Now for breakfast!
Posted on 01/06/2006 9:12:35 AM PST by DebtAndDelusion
Gold has long been valued, and not just for its beauty. The metal is also valuable for its resistance to chemical reactions, and for its electrical qualities. But some people have always valued gold most as an investment, even without any guarantee of growth in its value.
For years, gold prices fell. Now gold is in the news because prices have risen to their highest levels since the early nineteen eighties. Gold is trading above five hundred dollars a troy ounce, about thirty-one grams.
There seems to be no simple explanation for the increase in gold prices. Experts say investments in precious metals have increased in general. This is true even without the economic warning signs that have traditionally led many investors to buy gold.
In any case, the common belief in the security of gold has a long history.
From nineteen hundred to nineteen thirty-three, United States money was fully based on gold. In fact, under the gold standard, anyone who wanted could exchange paper money for gold coins.
But President Franklin Roosevelt and Congress began to cut the link between gold and money. Congress passed the Legal Tender Act of nineteen thirty-three. All United States money, paper or metal, became acceptable as payment for all debts, public and private.
In nineteen thirty-four, the Gold Reserve Act made it illegal to use gold as a form of currency within the United States.
But the gold standard remained important to international trade.
In nineteen forty-four, the United Nations held a meeting at a hotel in Bretton Woods, New Hampshire. The Bretton Woods conference established a new international monetary system. Other currencies were linked to the value of the American dollar, and the dollar remained linked to the value of gold.
The official price of gold was controlled. It stayed at about thirty-five dollars an ounce until the late nineteen sixties.
In nineteen seventy-one, the gold standard ended in the United States. By nineteen seventy-six, the International Monetary Fund agreed to a new system of exchange rates. But the process did not go smoothly. Gold prices reached record levels in the early eighties, at a time when inflation also jumped.
Today, gold remains important to the wealth of nations. But money supplies and gold supplies no longer have the relationship they had in the past.
Hard to believe there was a time when a person could go to the bank and trade American dollars for gold. No that's not right because I remember those days. What's hard to believe is how the government just keeps printing more and more money and...
people can't understand why the price of gold just keeps going up.
HG
That's "high noon" .... When you're talking about gold. ;-)
Now for breakfast!
The price of gold is going up because of marketing, it appears. If it weren't for gold, the sleep number bed, and steel buildings, we wouldn't have talk radio.
LOL!
Did someone really write that?
Put another way: The valuse of the U.S. dollar has fallen to $539 relative to a base of one ounce of gold.
"Bush's fault"
Actually, in all series-ness there's enough blame to go around, starting about 90 years ago.
go short
so, facts are, based on costs of inflation, etc., at this rate it'll only take another 250 years for gold to get back to the real $ value it was a couple decades ago ROFLMAO
I am by no means currency expert, but less dollar value makes junk we make less expensive for the world to buy, ...
same deal with chicoms they devalue their currency to sell us their junk
now, the problem is that once they let the dollar tank, the oil peoples did not like the fact they are getting less bank for the buck...
anywho...
This is not a very informative article. It dance's around the 'whys' and 'what happened when' of the recent history of gold.
What morons! Who would buy gold? Everybody knows that the US dollar is as solid as...........well........um............
Maybe we can't understand why gold keeps going up, because in the long run gold doesn't, and never has "kept going up".
Gold is nowhere near its absolute historical highs. Worse, if measured in constant dollars, taking into account inflation, Gold is nowhere near being NEAR its historical highs.
Gold hasn't been a good hedge against inflation, deflation, recession, upturn, downturn, or stagnation. Heck, it isn't even a good hedge against divorce anymore.
Might as well trade in beanie-babies. FOr a while they were a much better investment than gold.
China intially linked their currency to a constant dollar value in order to stop a multi decade decline, and to boost confidence in its currency among potential trade partners. Businesses love the predictability of a stable currency. These days it does devalue its currency in effect because their economy is doing so well.
Currency devaluation in order to boost exports is the dumbest thing all politicians around the world do. It's a fallback to the destructive, zero sum mercantilist mindset.
Don't forget the widex senso-diva hearing aid......
Moron here. My brother in law talked me into it kicking and screaming last June and I got in a 391.00. He, of course, keeps reminding me how reluctant I was to buy it.
Do you expect the dollar to double in price, or fall to half it's value, in the next two years? Because that is actually the definition of relative stability in the gold market these days.
that was a bit over my head
but your saying i was almost right? cause that would be good
at any rate thanks for the information
You say "at this rate it will only take 250 years to get back to the real value it had a few years ago". I think you have it backwards!
The simple facts are the DOLLAR is never going back to the value it had for many years of $20 to a oz. of gold. NEVER EVER!
There is a nice little inflation calculator here: http://www.westegg.com/inflation/.
Using it I see that $20 cash in 1925 would require $216 in cash today to equal the buying power it had then. So if you kept your $20 bill or bank deposit from then it *is* still legal tender (unlike most of the other world currencies from that period in history which have been repudiated) but it's only worth 1/10th of what it was. If you took the simple expedient of asking for a gold coin at the teller window back then it's now worth 2.2 TIMES what it was - INFLATION ADJUSTED. Or it's worth 27X times what is was in dollars.
Yes you could have done better if you picked the right stocks. You also could have done a lot worse if you picked the wrong stocks.
