What about buying gold now?

Discussion in 'Business & Economics' started by quantum_wave, Sep 23, 2008.

  1. ashura the Old Right Registered Senior Member

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    Don't forget your reasons for wanting to get gold and silver. The dollar will collapse, it's only a matter of time, and you need to make sure you've preserved your wealth somehow someway. Any ups and downs you see along the way are irrelevant. This isn't something to tide you over till the next week, it's something to help you for the coming years.
     
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  3. quantum_wave Contemplating the "as yet" unknown Valued Senior Member

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    OK, I forgot that in all the frenzy. Maybe just not watching it so much is a better idea.
     
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  5. Carcano Valued Senior Member

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    Read an interesting article today from William Bonner's excellent Daily Reckoning on silver investing:

    http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG072808.html

    "And while I don't know when that will happen, I do have an idea how high silver will get in price. The historical high for silver was set 531 years ago in 1477, topping at (using the purchasing power of 1998 dollars) a princely $806 an ounce. By comparison, the price of silver less than $19 an ounce today, and was only about $5 an ounce in 1998, after having bottomed at under $4 an ounce in 1992.

    Now, fast-forward to today as our 2008 dollars, which have fallen 50% in purchasing power since 1998, means that the all-time high price for silver, set in 1477, now stands at $1,012 an ounce, measured in the buying power of 2008 dollars! Over a thousand dollars an ounce! For silver! Whee!

    In case you ain't noticed, we're unmistakably coming off the lows of a 530-year bear market in silver and, theoretically, entering a long bull market, which ought to be exciting to people who have a lot riding on silver gaining so much in price (me), or even just keep up with this kind of thing, like, for instance, Israel Friedman, writing at InvestmentRarities.com, who notes that there are 5 billion ounces of gold sitting around someplace in the world, but that there are only 2.5 billion ounces of silver, even though 5 times as much silver is mined every year than gold.

    Therefore, silver is being consumed at prodigious rates, which is why Mr. Friedman says, "Silver is needed to maintain and improve future standards of living. Gold is needed for luxury and emotional reasons. Silver is for the optimist, gold for the pessimist."

    In that optimistic vein, Mr. Friedman says, "I honestly believe that silver must eventually sell for five to ten times what the price of gold may be."
     
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  7. quantum_wave Contemplating the "as yet" unknown Valued Senior Member

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  8. River Ape Valued Senior Member

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    No accident, of course, that this was shortly before 1492 and the plundering of New World bullion by the Spanish and Portuguese -- and of course by English pirates, who were the Somalis of their time.

    Yes, I would go along with an investment in gold or silver at this time if my investment funds were held in US$ (unfortunately they are mostly in GBP) -- and I go along with the preference for silver.

    A special consideration is that -- in this interval before the inauguration of the new US President -- it might prove a likely time for Israel to "take out" Iran's nuclear facilities. That would certainly give gold a $100 overnight boost. What odds, I wonder?
     
  9. quantum_wave Contemplating the "as yet" unknown Valued Senior Member

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    Today, Monday, gold moved above $820 by mid day after being up from around $750 and closing around $800 last Friday. The dollar is weakening with the Citi bail out and the 7 trillion dollar plus commitment by the US govt to avoid collapse of the banking system and a plummet into depression.

    DGP is up to around $16.20, plus 0.80 today with gold over $820, plus $20 today at 1 PM.

    One concern I have had is the short interest in gold on the part of the major banks and the other is rumors of Comex default this week. Now I see that the major banks have unwound their short positions for the most part and the rise in gold last Friday didn't bring COMEX to its knees. With the continued US commitment to shore up the economy, the coming bail out of the auto industry and credit card companies, the new dollars are flooding the market and gold is beginning to respond.

    My issue is whether to hold hard gold or gold paper issued by banks that provide gold ETFs? Any thoughts on the gold ETF vs the hard asset. Any signals to look for to move out of the ETFs?
     
  10. spidergoat Liddle' Dick Tater Valued Senior Member

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    I don't get why gold or silver is such a good thing. When the economy tanks, and you really need cash, won't everyone be selling at the same time, driving the price down?
     
  11. quantum_wave Contemplating the "as yet" unknown Valued Senior Member

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    A large portion of the wealth of a country is in savings and investments. The people who are smart keep ready cash to cover 3 to 6 months of expenses and invest the rest. When the economy tanks, banks are not considered a safe place to keep your money and so hard assists like gold are considered safe havens.

    Gold holdings are not considered the first source of cash to meet your needs when the economy tanks and those who are holding it will not rush to sell when things look like they will get worse, but people who still have some savings and investments in banks begin to feel their money is at greater risk and will move to gold. In a panic like that, gold will rise while the value of the dollar will fall, IMHO.
     
  12. River Ape Valued Senior Member

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    Order of priorities for investment in a troubled world:
    1: Rifle and ammunition.
    2. Body armour.
    3. Large pond and water distillation equipment.
    4: Garden tools, vegetable patch of generous proportions and a hen-house.
    5: Silver and gold.
     
