I'm not saying that paper will retain it's value. The gold bugs are saying that gold will retain it's value. But that is clearly false.

i think over a long enough period it does, but of course in the short run it bounces all over the place....its hard to argue though with the old silver quarter vs a gallon of gas theory but then that is silver

Gold retains its value, not it's price in funny money... it clearly does

So what about the price of gold meassured in a basket of goods. Let's say the CPI basket. Will gold retain it's value against that basket? Clearly not because in that case gold should've kept pace with the dollar inflation.

Against what does it retain its value? Clearly not dollars and not goods.

(random exp. warning)
If RE goes down 30%, wheat up 20%, gold up 25%, aluminum down 5%, the dollar down 10%... what does that mean for gold or the price of sleeping bags?

So we know this: gold retains it's value but what you can buy for it 10-20-30 years later can be totally different and substantially less. Sounds like speculation with substantial risk to me.

Gold is usually a speculative investment, but a good insurance policy.
The signals seem to be in favor of a rise in the price in most currencies, this does not make it a value investment.

gold has retained it's value for over 6000 years.

over the last decade, gold has gone from under $300 to over $1140 and US stocks have been flat.

gold bugs have been right... plain and simple. we've been pounding the tables on gold for a while, and we've given great advice. i started buying gold at $660 and i encouraged everyone else to do the same.

even just a few months ago when gold was around $1000, i was getting laughed at in this forum for still recommending gold. i was saying that it was still a good time to buy gold, and that it wasn't expensive, and that it is in a breakout pattern and is going a lot higher. well, here we are $1140 an ounce.

for once, it'd like to hear a critic of the gold bugs come in and say "you guys were right... i was wrong.... i thought gold was a bad investment, but it turned out that you guys really understood what was going on and i should have listened to you guys and bought gold".

Nice to know if you lose money in your life time of, say, 80 years. Sure, gold bugs have been right after being wrong 100 years.

lol

how have gold bugs been wrong for 100 years? the world was on a version of the gold standard up until 1971.

I have 1oz gold coins from 100 years ago that say $20 on them... gold was literally money back then. A hundrend years ago, everyone was a gold bug... everyone owned gold because it was money.

there were no such things as gold bugs 100 years ago. Could you imagine someone 100 years ago saying "buy gold, buy gold" ... everyone wanted more gold 100 years ago, because if you had more gold, that meant that you had more money. no one thought of gold as going up or down, gold stayed the same because it was money. So gold wasn't just an investment asset class like it is today... it was just money. to get more gold, you have to work more at your job to earn more money (gold). people were paid in gold.

i suppose posts like Brons really explain why so many people are missing out on the big gold bull market. sometimes i wonder why more people don't own gold, espeically given its spectacular performance over the last decade... but then i realize there are plenty of people like Brons out there who don't know the first thing about gold

Why confiscate something that would not retain value?
http://www.the-privateer.com/1933-go...fiscation.html

1933-1974 sad times for AU bugs
"At the end of 1971, the dollar was devalued by 8 percent. It now took $38 dollars to buy one ounce of gold. On February 12, 1973, the dollar was devalued again, this time by 11 percent. It now took $42.22 to buy one ounce of gold. By March the price of gold on private markets was almost $90.00 per ounce. On March 12, 1973, all links between the dollar and gold were officially abandoned.

Also in 1973, Congress passed legislation giving the President the discretionary authority to legalize the private ownership of gold, provided that legalization would not "adversely affect the United States' international monetary position." President Nixon chose not to exercise the authority given to him by Congress. The following year, Congress enacted new legislation legalizing private ownership of gold, which was finally passed into law by President Ford on August 15, 1974. With his signature, President Ford ended the forty-year ban on private gold ownership."
from Blanchard Economic Research Unit
http://www.blanchardonline.com/beru/

It was metaphorically. But even if you take it serious: there have been gold bugs who wanted to own physical gold. And they have not done well the last 40 (and these gold bug have been there long before the gold standard was given up) years. Suddenly they come out of the woodwork now that they have a great run. And they will again disappear into the night once the run is over.

