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It was suggested to me elsewhere on this forum that deflation could cause a dramatic fall in the value of gold. I don't understand the mechanics of this; in my beginner's mind I can't see why the headline price of gold wouldn't just fall in line with the general fall in prices. I'd like to tap your minds to expand this a little by asking what would happen to the value of gold for a UK citizen (and why/how) if:-

1)- Sterling plummets relative to all other currencies. Presumably if it halves in value against the Dollar, then gold becomes twice as expensive???

2)- The Dollar plummets, relative to all other currencies. If the Dollar halves against the Pound, then does the price of gold just double in Dollars, or does it become cheaper for us?

3)- Sterling and the Dollar plummet, relative to all other currencies.

4)- UK Inflation rises to perhaps 5 to 10% for a couple of years.

5)- Hyperinflation in the UK and/or US.

6)- Some deflation for a couple of years.

7)- Deflation for a few years.

8)- Steady rise in stock markets over a few years.

9)- Fall, either steady or quick, in stock markets.

Expert opinions welcome from people who really know what they're talking about!

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1,2 and3.

As GBP strengthens against $US, pog in UK gets lower. If you compare London Fix to exchange rates over last year you can plot to what extent. If $US were to weaken against other currencies rapidly then it's time to hang on.

4,5,6 and 7.

In economics inflation is how the currency in circulation, i.e., the money in our pockets, is handled with confidence. If the money is no longer trusted, because it has been debased, then the collapse of fiat as a token of exchange ends. Wiemar and Zimbabwe are the examples used.

You can't put a money price on gold in those situations, would you swap gold for $Zim ? The gold would have purchasing power as money in it's own right in those circumstances.

Deflation, the collapse of asset prices, would not affect gold. Gold would have an exchange value because it would be used as money having a universal acceptance. It's value as an industrial commodity would be wiped out, not it's use as a store of wealth, which is why it would be money that people accepted as such.

8 and9.

If stocks rally, as we have seen recently, then gold is sold to allow traders to go back to making a profit. It is after all their whole raison d'etre. As the shtf then investors go for the safe haven of gold.

All very simple and straight forward when you think about it.

Don't forget, the world is changing, not ending.

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Thanks DiggerUK for a clear and well-written reply. I'm giviing this some serious thought at the moment but, if it turns out to be a good idea, I'll probably miss the boat!

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Take care jumping in. Doesn't seem to be any great rush at moment. Little and often when you do. Market can turn on a sixpence.

Learn your subject. Ignore gold bugs.

I went early recently, not a disaster as I am below 540 average per ounce. But closer to pog than I am happy with.

You never know what the water is like until after you have jumped.

Live with your mistakes.

Don't expect to make a fortune.

Stay up, and ahead of what you paid by watching your average.

Most buyers are watching market like hawks at moment looking for their prey. Gauge your first buy right and you will survive. If you buy and it goes down afterwards you will at least lower your average with next purchase.

Sweaty palms are normal, so are sore eyes burnt out by screen watching.

Keep what your doing to yourself. Under, and off the radar, is the rule.

Others will be along to give you advice, stay close to your screen.

Happy stacking.

Good site here, look out for UK thread byBlackdug


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  • 407 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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