If you use the all time gold high of $840 in 1980 and use the calculator it does show you've lost money. But that spike was a huge short lived anomoly. Here's the chart:
Here is your worst case scenario: What cost $840 in 1980 now costs $2133. If you held cash you lost $1293 of purchasing power. If you held gold you lost $2083. A significant difference.
So at worst it is a commodity like others and the old saw "buy low, sell high" applies. Lots of people made profits on it in 2006. Is the bull over? Or will it set a new inflation adjusted high (Over $2133)?
If it continues to appreciate at the rate it did last year it would pass this mark in 8 years, not 250 as you claim, for gold to surpass the real world value of it's all time high.
Keep laughing!
Note the above DOW/gold graph.
Extrapolate the likely ratio in a year or two, and where that puts the DOW, and gold.
A growing economy relative to trade partners will strengthen a currency, and that is the case with China. By keeping its currency value constant that has the effect of weakening it compared to where it should be.
We buy from Chicaps...... not Chicoms.
If the ratio bottoms at its historical levels, at about 3-5 DOWs per oz of gold....
Everybody knows that the US dollar is as solid as...........well........um............
Sea foam????
You can see where this is going, historically speaking.
And when you hear folks say (again) "But it's different this time," that is your signal to move toward the lifeboats.
Gold just closed at $539.60, up $12.70 for the day.
I think the implications of the graphs posted at 18 and 24 are well worth pondering.
Like I always asky, if gold is such a good investment, why are there so many people eager to sell it?
That is the advantage America has enjoyed for 50 years, and it is coming to an end.
Your explanation is the best I've ever seen of this! No wonder your such a good author.
Fewer and fewer at a higher and higher price.
Chart of the day.
http://www.chartoftheday.com/20051230.htm?T
interesting. thanks. did you ping Carry_Okie to them?
There's a million gold bulls waiting to squeeze you.
Paper?
Still looking good to me. Famous last words when gold bottomed out in the $200.00 range..."Gold is dead".
Haha. Old commodities never die. They just make a new high.
Sooner or later.
They said the same thing about oil when it bottomed out at $10.00 bucks a barrel. "It's going to $5.00."
Yea right!
Look, I don't mean any disrespect or anything, but if the US paper dollar weren't as sound as can be, they wouldn't be printing them by the billions every week. I mean, come on! Who would print more and more worthless currency? Get real.
/sarcasm, obviously
The dollar isn't "unbacked" in the sense that collateral has been posted for that fraction of the Federal debt held by foreign investors.
I doubt Iran's petro-EUro bourse will open on time in March 2006
From lefty website--->>
In essence, Iran is about to commit a far greater "offense" than Saddam Hussein's conversion to the euro for Iraq's oil exports in the fall of 2000. Beginning in March 2006, the Tehran government has plans to begin competing with New York's NYMEX and London's IPE with respect to international oil trades – using a euro-based international oil-trading mechanism.[7] The proposed Iranian oil bourse signifies that without some sort of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project of U.S. global domination, Tehran's objective constitutes an obvious encroachment on dollar supremacy in the crucial international oil market.
http://usa.mediamonitors.net/content/view/full/17450
Sounds good - except for one thing - interest. If you had deposited that $20 in a savings account paying 5% interest (the average interest rate for 1925 - 2005) you would now have $482.91. I don't see that as much different as if you had bought $20 worth of gold with it. You would have the EXACT 2.2 times what it was - INFLATION ADJUSTED. In other words, gold hasn't done any better than a savings account. Now, had you invested that $20 in real estate or the stock market - you would have fared much better than either gold or cash.
Look, I don't mean any disrespect or anything, but if the US paper dollar weren't as sound as can be, they wouldn't be printing them by the billions every week. I mean, come on! Who would print more and more worthless currency? Get real. >>>>>>>>>>
Well, Gollleeeee, I hadn't never thunk o' that thar! I reckon you right, after all hit ain't never been done 'fore now, has hit? Yuk, yuk, yuk.
The goldbug articles seem to pop up after price increases not before. Is there a Peak Gold corresponding to Peak Oil?
I ain't selling.
If stocks are such a good investment, why are stock brokers seling stocks? Gee, why dont' they just buy all the stocks?
BS. Stock and bond marketing probably exceeds gold marketing by 100 or 1000 times.
Gold is going up for the following reasons:
1) We are in a secular bull market in commodities that will last for the next 10-15 years, if history is any indicator
2) The federal reserve continues to inflate the money supply via the creation of credit.
3) Some countries, such as Russia, are starting to realize the value in having gold and are accumulating it.
Technically that is correct. Over the long run, gold doesn't "go up". It merely holds its value, which is more than can be said of 90% of the other places where you can put your money.
Over the intermediate term (10 years or so), gold most certainly can, and will IMHO, "go up" relative to most other things.
Gold is nowhere near its absolute historical highs
Gold is just recently emerging from a 20 year bear market. I expect it to take out it's old highs. By an order of magnitude.
Gold hasn't been a good hedge against inflation
An ounce of gold will buy you a good pair of shoes and a suit today. Just as it would do so in 1900. Or during the days of the Roman empire. What can you buy today with a paper dollar printed in 1900, or a roman unit of fiat currency?
Might as well trade in beanie-babies. FOr a while they were a much better investment than gold.
Most Americans probably agree with you. That tells me that we have a long way to go until the bull market tops.
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