Let's make this really simple, it's about knowing what type of "secular" market it is:

1970-80: Secular Bull Market for gold/commodities
1980-2000: Secular Bull Market for equities
2000-present: Secular Bull Market for gold/commodities once again

0% interest rates and unprecedented printing/deficit spending means this secular bull run for metals/commodities will continue well into the future; that is until another Paul Volcker type comes around with the stones to raise interest rates while a Congress and Administration actually get serious about controlling the deficit. In other words, not any time soon.

Some would say the it's the dollar whose run may be over.

Would I?

No, not with certainty. But I've read enough to know the possibility can't be cavalierly dismissed.

gold will almost always do better than paper currency. but obviously in the long run, companies can grow and expand, making stocks good investments most of the time.

no one is saying that gold is always the best investment... it's a good investment during certin periods of time, and we happen to be in one of those periods. once all this economic turmoil is over, stocks will once again out perform gold. but for the previous ten years, and probably for at least the next 5 years, gold is where you want to be.

it's not like i'm always bearish on stocks... but currently, i'm bullish on gold, and i think gold will continue to do much better than stocks for at least another 5 years. But when stocks get cheap enough priced in gold, i will probably sell my gold and buy stocks.

and since i'm only 25 years old, i couldn't care less about what "gold bugs" were saying 20 years ago or 30 years ago, or 40 years ago. i've only had money to invest for a few years now, and i obviously made the right decisions in 2007 and 2008 to put my money into gold instead of stocks.

so you can ride out this bear market in stocks for the next few years... i'll ride it out in gold... and in a few years, i'll be in a much better position

What is your prediction about when the price will drop? What is your prediction about what the price will rise to beforehand? Or do you believe it has hit its peak?

Brons has no insight

I'm old enough to remember the 1980 gold peak, and geeky enough to have plotted the gold price every night after seeing it on the 7:00 news at age 14.

Remember that gold was a fairly new investment for Americans, and that things weren't going so well for the United States under Carter. Conditions were ripe for a speculative bubble. But today we are still far from that inflation adjusted peak:

http://www.inflationdata.com/inflati...tion_chart.htm

Just because something doesn't trade in a straight line doesn't mean it failed as an investment vehicle. Gold is definitely a speculation but so is buying any other asset class for any amount of time. From 1965 until 1983 the United States Dow Jones Industrial stock market average was flat. The index was at 1,000 beginning in 1965 and was at 1,000 in 1983. If you had bought the market and held there was a big opportunity cost.

A pretty good case I just read,

http://livingoffdividends.com/2009/1...sy-investment/

"...Despite its out-performance of all major asset classes, gold still gets no respect from the investment community. That’s because it is only a store of value and typically only does well in periods of currency crisis, or times of poor monetary policy.

For example, during post-WW2 Germany and in post-Mugabe-school-of-economic-policy Zimbabwe, their currencies have faced severe devaluation and gold prices sky-rocketed against those currencies. Faced with hyperinflation and an inability to buy basic necessities, people flock to gold causing the price to soar.

...I’m interested to see the effect on mortgage rates once the Fed stops buying Treasuries and mortgages.

The government is increasing its deficit spending at a steady clip. If this continues, eventually we will be unable to repay the debt and barely just able to service the debt. Obviously this is not a viable long-term strategy, but it doesn’t look like there is any other back-up just in case helicopter Ben’s strategy of throwing money at the problem doesn’t pan out.

Clearly, we are currently in a crisis period in regards to fiscal policy and gold prices are likely to keep going up. During times of good fiscal policy, gold does nothing. This does not seem to be one those times.

