You look at it far to simply. Interest rates in relation to inflation definitely have a significant impact on the price of gold. However, it was a cut and dry as you think, everyone would make fortunes by simply following the Fed. The question is how much is the price of gold "overvalued." It has no cash flows, which means nothing right now, but if it interest rates start changing or the economy kicks into gear, prices could drop quickly. Gold is based on speculation, not value/income creation. DA60 and I were talking more in terms of long-term investments. In the next year or so Gold could very well go up and probably will. In my opinion gold isn't a viable "investment" over the next 5 years.
Who's losing confidence in dollars? Since the S&P downgrade the demand for U.S. treasuries has actually increased. The primary driving factor being the Euro fears. The budget is slowly being cut, albeit not as quickly as it should be. However, the U.S. economy is slowly starting to pick back up. If this trend continues revenue will increase and the deficit will become less of an issue (which is silly but true). The U.S. may be able to "grow" itself out of its debt a bit (as it did ALOT following WW2). I don't think it will be anything like the 50s, but economic growth always takes the edge off of debt. Price is a very important component of investment. If a "great" stock is trading $20 above its intrinsic value you'd be foolish to invest in it. This is even more important in Gold and other commodities which are based purely on speculation and the markets willingness to buy your asset at a higher price.
But what does it matter if it may or may not be a good investment in five years? It's not like people cannot sell their gold very quickly...it's not a house or a savings bond. What matters (IMO) is that gold/silver are primarily determined by low interest rates and excessive government spending (again, IMO). Both show no end in sight. So, for the foreseeable future (with ups and downs), gold/silver should be a good investment. I do not see why it matters whether it is in five or ten years. Once again, I am NO expert.
I see a lot of people invest in gold with the intention of holding on to it long-term. If you pay attention to the market and are willing to sell when you see rates change or the economy pick up, then by all means do it. I just see how high gold is right now and don't see a lot of room for it to grow.
Here's an interesting article on Gold. http://seekingalpha.com/article/410301-the-winds-are-a-changin-in-gold
One) Investing is not for children...especially something as volatile as gold/silver. If one is not going to do their homework - don't invest. Besides....it's not complicated. When Bernanke starts to raise rates...sell. Simple. Two) How can the price be too high if only about 6% of Americans own substantial amounts of gold (apparently)? The price is irrelavent...it should keep going up (more or less) as long as their is currency/inflation instability. Right now, many investors (like Buffett) have been and still are advising not to buy gold. Yet the price has still risen almost 500% in 10 years. What would happen to that price if some of those people change their minds...as some are? People have been saying gold cannot go higher for years. Did people say Apple could never go to $200, $300? Now it's over $500. There is (within reason) no such thing as a maximum price for something...especially in an era of high inflation/excessive money 'printing'. Gold is not even as expensive as it was (with inflation) back in 1980. Silver is NO WHERE NEAR it's all time high (with inflation) in 1980. And check interest rates back then...they were FAR higher; and the deficits were FAR lower (even with inflation).
The fact that so many people own gold would contribute to it being overpriced. High demand raises prices. Again, the last 10 years are close to the best in Gold's history. Much of its gains are a result of the post 9/11 recession and the 2008 financial crisis, macroeconomic events that were difficult/impossible to predict. Apple is a stock. You cannot compare a commodity to a stock. Apple's market cap and revenues have grown significantly since it was priced at $300. Commodities don't have cash flows, they're completely different types of investments. Gold was trading at around $850 dollars an ounce in 1980....in the midst of a large recession. By mid 1982 the recession ended and it was down to less than $300 an ounce.
High demand? 6% is high demand? Okaaaaay. Where is your proof that the Fed is going to raise interest rates before 2014? Where is your proof that governments will balance their budgets within 3 years? Where is your fact-based proof that gold/silver are near the top? Not theories please...facts.
And where did I compare Apple stock with gold? I simply used Apple stock as an example of investment items skyrocketing FAR beyond what people think is possible.
if interest rates change and the economy kicks into gear? Are you listening to yourself? Interest rates can't rise or the entire house of cards collapses.....there are several zombie banks in the US now so any rise in interest collapses those banks.......add to that the fact that the US government needs low interest rates to finance its huge debt. And nobody said hold gold forever.......only until the fed gets its act together and raises interst rates and the US government cuts the deficit in half!
the main purchaser of treasuries and american debt in general was bernacke and the fed......the only other buyers were some central banks and not because they love zero interest rates but but because they want to peg their currency to the US dollar!
