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Should I Buy Gold Now That It Is At Its All-Time High?
Zero Hedge ^ | 07/27/2011 | Simon Black of Sovereign Man

Posted on 07/27/2011 1:31:27 PM PDT by SeekAndFind

There’s one question that I’ve been seeing over and over for the last several weeks as the price of gold has taken out its all-time highs and continued a nearly uninterrupted ascent: Should I buy gold now?

It’s understandable, especially for people who don’t own precious metals yet. Nobody wants to be the sucker who buys gold at the top, only to watch it crater back to $1200 or below. But here’s some food for thought–

The US dollar is shattering historic lows against currencies like the Swiss franc, Australian dollar, and Singapore dollar. Any currency that isn’t a complete disaster is now being viewed as a safe haven. And the mainstream world is now, finally, waking up to the reality that the United States might actually default.

Never mind that the government has been insolvent for years and the evidence of such has been widely available to anyone willing to look at basic facts. Literally, only in the last week have people finally began to consider the possibility of a US default.

Here in Europe, the situation is arguably even worse. No one is being shy about a default in Greece– it’s discussed openly now by policymakers, and major financial institutions are preparing for a restructuring. And with its public debt more than 120% of GDP, Italy will not be far behind.

Governments no longer have the benefit of operating behind a curtain; their financial imprudence and technical insolvencies are now under the spotlight for all to see… and confidence is fading quickly.

The more people lose confidence in the dollar and euro, the more they look for alternatives. Large institutions and money mangers collectively control trillions of dollars within the financial system. Unallocated capital– funds held as cash and not being actively invested at the moment– must be held somehow, somewhere.

This is the chief reason why so many smaller currencies are surging. Compared to the dollar and euro, the Swiss franc looks incredibly safe, and money managers have a much higher degree of confidence that their Swiss bonds will be repaid than they have in the US or eurozone.

The more capital flows into these smaller currencies, the more they’ll appreciate against the dollar and euro. It’s simple matter of supply and demand– increased demand for the Swiss franc coupled with excess supply of US dollars means a stronger franc in US dollar terms.

Ultimately, this is the primary reason for gold to go higher in the long term.

Large financial institutions are increasingly looking at gold as a safe haven; it’s becoming less of a speculation and more of a store of value… and unlike most of the other available asset classes, precious metals are not politically sensitive.

Even stronger currencies like the Swiss franc have limits to their appreciation. At some point, the Swiss National Bank will impose capital controls to thwart the rise of its currency. Oil and agricultural commodity prices will likely be regulated and speculation outlawed if prices become too high.

But if gold goes to $2,000… $3,000… it may be an embarrassment to central banks, but it won’t become a populist issue. You won’t see any Tunisian merchants setting themselves ablaze because the price of gold is too high… and not too many politicians looking to fix the price.

Even if they do try to regulate gold prices or even make it illegal, you can be sure that the gold trade will continue to thrive in the rest of the world– especially in Asia and the Middle East.

So instead of worrying about buying gold at its all time high, ask yourself another question instead: Over the next few years, do you expect that these broken, bankrupt governments will inspire confidence among institutional investors, or do you think that confidence will continue to erode?

If you’re leaning towards the latter, you can be sure that more money will flow into gold, and that prices will rise.

Yes, there will be price fluctuations. Whenever the US government announces that it has finally reached a debt deal, there will probably be a correction. Given what’s coming in the next several months and years– debt downgrades, more budget battles, government shutdowns, asset seizures, etc., any correction will be a small blip along a long-term rising trend line.

And in case you’re still worried that you’d be a sucker to buy gold at $1600, consider that, if you don’t, in three years you’ll probably feel like a sucker for not buying gold at $1600 when you still had the chance.


TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: gold; price

1 posted on 07/27/2011 1:31:34 PM PDT by SeekAndFind
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To: SeekAndFind

...with this clown in office, you can bet his buddy Soros is...


2 posted on 07/27/2011 1:33:33 PM PDT by Doogle ((USAF.68-73..8th TFW Ubon Thailand..never store a threat you should have eliminated))
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To: SeekAndFind
So many questions...

How much to buy?

In what form?

From whom?

Where to keep it?

What is the purpose of having it?

When to sell?

Where will the cash to buy it come from?

A disclaimer...I have gold and silver both as approx 10% of my portfolio. Both bought a long time ago.

3 posted on 07/27/2011 1:36:16 PM PDT by wtc911 ("How you gonna get down that hill?")
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To: SeekAndFind

I’d say wait for the budget debate to be decided, if Obama “wins” buy all the gold you can afford.


