Another Fresh High for Gold Prices

TheStreet.com ^ | 5/11/2006 | Nick Godt

[Proud_USA_Republican]

Gold and metals rallied again to record levels on Thursday fueled by supply constraints, crude oil approaching $74 a barrel and continued dollar weakness.

In recent action, gold for June delivery was surging $18.10 to $723.80 an ounce. It earlier reached a morning high of $728, a level unseen since September 1980.

With gold gaining close to $200, or 40%, since the start of the year -- and with the rally showing little fatigue since topping $700 an ounce this week -- more analysts are throwing up caution flags.

"A significant sharp correction is lurking out there," writes Peter Grandich, editor of the Grandich Letter. "It's highly likely to come out of left field and at its depth, should end up giving cause to question if the bull market is over."

Yet, like many others, Grandich has given up on trying to determine when such a move might occur, noting that "those who have tried up until now have been run over by this mega bull."

Among other metals, silver for July delivery also reached a 25-year high, rising 64 cents to $14.92 an ounce. As for copper, the July contract, rallied 21 cents to $3.90 a pound, just off a new all-time high at $4.04.

[Proud_USA_Republican]

Careful you don't get run over by the mega bull made of gold! :)

[o_zarkman44]

The gold market is tapping a brand new generation of investors. They are counting on the past being forgotten, on how many people lost a lot of money when gold went from record highs to less than half of that value. The people who got in on the end of the gold surge were hurt the most.

[RS]

"In recent action, gold for June delivery was surging $18.10 to $723.80 an ounce. It earlier reached a morning high of $728, a level unseen since September 1980."


So let's see .... if I bought an ounce of Gold in Sept 1980, I would break even today ?

.... Assuming I forget about the 25 years of compound interest I might have earned ...

[american spirit]

Wonder what's affecting the price the most.......declining value of the dollar, oil prices, China looking to dramatically increase it's gold reserves?

[jaydubya2]

I understand that the price on something is based on what people are willing to pay for it, but I don't understand who is willing to pay $700+/ounce for gold. Is it really that valuable?

[HuntsvilleTxVeteran]

America Fiat Dollar hits new low!
Truthful headline.

[AdamSelene235]

In 1980 the money supply, M3 was 1,823 Billion. Today the government refuses to tell the population how much it has printed but as of the last available datum on 2/2006 it stood at 10,298 billion.

That's about 5X. And I can guaran-damn-tee you that M3 has taken off like a rocket since they ceased its publication.

Less transparency does not increase responsibility, quite the opposite.

[redhead]

"So let's see .... if I bought an ounce of Gold in Sept 1980, I would break even today ? .... Assuming I forget about the 25 years of compound interest I might have earned ..."

I bought mine in 1999 at $260. I'm happy.

[jiggyboy]

So let's see .... if I bought an ounce of Gold in Sept 1980, I would break even today ? Um, yes? And if you bought it in 2001 you'd be up 3x? Do you have a point?

[Chena]

I'm thankful we got in early....years ago. And now spring is here and it's time to go mining. I love pretty, gold rocks. LOL

[Atlas Sneezed]

So let's see .... if I bought an ounce of Gold in Sept 1980, I would break even today ?

---

A more pertinent question is how you would have done if you had invested, say, $1000 per year in gold over that period. Cherry-picked buy dates based on hindsight are economically unhelpful.

"Averaging in" during a period when the price declines then returns to its original level is a VERY good way to make money.

But gold and other precious metals are not about earning money, they are about preserving wealth.

[Atlas Sneezed]

$1000 per year invested in gold since 1980 (through 2004 at average annual prices) would have cost an average of $361 per ounce, which is a doubling of money. Not super for 26 years, but not the loss you thought it would be.

If you had started in 1990, the average purchase price would be $336/ounce. If 2000, the average price would be only $318/ounce, giving a 150% gain in 6 years.

All for something with tangible value that has been a store of wealth for millennia.

[RS]

"Do you have a point?"

Pretty simple, gold is now a speculative commodity - It is NOT stable in it's buying power, and to consider it as some sort of indicator of anything is foolish.

For example,

If Russia were to release a massive amount of it's gold reserves, the price would plummet - does that mean the world is more stable or we have less inflation ... no.

[tertiary01]

The Hunt brothers are DEAD!

Greenspan kept gold artificially down for years. He is no longer able to do that, so gold is rising to it's natural level.

[Atlas Sneezed]

Pretty simple, gold is now a speculative commodity - It is NOT stable in it's buying power, and to consider it as some sort of indicator of anything is foolish.

---

I disagree.

Gold is very stable in its buying power. Consider how the price in gold for a handmade business suit, a nice house, a college education, or a hospital stay has remained much more stable over the generations than has their prices in dollars.

Long term.

[LurkingSince'98]

"It is NOT stable in it's buying power"

your soooooo right it - an ounce of gold used to buy $350 little green pieces of paper not it buys $720 little green pieces of paper.

LOL

you are funny! you should be a comedian!

Lurking'

[djf]

I love the 1980 comparison. Anytime anybody brings it out, I think it shows they have some kind of agenda.

Now, OTOH, one thin silver dime from 1964 has .071 ounces of silver in it. At current spot of 14.97, that dime has $1.06 worth of silver in it.

I'm watin for the time (and it will come) when I can pull up to the gas station and fill my tank with a 1964 half dollar!

[AustinBill]

I understand that the price on something is based on what people are willing to pay for it, but I don't understand who is willing to pay $700+/ounce for gold.

Entry price doesn't matter as long as you are confident you can sell at an even higher price to a "greater fool". Like all bubbles, this one will end when the supply of greater fools runs dry.

[RS]

"$1000 per year invested in gold since 1980 (through 2004 at average annual prices) would have cost an average of $361 per ounce, which is a doubling of money. Not super for 26 years, but not the loss you thought it would be."

? Apples and Oranges ... SOMEBODY bought a bunch in 1980 and took a beating. ( Some smart cookie sold a bunch and made out like a bandit )

Did you run the same numbers simply leaving the money in the bank ? Or buying a CD each year ?



"All for something with tangible value that has been a store of wealth for millennia."

Didn't I hear that on a late-night infomercial ?