1) the debt is growing faster than the GDP 2) the growth is phoney....its coming strictly from Bernacke's monetization of the debt.....when you add alot of currency to the system its bound to create a little economic activity for awhile 3) the debt is not shrinking anywhere near fast enough.....and if history is any guide then I am willing to bet that when the next recession hits soon you will have 2 trillion +++ deficits in the US. you want to believe that gold is "NOT" the place to be then go ahead......I know better!
if you think gold is high now just wait a couple of years LOL You see.....again I say you just look at the price .....thats it........look how much money the US and the european central banks are creating? Right now the velocity of money is quite low.....just wait until it picks up......prices will rise so quickly it will make your head spin. In the 70's the money supply want up less than half as much as it did in 2009/2010 yet it produced double digit inflation over a period of 5- 9 years.....it takes time for all that money to work its way to the grocery store but trust me eventually it will. You say in terms of dollars gold is expensive? How about in zimbabwe dollars? Its over a trillion dollars per ounce there. You see....again I say to you just dont look at price....look deeper. Notice a silver dime can still buy you a gallon of gasoline...what does that tell you. Just look deeper will ya and look at why gold is "REALLY" rising....and not the propaganda on the network televisions!
Gold closed out the week at $1713.00/oz.. That's down $59.42 (or about 3.5%) for the week. http://www.goldprice.org/gold-price-history.html
Gold Bulls Strengthen as Wagers Hit $131 Billion 'Gold traders are the most bullish in four months after investors accumulated more metal than ever and hedge funds raised bets on gains to a five-month high. Sixteen of 23 analysts surveyed by Bloomberg expect prices to gain next week and one was neutral, the highest proportion since Nov. 11. Investors increased their holdings in exchange- traded products backed by bullion for seven consecutive weeks and now hold 2,407 metric tons valued at $131 billion, data compiled by Bloomberg show. Demand for gold is strengthening as European leaders seek to contain the regions debt crisis and governments from the U.S. to the U.K. keep interest rates at all-time lows to shore up growth. The Federal Reserve and Bank of England have bought debt and the European Central Bank offered unlimited three-year loans to the regions lenders, actions that spurred some investors to buy gold as protection against inflation.' http://www.bloomberg.com/news/2012-...ion-wagers-reach-131-billion-commodities.html
Gold closed out the week at $1713.00/oz.. That's down $53.58 (or about 3%) for the week. http://www.goldprice.org/gold-price-history.html
Gold closed out the week at $1660.24/oz.. That's down $52.76 (or about 3%) for the week. http://www.goldprice.org/gold-price-history.html
Right now the banks are still de-leveraging, it will take another year at least before significant growth occurs. Gold is being driven up by speculation alone so it sits atop a giant bubble, all you guys that think it won't tank are the same guys who fought for deregulation. I find any product touted by someone like Beck to be so suspect as to have me running the other way. Bully for any of you who invested when it was in the 600's, but it might be a good time to invest somewhere else. I know you all wish for the mighty crash of the system but the powers that be won't allow it (by hook or crook). Plan for a recovery. Think about this post in a year, I'll be considered a prophet.
Gold is not going to fall until the FED raises rates.....period. It may have some mild swings but it is not going to fall until rates go back up. When the FED announces that rates are going up...then you can sell. The FED can't raise rates as the banks will fail as they still have all that garbage on their balance sheets not to mention debt service on US debt. I have heard the same argument you are making for years and years. Gold has remained stable....it is the US dollar that is not stable.
We shall see. Btw - I am not calling for western economies to collapse anytime soon. What I do believe will probably happen is another deep recession and maybe another one after that. Or possibly a large war to deflect attention away from the economies. And when all that is done - THEN I think western economies (not all of them) will collapse. Or more specifically, the fiat currency system will collapse. There seems (to me) to be little chance that governments will allow the economies to collapse on their watch without doing everything they can to delay the inevitable - at least until they can kick the can down the road so someone else gets the blame. If this is what you are basing your precious metal speculation on - then (imo) your prediction will not come true. The fundamentals of the western economies are terrible and are generally just being propped up with cheap money from governments running record deficits and free money 'printing' central banks. When the governments/central banks stop throwing massive amounts of debt at the economy and it is still growing - then you can realistically talk of a 'recovery'...not before (imo). I stated last year that I thought gold/silver would (temporarily) substantially correct. So far this year I have been proven wrong. But a large correction is still possible. Especially so long as the economic numbers continue to look good (at least on the surface). I also said before (and I was by NO means the only one) that I thought the U.S. economy would improve this year since it is an election year and the sitting government will pull out all the stops to stay in power - including whatever programs they could get through a hostile Congress and manipulating the Fed to do whatever it has to to artificially pump up the economy at least until November. So far, I have seen somewhat right about that. (btw; yes - people think the Fed is independent. But Obama re-approved Bernanke a few years ago as Fed Chair; and to think he did not ask for something in return for that nomination is - imo - extremely naive) A prophet? My we are modest. BTW - I am NO expert.
With the "REAL" inflation rate running at near 10% and bernacke keeping interest rates artificially low......how anybody can even consider "NOT" owning gold is beyond me!
Gold closed out the week at $1668.25/oz.. That's up $8.01 for the week. http://www.goldprice.org/gold-price-history.html
Exactly. As long as the solution is to create more debt to service existing debt then the bull market in metals won't be over. If the past is a guide to the future then that can is going to be kicked a hell of a lot further down the road.