4 posted on 07/27/2011 1:38:01 PM PDT by Teflonic
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To: SeekAndFind

Course not, our massive debt problems will tank our economy and drive gold down to about $700. Buy it then if you must.


5 posted on 07/27/2011 1:38:32 PM PDT by kingcanuteus
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To: SeekAndFind

If you can’t afford to lose then don’t take the bet!

Mel


6 posted on 07/27/2011 1:38:47 PM PDT by melsec
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To: SeekAndFind

Up 150% over the last 5 years, I am not expecting it to go down anytime soon.

Last time it went down was when RR assumed the presidency.
Barring a similar upheaval, I’m not expecting any softening in the gold price.


7 posted on 07/27/2011 1:44:12 PM PDT by RitchieAprile
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To: SeekAndFind

Gold, schmold!

Two words: pork bellies!


8 posted on 07/27/2011 1:46:06 PM PDT by papertyger
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To: SeekAndFind

Buy it on August 3.

Better yet, take a short position now.


9 posted on 07/27/2011 1:55:45 PM PDT by OpusatFR
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To: kingcanuteus

If the economy tanks one would think gold would go through the roof. But nobody really knows what will happen. It’s all a gamble.

But I wouldn’t be buying dollars.


10 posted on 07/27/2011 1:57:35 PM PDT by Terry Mross (I'll only vote for a SECOND party.)
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To: SeekAndFind

Here are the 52 week highs and lows for GLD to gold etf.

113.08 - 158.637
7/28/10 - 7/27/11

Quite interesting that the 52 week low was exactly one year ago from the 52 week high set today.

In the past year (as has been the case for decades) the government has spent more than it took in and printed money to make up the difference.

Is there any indication the Democrats or the Republicans are going to do anything different in the coming year?

Basically gold went up $450 this past year. I don’t see anything to stop the rise in gold in the next year.


11 posted on 07/27/2011 1:59:22 PM PDT by Presbyterian Reporter
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To: melsec

Even US dollars are a bet, on deflation.

It could be that the “thread the needle” tactic could be what’s on the menu.

Short bouts of deflation, with more money creation after that causes inflation, then another dose of deflation.

Cash and metals, that will play both bets.


12 posted on 07/27/2011 2:01:08 PM PDT by TruthConquers (.Delendae sunt publicae scholae)
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To: SeekAndFind
If you need to see why current prices are high for a REASON:

(Note that the scales have been adjusted to provide a more dramatic image that would be shown if each started at zero).

13 posted on 07/27/2011 2:03:43 PM PDT by Atlas Sneezed (Government borrowing is Taxation without Representation)
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To: papertyger
Gas (non-oxygenated) and oils (two-cycle, bar and chain, 30W)

Malt and hops (all grain brewing is too tedious)

Wine and Whiskey

Weed and seed

Shells and bullets

14 posted on 07/27/2011 2:04:13 PM PDT by Aevery_Freeman (White Hetero Able Male (WHAM) a.k.a. NOT Holder's people)
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To: RitchieAprile

You’ve got that right.

Volker was the FED, and Bernank is NO Volker.

In fact, they CAN’T raise interest rates, the cost of paying for the interest will kill the ponzi scheme. They need to keep interests low, like, forever.

The question is, for how long will this go on?


15 posted on 07/27/2011 2:04:31 PM PDT by TruthConquers (.Delendae sunt publicae scholae)
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To: SeekAndFind

The best answer is that anyone who think they should own some gold should accumulate it gradually, perhaps on a monthly basis.

I’d advise silver first, which is also easier to buy in smaller quantities.

Best options for small buys are eBay and Gainesville Coins (both of which this Freeper has used).


16 posted on 07/27/2011 2:05:39 PM PDT by Atlas Sneezed (Government borrowing is Taxation without Representation)
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To: Aevery_Freeman

I wonder how many of them magic beans I can get for the family cow?


17 posted on 07/27/2011 2:06:48 PM PDT by papertyger
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To: kingcanuteus

Course not, our massive debt problems will tank our economy and drive gold down to about $700. Buy it then if you must.


I think the conventional wisdom is that owning gold is a hedge against this. Besides, the demand for gold is international.


18 posted on 07/27/2011 2:07:01 PM PDT by Atlas Sneezed (Government borrowing is Taxation without Representation)
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To: Terry Mross

“But I wouldn’t be buying dollars.”

Of course not. Because you’d rather buy at the historic highs and sell into the historic lows.