  13. quantum_wave Contemplating the "as yet" unknown Valued Senior Member

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    The first item on the list should be mental preperation. Know what you are capable of and what you aren't.

    How do you get rid of the bodies

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    ?

    Anybody have an answer to the gold ETF question? What signals do you watch for to time getting out of paper and into hard assets?
     
  14. River Ape Valued Senior Member

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    You should have figured!

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  15. quantum_wave Contemplating the "as yet" unknown Valued Senior Member

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    I was still working on mental prep.
     
  16. MacGyver1968 Fixin' Shit that Ain't Broke Valued Senior Member

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    What about other metals..like copper? I hear the price of copper is through the roof...and will only get higher.
     
  17. quantum_wave Contemplating the "as yet" unknown Valued Senior Member

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  18. Carcano Valued Senior Member

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    http://www.telegraph.co.uk/finance/...e-above-2000-next-year-as-world-unravels.html

    Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.

    The bank said the damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.

    This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

    "They are throwing the kitchen sink at this," said Tom Fitzpatrick, the bank's chief technical strategist.

    "The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

    "Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don't think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes," he said.

    "This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised."

    "What happens if there is a meltdown in a country like Pakistan, which is a nuclear power. People react when they have their backs to the wall. We're already seeing doubts emerge about the sovereign debts of developed AAA-rated countries, which is not something you can ignore," he said.

    Gold traders are playing close attention to reports from Beijing that the China is thinking of boosting its gold reserves from 600 tonnes to nearer 4,000 tonnes to diversify away from paper currencies. "If true, this is a very material change," he said.

    Mr Fitzpatrick said Britain had made a mistake selling off half its gold at the bottom of the market between 1999 to 2002. "People have started to question the value of government debt," he said.

    Citigroup said the blast-off was likely to occur within two years, and possibly as soon as 2009. Gold was trading yesterday at $812 an ounce. It is well off its all-time peak of $1,030 in February but has held up much better than other commodities over the last few months – reverting to is historical role as a safe-haven store of value and a de facto currency.

    Gold has tripled in value over the last seven years, vastly outperforming Wall Street and European bourses.
     
  19. Read-Only Valued Senior Member

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    10,296
    For all of you advocating buying gold and silver, I have a simple and direct question - and I'd like a simple and direct answer. An honest one, also.

    Just exactly how many people do you know that have made a significant profit from investing in precious metals? I personally know about three hundred people (a result of a long and active life) and not a single one of them EVER have.

    It's my view, and that of many other folks well-versed in things economic, that those are strictly repositories of safe-keeping - not something that anyone smart actually invests in expecting to MAKE money.

    What are your answers?
     
  20. nietzschefan Thread Killer Valued Senior Member

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    Well they are right. Modern currencies...at least the big two are FAILING and the banks that back them don't want to fail. One way historically was to hold a LOT of fuckin gold in your bank to prove you were going to survive times like RIGHT NOW(banks failing).

    So unless YOU READ ONLY can come up with something new that does the same thing, well....the way things are going, if they keep progressing, yes Gold is going to rocket. You might want to put a few thousand of your millions in precious metals at least to hedge it.
     
  21. joepistole Deacon Blues Valued Senior Member

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    I think the way to play it is in companies who produce gold and silver rather than directly holding gold and silver as their are holding costs for holding the actual metals.
     
  22. nietzschefan Thread Killer Valued Senior Member

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    You only have to pay the holding companies Colt and Smith&Wesson...once.

    But yeah, directly holding gold is good only in a time of total collapse.
     
  23. quantum_wave Contemplating the "as yet" unknown Valued Senior Member

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    Thanks to Carcano for that interesting article.

    The question of gold as an investment vs. a store of value is a good one. It is both and the success of both strategies has a checkered past. But changing times bring changing circumstances and right now, the future of the dollar is the uncertainty. Can the USFed print enough money to keep the economy from collapse without printing enough money to collapse the dollar?

    If they print enough money to avoid the collapse of the economy, then inflation will be the result, and some would say exponential inflation ... oh wait, that is physics ... make that hyperinflation

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    . A good time to hold gold.

    If They print so much money that the confidence in the dollar is ruined, the dollar collapses and then gold as a store of value proves to be the right strategy.

    Having gotten into this fix, the only way forward includes the increase in the price of gold in dollars whether it is due to inflation or the decline in the dollar or both.

    I think the question is when, and how bad. If things happen in an orderly distressed way so that gold futures increase in a reasonable fashion, gold paper like ETFs can perform nicely without the need to hold physical gold. If things happen so fast that the COMEX futures default and gold cannot be delivered to fill the futures contracts that demand delivery, then banks and funds backing the paper gold will fail and only those holding physical gold will win.

    The cost and inconvenience of buying and holding physical gold must be compared against the risk that only physical gold will win. Half paper and half physical isn't a bad strategy and if the paper fails but the physical gold doubles, the net is a break even. Maybe not a bad outcome vs holding other investments is such a collapse were to occur.
     
    Last edited: Nov 28, 2008

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