Wednesday, May 19, 2010
Start selling!!!
Cnn: Will gold be $800 in one year, or two?
When gold prices turn skyward, like they did for the past two weeks before some recent flattening, some mix of greed, fear and uncertainty are likely ruling the market. What better time to remember what really drives prices over the long-term: market fundamentals. Through that lens, gold might not be such a hot investment.
Posted by mark @ 10:52 AM (1056 views) Add Comment
17 Comments
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1. Crunchy said...
One should buy their children gold from birth.
Take a look at the long history of Gold v Paper v Inflation. Which one was around longer before the --------- stepped in.
We live for many years not hours.
"My money don't fold it jingles!"
Amen!
2. hpwatcher said...
Yawn.
3. inbreda said...
but maybe gold, like the housing market, is in a new paradigm where the fundamentals dont apply and it is a good thing to rob honest hard working people to support anyone who buys gold as a way to get rich without any effort?
4. quiet guy said...
Quite right Mark. Any student of economics knows that fiat currency is the modern progressive money of the future and this gold fad will soon blow over. Better to place your savings in the hands of the MPC than some blingy jewellery metal. I am confident that politicians know best and the mainstream media can be trusted to give me the investment advice I need.
5. Mrhappy said...
So much for Sold2rent1's gold superspike!
6. hpwatcher said...
but maybe gold, like the housing market, is in a new paradigm where the fundamentals dont apply and it is a good thing to rob honest hard working people to support anyone who buys gold as a way to get rich without any effort?
Quite bitter about it aren't we?
There will be a bubble in gold sooner or later, but not for a few years yet. Usually announcements like this are attempts to drive down the price so that parties can enter the market.
7. Wageslavex14 said...
There are no real market fundamentals for gold, though. Industrial demand would provide some kind of base level of demand, but the price of gold is determined by the belief that it will inevitably be accepted as currency.
I'm not saying that this view is necessarily wrong, but to talk about market fundamentals for gold is pretty silly.
8. sureseam said...
Wealth is a strange thing; and I suspect very few of us measure our wealth in fiat money. Some measure it in cars, others in shoes(!) and (too) many Brits measure it in houses. This aspect of a deeply rooted psychology partly explains why house prices are slow to droop in the face of rational onslaught and changed circumstances.
OTOH you can measure wealth in gold as a yardstick that changes very little; unlike currencies like the dollar or sterling that have been heavily inflated over time.
Measuring house prices and equity indices in gold and graphing the results over time is interesting. It suggests that there are times to hold gold as a counter cyclical even if you aren't a gold bug.
Related food for thought:
http://gold.approximity.com/gold_charts.html
And especially the long term chart of house prices measured in gold:
http://gold.approximity.com/HP_UK_in_gold_1930.PNG
9. Will said...
More food for thought - once you adjust for inflation, we're not even close to where the gold price was in 1980:
http://goldnews.bullionvault.com/gold_inflation_adjusted_041520105
10. sureseam said...
WRT: Inbreda @ 2
1) There are folk who are 40%+ in gold (and silver); whose deeply held perspective is that gold is real money and that ordinary fiat money is a poor speculation. Given that deposit rates are now less than inflation, real returns are negative so they have a point. Their view is that precious metals are about capital preservation not speculation - so your bitterness would be viewed (harshly) as naivete.
2) Gold bugs tend to view precious metals as a one way street; and yet in truth it is classified by investment professionals as among the most volatile of assets (exceeded perhaps by silver).
3) Another point to appreciate is that the oft cited gold bull market of the 1970's included a couple of years where it fell low and stayed low - in the midst of decade bull market.
4) SocGen predicting $800/oz (in the CNN article) is a substantive drop (from ~$1220); so perhaps the route to effortless wealth does not include buying gold just now.
But anyway - I guess you were being ironic rather than bitter?
11. debtfree said...
You have to laugh at the ignorance of understanding gold as a currency.
Gold is in a bubble ?
I'm afraid not, it is fiat currency that is in a bubble and that is a fact.
Gold is just reflecting what the currency is worth, it's not going up or down in price, the value of the currency is what you need to be concerned about.
12. debtfree said...
"Barclays Wealth in London predicts gold will fall to a fair value of $800 an ounce by 2012, as investors eventually dump it for riskier trades; Societe Generale, the French bank, is betting a correction happens faster, predicting $800 gold by the end of 2010"
Is this the same companies that have lost millions and needed bailing out by the taxpayer ?
That's right, you sell and I'll buy it.
FFS, I would listen to any of them.
The article is claptrap.
13. Will said...
Spot on debtfree.. Classic VI propaganda!
14. alan said...
With most of the major currencies either in trouble or printing, I can't see gold falling below $1100 - even in a spike.
IMHO, Gold may have the upward mobility to spike around $1400 by the end of 2010. There may be trouble ahead for the Euro this year, plus a number of other ticking time bombs....
15. mdmick said...
Towards the end of the article, there is the nugget:
"The thing is, no one knows ..."
Can I have a job writing articles too please?
16. Chilli said...
What would you guys say if I said Gold is a Fiat Currency?
Maybe I'm just being silly now. but Fiat Currency has value because we give it value. The value is a function of the supply of the money in its various forms and our demand for it.
Gold has industrial demand sure, but its industrial demand doesn't explain its volatility. Supply then might account for it, but a gold exchange should decrease volatility as investors take arbitrage opportunities. So industrial demand and gold supply doesn't account for the volatility. Its speculators running off to gold every time the proverbial sh*t hits the fan that makes it fluctuate, which is the definition of fiat currency. It has value because we give it value.
Only difference I can see is that no government controls the supply of gold. However, that doesn't mean there aren't a few gold cartels out there that do.
Something else; isn't there more industrial demand for silver rather than gold? I don't actually know, but I imagine its so. Silver should be valued more then surely?
Anyway the primary gold bug argument is to counter government abuse of money and the resulting inflation. But adopting gold didn't save Spain during our industrial revolution. Gold as a currency is obsolete.
17. hpwatcher said...
Anyway the primary gold bug argument is to counter government abuse of money and the resulting inflation. But adopting gold didn't save Spain during our industrial revolution. Gold as a currency is obsolete.
There is evidence to suggest that gold is already being used as a gold standard across europe - probably by default than anything else.
But adopting gold didn't save Spain during our industrial revolution. Gold as a currency is obsolete.
No it isn't because the fact is that it has real value today - and as a currency. Now if you said tulips, I would agree with you.
You have obviously made your mind up, but just watch as the value of your paper money evaporate.....