Still buying more USD. :)


19 posted on 07/27/2011 2:11:18 PM PDT by BenKenobi (Honkeys for Herman!)
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To: papertyger

Enough to grow a bean stalk to the national debt ceiling.


20 posted on 07/27/2011 2:12:21 PM PDT by Aevery_Freeman (White Hetero Able Male (WHAM) a.k.a. NOT Holder's people)
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To: TruthConquers

Hey a deflationista! Yeah, I believe that deflation is the name of the game, whichi is why they are going to seek to increase interest payments, not lower them.


21 posted on 07/27/2011 2:13:17 PM PDT by BenKenobi (Honkeys for Herman!)
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To: Aevery_Freeman

Fee, Fie, Foe, Fum...I smell a train wreck for those what’s dumb!


22 posted on 07/27/2011 2:17:19 PM PDT by papertyger
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To: SeekAndFind

Gold has been at an all time high for the last three years.


23 posted on 07/27/2011 2:20:30 PM PDT by SampleMan (If all of the people currently oppressed shared a common geography, bullets would already be flying.)
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To: kingcanuteus
Course not, our massive debt problems will tank our economy and drive gold down to about $700. Buy it then if you must.

I could be wrong but I think your logic is 180 degrees wrong. If the economy "tanks" gold and silver (after a short period of falling) will skyrocket.

24 posted on 07/27/2011 2:20:52 PM PDT by Clink (Conservatives believe it when they see it. Liberals see it when they believe it.)
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To: SeekAndFind

You can never go wrong buying Gold. except when it’s really up .. lots of speculators abound.. Diamonds may be a good buy too.. corn and soybeans too.. :-)


25 posted on 07/27/2011 2:21:50 PM PDT by NormsRevenge (Semper Fi ... Godspeed .. Monthly Donor Onboard .. Obama: Epic Fail or Bust!!!)
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To: Beelzebubba

Thanks for the graph. The only game in Washington is to spend more than they take in and print money for the balance.

The current players have been doing the ‘print more money’ tango for decades and know no other dance steps.

The graph makes it pretty obvious gold will continue to increase in price since there appears to be no will in America to say enough is enough.


26 posted on 07/27/2011 2:24:52 PM PDT by Presbyterian Reporter
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To: SeekAndFind

I wonder if, in January, 2009 (when gold was at $900 and silver was at $12.00)people were asking the same question?


27 posted on 07/27/2011 2:27:23 PM PDT by Clink (Conservatives believe it when they see it. Liberals see it when they believe it.)
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To: SeekAndFind

I asked the same question when it was at an all time high of 950 and dropped what was left of my 401K. As long as the trend line is up for the past qtr you should expect it to continue.

Pray for America


28 posted on 07/27/2011 2:49:18 PM PDT by bray (Palin is the DC Nightmare)
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To: Clink

RE: I wonder if, in January, 2009 (when gold was at $900 and silver was at $12.00)people were asking the same question?

I can attest to the fact that they were. In fact, the Gold ETF, GLD was dropping to $86 ( about 860/oz ) early in 2009 and I was wondering if Gold has already made its top.

I decided to put a small percentage of my portfolio into GLD simply because I saw that Obama and the Fed were hell bent on printing money. I bought at about $880/oz. I am of course, close to doubling my investment already. My only regret is not buying more.


29 posted on 07/27/2011 3:26:12 PM PDT by SeekAndFind (u)
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To: kingcanuteus
Course not, our massive debt problems will tank our economy and drive gold down to about $700. Buy it then if you must.

When Nixon was threatening to break the last ties to gold, Milton Friedman predicted that gold would sink like a stone. He was certain its only value was as the backing for the U.S. dollar.

He was wrong. Respectfully, I think you are, too.

When our economy tanks, gold will be driven even higher. Or, more properly said, the dollar will be driven even lower. Gold remains the same.

30 posted on 07/27/2011 3:27:38 PM PDT by BfloGuy (There is no remedy for the inefficiency of public management. -- L. Von Mises)
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To: Clink

“I wonder if, in January, 2009 (when gold was at $900 and silver was at $12.00)people were asking the same question?”

I wondered at that time. I sold most of my sinking stocks and bought physical gold at $900/oz. No regrets.


31 posted on 07/27/2011 3:27:48 PM PDT by TexasRepublic (Socialism is the gospel of envy and the religion of thieves)
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To: kingcanuteus
Course not, our massive debt problems will tank our economy and drive gold down to about $700. Buy it then if you must.

When Nixon was pondering whether or not to break the dollar's last ties to gold, Milton Friedman predicted that gold's price would drop to near zero. He was convinced that its only value was its connection with the almighty dollar.

