Yes, but it's all speculation; we can only guess what / when they'll do certain things.
You would really hold on to hold to $500? Surely you'd be selling / re buying ... sure, gold is perhaps great for a trader, but not so much for a medium term investor imo.
I guess I just don't believe gold to be as sure-a-thing as many seem to think. Surely, if it were such an easy bet; it would already be priced to reflect all of these "guarantees" - the collapse of the USD, & all the other "facts".
Why aren't all managed funds pouring their money into Gold EFTs? Why does GS have short positions (do they still?) on gold?
Frankly, by the charts - depending on the year you begin from ... Gold has been a piss-poor performer! In 78'-80 it was 750 ... and it's only just hit that price range again! 30 years ... that is disgraceful. If you had bought in at 300 back in 79, & held with a long term, bottom-draw plan ... your money would not have made any gains if you sold up in 03. Wouldn't have even matched inflation.
All I'm saying is; it plummeted then, & it may eventually plummet again.
If this "secret, inside, select few, special" knowledge that seems to be possessed by many gold bugs doesn't ever become known / believed by the general public, gold simply won't budge.
Furthermore, gold is a metal. A precious, useless, shiny commodity; which merely has the perception of being something special
: But, I accept that - for the time being, & probably for a long while yet ... it is just that. Something special.
In the eventual-long-term (not in our generation) I do see gold completely collapsing. People argue that once there's none left to mine, prices will rocket ... I disagree. Prices could plummet! If there's no longer any work-value placed on gold (the effort in getting it), & no more can be made / found ... and as population grows / it's only held by a few, who the hell would buy the archaic relic? Perhaps collectors? I know I sure wouldn't
:
Here's something philosophical to ponder over; USD is backed by nothing? What is gold backed by?
...
Been away a few days, RS answered most but here's my view on it.. in Q&A..
What is gold backed by?
Gold is backed by the labour and capital required to extract it from the earth. It therefore has
intrinsic value - it has a
replacement value that bears relation to real world things.. salaries, truck tyres, rents. Paper notes have no replacement value- their production and printing cost almost nothing. They have value only in people's readiness to accept the intrinsically worthless paper as a store of value.
Why would people stop accepting PAPER as a store of value?
It begins when the net
yield on paper currencies turns negative. Jin Li has saved RMB 50,000 in a bank account, and it's earning 3.5%pa interest. But her money is losing its purchasing power at 7.5%pa - the rate of consumer price inflation in China. Will she be happy with her savings losing purchasing power at a rate of 4%pa year after year? Will US savers be happy with a similar annual loss? Cash savings in the US Dollar, the Renminbi, the Ruble and many other paper currencies are
losing value domestically year on year, because REAL INTEREST RATES ARE NEGATIVE. This isn't some mysterious knowledge unique to gold bugs - it's kitchen table reality. People don't like losing money. That's why the gold price has been rising strongly these 8 years. Not fear of deflation, not 'safe haven', not jewellery, not speculators, not Y2K:
negative real rates and more importantly at this point, investor anticipation of them.
Why are real interest rates in key paper currencies negative?
One week ago, the global financial system came within a hair's width of collapse. The Fed realises how serious this is - that's why they slashed interest rates. Consumer price inflation is now higher than the interest rate, and still trending up, while interest rates are being forced down. This makes real rates more negative, and paper currencies even less attractive as stores of value.
Why would people prefer to store their savings in GOLD under these circumstances?
Because gold is a universal currency that pays a 0% rate of interest, and zero percent interest is preferable to a negative rate of interest! Period! If you look at the history of government currencies through the Roman Denarius, French Assignat, US Continental, 1949 Chinese Yuan, Argentine Peso, etc.- all failed experiments in government money - you'll see that through the past 2000 years of history, whenever negative real interest rates prevailed in government currencies, the value of gold went up massively relative to those government currencies. It's pretty simple and logical.
Will gold go up or down?
Short-term aside, it's pretty simple: will real interest rates in the major currencies trend up or down? Personally I am skeptical that inflation is going to fall, after agricultural commodities just doubled or tripled in price, with strong fundamentals - and I'm skeptical that the Fed will now suddenly be able to raise interest rates to generate a positive real rate in the face of a slowing, debt-laden economy.
I'll be keeping my gold holdings until there is any reasonable prospect of real interest rates in the major currencies turning strongly positive for more than a year. That's when the 1970's gold bull market ended - when Paul Volcker in 1980 raised the overnight rate to 21.5% - vs. a 13% rate of inflation, giving a REAL interest rate of 7.5% - and kept it there. A similar measure will be needed to bring the current gold bull market to a halt - that is, to stop severely penalising cash savers. Anyone who thinks Bernanke can raise the nominal overnight rate to 10% in the near term should take their investment cues from US housewife parties, and sell gold!
Anyone who doesn't understand the central importance of negative real interest rates for gold should probably not get involved in precious metals because they won't know when to ultimately sell!
On the chart: gold sold off in early 1980 as contrarian investors anticipated positive real interest rates. From Jim Rogers, of soon after Volcker was appointed: "I sold gold after a speech by Paul Volcker: I could see the guy was serious about tackling inflation".
When Bernanke's successor delivers a similar speech I'll sell my long term gold holdings - but not before!