.
Subtract the inflation and you have your net gain. Considering a 100% gain minus inflation adjustments you still come out ahead.
Year |
High |
Low |
Year |
High |
Low |
|
|
1972 |
70.00 |
44.00 |
1990 |
423.75 |
345.85 |
|
|
1973 |
126.00 |
64.00 |
1991 |
403.00 |
344.30 |
|
|
1974 |
195.00 |
117.00 |
1992 |
359.60 |
330.20 | |
|
1975 |
185.00 |
135.00 |
1993 |
406.70 |
326.10 | |
|
1976 |
142.00 |
102.00 |
1994 |
397.50 |
369.65 | |
|
1977 |
168.00 |
127.00 |
1995 |
396.95 |
372.40 | |
|
1978 |
243.65 |
165.70 |
1996 |
416.25 |
367.40 | |
|
1979 |
524.00 |
216.55 |
1997 |
367.80 |
283.00 | |
|
1980 |
850.00 |
474.00 |
1998 |
314.60 |
273.40 | |
|
1981 |
599.25 |
391.25 |
1999 |
323.50 |
252.80 |
|
|
1982 |
488.50 |
296.75 |
2000 |
325.50 |
264.10 |
|
|
1983 |
511.50 |
374.25 |
2001 |
291.45 |
256.65 |
|
|
1984 |
406.85 |
303.25 |
2002 | 342.75 | 277.75 | |
|
1985 |
340.90 |
284.25 |
2003 | 417.25 | 319.90 | |
|
1986 |
442.75 |
326.00 |
2004 |
454.20 | 375.00 | |
|
1987 |
502.75 |
390.00 |
||||
|
1988 |
485.30 |
389.05 |
||||
|
1989 |
417.15 |
358.50 |
||||
|
|
||||||
That sort of thing is usually a sign that bankers have found ways around the controlled variables. There is an endless game central banks and the rest of the banking system play. Central banks control money creation by targeting variable X. Banks come up with ways to leave X essentially unchanged yet create additional effective money Y. Central banks target Y. Banks invent Z. Etc.
Incidentally, CPI measured inflation in the last year was 4.3%, significantly above the 3.2% average since 1982. The Fed has been tightening for a reason.
Do you know what the gold vs. silver argument was all about?
How do you figure your gold profit would be tax free?
Did I say Tax Free? oops..
Buying and selling precious metals, like sex, is all about timing.
Back in the '70s I read a great book by Harry Browne with the numbing title "How you can profit from the coming devaluation". I was on vacation and stayed up until 3 a.m. reading it. The guy was spot on. Before I got back from vacation, there was a devaluation. (Devaluation is the government euphenism for bankrupcy - as in a 50% devaluation in effect says the country is bankrupt and will pay off debtors at the rate of half what is owed them.)
Remember the "dual rate" of LBJ? The govt said gold was worth $44 an ounce, but wouldn't redeem any dollars in that (foreign govts could still demand conversion - LBJ talked them into taking silver instead at 95c an ounce, all the while exhorting people not to hoard silver - Gresham's Law* proved once again.). The free market immediately went to $48, when I bought in.
I bailed at $105 an ounce, kissing my hands at what a smart speculator I was - it CAN'T POSSIBLY go any higher. Got back in at $125 and stayed until $525 when I figured that was absolutely the tops. Jesu, what a ride!
Out of all that, what sticks in my mind was walking into a coin shop with $52 face value silver coins and walking out with $1004. Talk about being stunned!
A long time ago, a wise man said that gold was the thermometer of the world's condition, so maybe these Asians know something we don't.
*Bad money drives out the good. If you have two coins, one intrinsically worth more than the other but of equal buying power, which would you keep?
very good post!
And when you sell your house you can legally exclude $250,000 ($500,000 for a married couple) of profits from capital gains taxes.
"Do you know the North Koreans were printing US currency?"
Did you know that the Federal Reserve, through the Treasury Dept., is printing US currency with nothing at all backing it?
What is the difference?
Exactly. Buying at the top of most markets generally doesn't work out too well. See: NASDAQ = 5400.
"Unfortunately Father bought stocks on margin in 1929. When the crash came we had to move out of the city house onto the farm. If he hadn't had his gold I think we would have starved during the 30's."
Your Dad's gold was confiscated by FDR in 1933.
Gold is rebounding from a long period of being in the dumps. Gold should be at $750 or so. Doesn't mean there will be major crashes in the economy.
Yes, in hindsight you can make any investment look great.
Dear Willie Green,
"Yeah... your friend's dad was a johnny-come-lately boob..."
The gentleman was actually a genius, as measured by IQ. But you're right, he was a boob, just the same.
"...who should've bought in when it was < $40 in '70."
Sure, and if he'd have had $10,000, he could have bought 250 ounces at the price. And today, it'd be worth a cool $130,000. Pretty darned good!! That's about a 7.5% nominal return! That's almost as good as the stock market, with dividends reinvested, over the last 35 years!