Just because something doesn't trade in a straight line doesn't mean it failed as an investment vehicle. Gold is definitely a speculation but so is buying any other asset class for any amount of time. From 1965 until 1983 the United States Dow Jones Industrial stock market average was flat. About 20 years. The index was at 1,000 beginning in 1965 and was at 1,000 in 1983.

If you had bought the market and held there was a big opportunity cost. Do records like this make "buying and holding" stock indexes failed logic. Well, I would say yes. What's your alternative to gold Brons? I bet I can prove holding it is failed logic because of periods it underperformed other investment vehicles.

So what Brons is saying I feel is that gold can never be a good hold but the cyclical nature of every other asset class shows the same thing. I think it is more about "timing" intelligently.

Anyway, I appreciate you and everyone else debating your points. I don't own physical gold but I am probably going to think about owning it through some ETF or whatnot for the rest of this run. I think once we get over the fact that there is no perfect investment for long periods of time we can start to figure out how to play them appropriately.


A pretty good case I just read,

http://livingoffdividends.com/2009/1...sy-investment/

"...Despite its out-performance of all major asset classes, gold still gets no respect from the investment community. That’s because it is only a store of value and typically only does well in periods of currency crisis, or times of poor monetary policy.

For example, during post-WW2 Germany and in post-Mugabe-school-of-economic-policy Zimbabwe, their currencies have faced severe devaluation and gold prices sky-rocketed against those currencies. Faced with hyperinflation and an inability to buy basic necessities, people flock to gold causing the price to soar.

...I’m interested to see the effect on mortgage rates once the Fed stops buying Treasuries and mortgages.

The government is increasing its deficit spending at a steady clip. If this continues, eventually we will be unable to repay the debt and barely just able to service the debt. Obviously this is not a viable long-term strategy, but it doesn’t look like there is any other back-up just in case helicopter Ben’s strategy of throwing money at the problem doesn’t pan out.

Clearly, we are currently in a crisis period in regards to fiscal policy and gold prices are likely to keep going up. During times of good fiscal policy, gold does nothing. This does not seem to be one those times."

sorry about that double post. I didn't mean to do that.

Stocks and bonds Yes you can, easily. But the point was that gold should retain it's value while it's a fact that it doesn't.
Gold can be a good hold from a results perspective. I don't deny that and I admit that gold bugs have been doing well the last few years. The problem with gold is that there is hardly any fundamental value. Sure China and India are buying right now but what are they going to do with it? They're either going to hold it indefinitely or going to sell it again in the future like India has done in the past.

Some gold bugs would call the stock market a ponzi scheme. But if the stock market is a ponzi scheme what is the gold market? I guess a MLM-scam. You buy gold to sell it to someone else for more who sells it again for more. It's all great until there are no buyers left and you're the last one to hold the gold.
GovnorJimmy: snagglepuss is right when he talks about price guessing. I don't do that. I own stocks and bonds but I don't guess what tomorrows price will be. I hold them when I find them cheap and I don't really care what the price tomorrow will be (up is always nice tho) as long as the underlying is worth more than the price of the stock or bond. This is also why I'm not guessing what tomorrows gold price will be, especially because there is no fundamental behind it.

Look, I congratulate the people that did well with gold the last 10 years. I didn't do bad either but gold outperformed me (I think, I didn't really check). Watch out for recency bias. Just because it reached a nominal all time high doesn't it will go higher still. I think gold will always retain some value and there is money to be made with it, but I'm going to say if it's going to go up or down tomorrow.

The reason people say in the long term you will get more fiat dollars for gold is because the fiat money supply increases much faster than that of gold. Most people who own gold should expect it to retain its value vs real goods- food, clothing, energy.

So under what circumstances does that not happen? From 1982-2004 we printed a bunch of money but I don't think gold went up at all, did it?

why are you being selective with the years? Why not 1975-present? Or ANY date to present!!! http://66.38.218.33/charts/historicalgold.html

Can you find a 30+ year chart of gold vs a fiat currency where the currency gains overall?