Buying in to Gold

deemy2004

christ....
slow down a bit cannot keep up with the typinnnnnggg......

deemy2004

Okay, the US FED and the other central banks made a lot of mistakes during the 1930's

THEY did NOT repeat these mistakes during subsquent financial crisies. Notably 1987, 97-98, and the 2000 to 2003 bear market.

For gold to double, there would need to be a sustained financial AND economic crisis, i.e. were talking 6 million + unemployed in the UK alone with the GDP down some 20% from its peak.

There is NO sign whatsoever of such a scenerio.

People who have invested in gold or are investing in gold, or going to have to wait a hell of a long time ! i.e. gold peaked in Jan 1980 at $850 !!!

Gold at the moment is $450, thats AFTER a 4 year bull market !
Okay I agree that gold does not show any signs of topping, YET, but it is a BAD long-term investment, because of its inability to keep pace with inflation.

And because it is such a bad investment, investment banks, central banks et-al are net sellers of gold, becuase they KNOW as bankers how bad an investment gold is.

cheerfulcat

But a lot of people don't buy gold as an investment; they buy it as insurance...

Cheerfulcat

deemy2004

Strange insurance ?  :o

£105 of gold securing £100 of cash

There are many ways to insure your investments, from long dated out of the money put options on the stock indices

to getting interest earning Inflation proof indexlinked government stock

deemy2004

Another point.

'IF' the financial system went into complete meltdown, institutions would be forced to sell their gold holdings to meet their liabilities. Futures traders anticipating this likelyhood would short gold which would drive the gold price sharply lower, leading to panic selling amongst gold investors as this is not what was supposed to happen !

That includes the russians and japanese

cgnao

Gold bad in the long term and unable to keep up with inflation?!?!? This is the single biggest finacial absurdity I have ever heard.

Until 1913 British pounds were gold backed. As a matter of fact, one gold sovereign was one pound.

In the late 1960's you had to fork out about 5 paper pounds to buy one gold sovereign.

Today you need tp fork out just under 60 paper pounds to buy the same one gold sovereign.

Inflation has eroded one paper pound to about 1/60th of the 1913 value and about 1/12th of the late 1960's value.

The fact that gold has not gone up with inflation from 1980 is THE reason you want to buy it now.

When people realise how fragile the current fiat money system is, gold will skyrocket in paper money terms. In real value terms, though, it will preserve and possibly increase slightly the wealth of those who have been wise enough to buy it at these bargain prices.

Got gold? Protect yourself.

deemy2004

Talkign about 1913

In 1913 Gold was $20.67, average US wage was $633

Which means they were earning 30.6 ounces of gold per year

Now gold price is $450, average wage is $33,000 (2002)
Which means they are earning 73 ounces of gold per year.

So the value of gold is constantly being devalued and this has been going on pre the 1930's etc..

Gold is a bad long-term investment.

cheerfulcat

Strange insurance ?  :o

£105 of gold securing £100 of cash

There are many ways to insure your investments, from long dated out of the money put options on the stock indices

to getting interest earning Inflation proof indexlinked government stock

Deemy, it's insurance against something nasty happening to the stock market/banking system...

Consider the fact that under fractional reserve banking, all that money floating around out there isn't real; it's computer generated and what's more, there's nothing to back it up. We probably do need a fiat currency but I still like to have some gold coins, just in case...

Cheerfulcat

cgnao

I repeat, gold is not an investment. It is money, true money. Money that is the least affected by inflation than any paper currency.

The fact that the average US salary in dollar terms has gone up by several dozen times, while only a couple of times in gold terms, is an indication of this.

Inflation is a shabby stealth tax imposed on us all by governments. To keep this going they have to suppress gold at all costs, and have been quite successful in doing so from 1980 to 1999. Central bank gold sales have been drying up fast since then and the game is almost up because of the finite amount of physical gold available. As a result of the two decades of suppression, gold is at historic lows in terms of average salaries, oil prices and commodity prices. The opportunity to acquire real money at a fraction of its real value will not last for long.

For a very interesting insight on inflation, see http://www.financialsense.com/series4/part1.html

For graphs of oil prices in terms of gold and US dollars, see
http://www.goldmoney.com/en/why-gold.html

Got gold? Protect yourself.

cheerfulcat

Talkign about 1913

In 1913 Gold was $20.67, average US wage was $633

Which means they were earning 30.6 ounces of gold per year

Now gold price is $450, average wage is $33,000 (2002)
Which means they are earning 73 ounces of gold per year.

So the value of gold is constantly being devalued and this has been going on pre the 1930's etc..

Gold is a bad long-term investment.

Deemy, all that proves is that people in the US were paid less ($7203 pa ) in 1913 than they were in 2002! In fact the value of gold - not its price, but what you can exchange it for - is almost constant.

Cheerfulcat