He was wrong. When Nixon made the move, gold instantly shot up to $50 and tripled by 1972. I think you're wrong, too (respectfully). When the economy tanks, the dollar will along with it.

Gold is the constant -- it only reflects the perceived value of the currencies it's priced in. I'd keep buying.

32 posted on 07/27/2011 3:35:41 PM PDT by BfloGuy (There is no remedy for the inefficiency of public management. -- L. Von Mises)
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To: SeekAndFind

I wish I’d had your insight (and considerably more fiat:)


33 posted on 07/27/2011 4:26:11 PM PDT by Clink (Conservatives believe it when they see it. Liberals see it when they believe it.)
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To: TexasRepublic

In case I wasn’t clear, my question was rhetorical. I’m sure when gold hits $2,000.00 and silver $70.00 people will be asking the same question. Hmmm, precious metals or dollars, what should I buy? Duh.


34 posted on 07/27/2011 4:28:46 PM PDT by Clink (Conservatives believe it when they see it. Liberals see it when they believe it.)
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To: BenKenobi

I believe that deflation is the name of the game...


Precious metals can do just fine during deflation.


35 posted on 07/27/2011 5:36:24 PM PDT by Atlas Sneezed (Government borrowing is Taxation without Representation)
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To: SampleMan

Gold has been at an all time high for the last three years.


This is actually the 11th consecutive year in which gold has set a new multi-decade (or all-time) high.


36 posted on 07/27/2011 5:43:36 PM PDT by Atlas Sneezed (Government borrowing is Taxation without Representation)
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To: jiggyboy; PA Engineer; blam; TigerLikesRooster; Cheap_Hessian; CJinVA; Jet Jaguar; ...

goldbug ping

Thanking FReeper Beelzebubba for the awesome US Debt & Debt Limit vs Gold relationship chart.


37 posted on 07/27/2011 5:48:52 PM PDT by OneLoyalAmerican (In God I trust, all others provide citations.)
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To: SeekAndFind

One can not know whether gold is at an all time high. We only know that gold has recently reached an unprecedented high.


38 posted on 07/27/2011 6:07:45 PM PDT by arthurus (Read Hazlitt's "Economics In One Lesson.")
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To: Beelzebubba

I use a local coin dealer. His margin is less than that of anyone who sells on line or on the phone.


39 posted on 07/27/2011 6:13:03 PM PDT by arthurus (Read Hazlitt's "Economics In One Lesson.")
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To: Beelzebubba
Precious metals can do just fine during deflation.

The worldwide gold market is small. Much smaller than bonds or stocks. Thus money flowing into this market can make it shoot upwards during an inflation or deflation. Just depends on the events and the market psychology

40 posted on 07/27/2011 6:41:40 PM PDT by dennisw (NZT -- works better if you're already smart)
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To: Beelzebubba
Precious metals can do just fine during deflation.

The worldwide gold market is small. Much smaller than bonds or stocks. Thus money flowing into this market can make it shoot upwards during an inflation or deflation. All depends on the events and the market psychology. America could have a deflation but gold is pushed upward by international buyers who are experiencing inflation

41 posted on 07/27/2011 6:43:29 PM PDT by dennisw (NZT -- works better if you're already smart)
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To: arthurus

That’s good news. Few are so lucky.


42 posted on 07/27/2011 7:03:35 PM PDT by Atlas Sneezed (Government borrowing is Taxation without Representation)
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To: SeekAndFind

I’d say buy silver. If USA fiscal house gets in order, it may go down, but it is used for many things, and inflation will eventually restore whatever value might be lost.

If things get worse, and a financial collapse happens, a bunch of silver eagles would be better to redeem, than Gold.
I would rather carry a silver eagle worth $40 in my pocket than an oz. of gold @ $1600.00.


43 posted on 07/27/2011 7:14:35 PM PDT by greeneyes (Moderation in defense of your country is NO virtue. Let Freedom Ring.)
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To: SeekAndFind

——Compared to the dollar and euro, the Swiss franc looks incredibly safe, ——

Last Week or so, John Maudlin reported on a conference in Switzerland. The visit was expensive. A Diet Coke cost him $12!!

Then there is the opposite problem if you own gold, or gold stocks. Should you sell? Is gold at the top? Then if you do sell, what are you going to do with the proceeds? Buy Ammo? : )


44 posted on 07/28/2011 4:26:51 AM PDT by bert (K.E. N.P. +12 ....Flash mobs are trickle down leftwing REDISTRIBUTION))
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