Or he could have bought, in 1970, the property on which my neighborhood was built, at about $10,000 per acre. If he'd have kept it undeveloped until now, it would be worth north of $200,000 per acre, now. By the way, if he'd have bought just about any old developable raw land in the Washington, DC region in 1970, today, it'd easily be worth 15 - 20 times what it was in 1970. That's even better!
Or, he could have bought $10,000 of Intel in 1971. That would have bought enough shares that, after taking into account all the splits over the years, he'd have around 500,000 shares. Intel's hovering around twenty-five bucks a share. That's about $12.5 million! Even better!!
And, of course, right now, we're looking at a 25-year high in the price of gold.
And of course, you're starting from a low point which was artifactual, in that the price you're starting with was as the gold standard regime was coming to an end, and the price of gold was permitted to fluctuate. So, you're measuring from an artificially low point to a market top (at least so far).
The point is, gold has been a volatile investment over the last 35 years, and volatility is not exactly consonant with "great store of value."
As an investment, it's pretty much a dud. As a store of value, it's pretty much so-so.
If you'd have bought gold in 1970, and sold in 1980, at the top, you'd have made a small fortune in less than ten years! If you held on to it past 1980, and then sold, say, around 2000, you'd have done okay, if not quite striking it rich. On the other hand, if you'd have bought in 1935 and sold in 2000, you'd have underperformed by far most every other type of investment class.
So, sure, if you bought at the right time and sold at the right time, gold could have made you rich.
But in 1970, I was 10 years old, thus I personally lacked the opportunity to get gold at $40 per ounce. On the other hand, I was 18 or 19 at the top of the market, and was told by folks to take the money that I'd saved (I had a tidy bank balance at the time) and invest in gold. After all, the Russians were in Afghanistan! We were having another oil crisis! Iran had our hostages! Inflation looked like it might give way to hyperinflation! Interest rates were well into double digits! Unemployment was high!
What in the world would ever stop the price of gold?!?!?
If gold is a STORE of value, then it shouldn't matter too much when I buy it or when I sell it. I should get back approximately what I put in. STORES of value are not things that swing wildly in price in the relatively short term.
sitetest
PS: I thought it was illegal in the United States to own gold bullion from FDR's time until Mr. Nixon took us off the gold standard.
Uh yeah, right. Just like criminals turn in their guns after gun bans.
Wise, indeed. Great post!
Since gold is the thermometer of inflation, it has behooved the central bankers, through various methods, but particularly through dumping, to slap an ice-pack on the gold thermometer's bulb over the last 15 years.
This has worked fine until recently. A more appropriate level for gold may well be much closer to $1000/oz than seems possible now.
Although many arguments can be made as to what the price should be, according to mining economists a price around $700/oz would be necessary to balance the annual demand/supply ratio. Since the early '90s, around 1000T annually from Central Bank holdings(mostly Euro) has been dumped in the market. This process has been winding down, and we now have the new phenomena of Asian CB buying.
This can only be good news for gold stocks.
Physical gold is never an investment, but only an insurance. Gold stocks, otoh, pour out cash like an artesian well as margins fatten - look at Goldcorp, for instance.
The real bargains in the sector are now among the developers trading on Canadian exchanges.
IMHO. ;^)
P.S. My largest holding jumped 23% yesterday on news of a Quebec drilling program. I took a little profit this morning on another junior which had leapt over 60% in the last week. One of my two silver stocks has doubled in the last month - I'm not taking profit yet in this one.
I've been in this market for 20 years, and I've never seen such a sceptical lag in the participation of the juniors relative to the senior producers - most of them are still inert. A bull market climbs a wall of fear.
Father had heard Gramps' stories about Bryan and silver all his life before he left for France in the Great War. When he got over there he saw that those who had survived four years of the Hun and the Krupp gun had done so by having gold. If you still had gold coins you could still eat.
Didn't matter whose royal face was on the gold coin, could be British, French, German or any other government that had once minted gold money -- it spent where paper didn't.
Well Father came back from the Great War with memories of the Belleau Wood that drove him to drink and a whole lot of gold coins. He said he got it from gambling but Gran used to say he had gotten it running black market liquor. Didn't really matter because Father had gold when he came back from the war and he just put it away. During the depression Gramps changed his opinion about gold in a big way and didn't mention Bryan much anymore.
When that thieving, lying, devil worshipper Roosevelt stole the country's gold, Father said his gold coins were "collectibles from the old world." Actually he said that much later. At the time he didn't let anybody know he had gold except a couple times a year when he went to the state capitol to sell a couple so we could eat another few months.
Now the Asians and Islamics are buying all the gold! Thank goodness all the smart people in the west who have all the money aren't doing that or else the price would go sky high. I guess if people in America want to have paper dollars and fancy stock certificates that is their right in a free society. I'm glad everybody in America is making lots of money trading pieces of paper.
But if America keeps sending all their paper dollars to Asia, then they are going to buy all the gold! Oh well -- if you've seen one Great Depression, then you've seen them all.
HG
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.