Gold Price - Where is it heading?

[Tysonboss1]

I see Gold as money that never ever changes in value

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I Beg to differ, Gold changes in value every day, less than a year ago it was over 1900 USD now it's closer to 1600 USD, do you really think that the USD has improved in value by that amount

it is Fiat currencies that have the wild swings.

Yes they can move in value, But not as quickly as commodites like gold

Id much rather do all my dealings in Gold and Silver but things dont work like that (yet)

Really, you want to lug physical gold around, seems like a step back to the dark ages to me.

 

[CanOz]

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Really, you want to lug physical gold around, seems like a step back to the dark ages to me.

Perhaps a gold linked currency....now there's a novel idea!!

CanOz

 

[sinner]

Perhaps a gold linked currency....now there's a novel idea!!

CanOz

Gold linked currencies, so 1900s.

Currencies which sever the link with gold? Now that's what I'm talking about...

Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002.
What is money? Economists know that money is defined by the functions it performs, as a means of exchange, a unit of account and a store of value. But, just as importantly, money is also defined by the community for whom it performs these functions. Because it is an economic instrument for each of its users, it is also a political and cultural bond between them. Consider this simple fact: we engage in an exchange of goods and services everyday by using money as the means of exchange; and we offer our labour in exchange for money, which, in itself, has no value. We only do this because we believe that we will, in turn, be able to exchange that money for more goods or services. This fact tells us much about the confidence that we place in money itself. And it tells us much more about the confidence that we place in each other. Hence, money is, in essence, a social contract.

The euro, probably more than any other currency, represents the mutual confidence at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. It is not backed by the durability of the metal or by the authority of the state. Indeed, what Sir Thomas More said of gold five hundred years ago – that it was made for men and that it had its value by them – applies very well to the euro.

http://www.ecb.int/press/pr/wfs/2011/html/fs110706.en.html


ECB structures their balance sheet such that
Currency: means of exchange, unit of account
Gold: store of value

I laugh at those who still think dollars bid for gold and not the other way around.

http://fofoa.blogspot.com.au/2011/07/euro-gold.html

The point is that the Eurosystem's response (volume expansion) to its current systemic threat (the debt crisis) is not surprising. Does this mean the euro will collapse (experience hyperinflation)? No. Because, for one reason, it has severed the link to the nation-state. The euro is behaving perfectly predictably in maintaining the nominal performance of its system through expansion, but it cannot be forced to fund the future government profligacy of the PIIGS through volume-only expansion. That link is severed.

But the dollar, on the other hand, is nominally on the hook not only for the debt mistakes of the past, but for all future dollar-denominated liabilities, obligations, entitlements and promises of the biggest debtor in all of history, on top of a debt mountain that is probably another $100T in size depending on your measurement criteria. That's a big difference. The dollar is an old currency in the winter of its life, linked to the greatest profligate debtor the world has ever known. The euro is a young currency that has severed its link to the nation-state. The ECB can save its own system, but the member states cannot force it to fund perpetual profligacy.

Here are a few simple principles that will save you the hassle and embarrassment of constantly being surprised by the actions of politicians and central bankers. They will never sacrifice the system to preserve the value of the currency. But they will always sacrifice the currency to save the system. And there is a very simple formula for how they do it.

 

[CanOz]

Whatever...my point was that a gold linked currency is LIGHTER than carting around physical gold...

I'll leave the fiat currency argument to you and UF...not much interest in it.

CanOz

 

[sinner]

Whatever...my point was that a gold linked currency is LIGHTER than carting around physical gold...

I'll leave the fiat currency argument to you and UF...not much interest in it.

CanOz

My point is that someone came up with an even better concept than that, gold linked currency might be lighter than gold but its supply doesn't expand and contract readily enough for the means of exchange/unit of account needs of modern economies. Gold linked currency might weigh less than gold but that doesn't make it very economically useful.

The Euro has been set up specifically for consumers/debtors to have a stable means of exchange and unit of account, leaving the gold as a store of value for the producers/savers. So you get all the benefits of 'lighter than carting around gold' coupled with golds systemic stability/confidence on the ECBs balance sheet.

 

[CanOz]

My point is that someone came up with an even better concept than that, gold linked currency might be lighter than gold but its supply doesn't expand and contract readily enough for the means of exchange/unit of account needs of modern economies. Gold linked currency might weigh less than gold but that doesn't make it very economically useful.

The Euro has been set up specifically for consumers/debtors to have a stable means of exchange and unit of account, leaving the gold as a store of value for the producers/savers. So you get all the benefits of 'lighter than carting around gold' coupled with golds systemic stability/confidence on the ECBs balance sheet.

So basically the currency is fine, in design. Its just the politics and the lack of a fiscal union that lets it down?

CanOz

 

[sinner]

So basically the currency is fine, in design. Its just the politics and the lack of a fiscal union that lets it down?

CanOz

Define let down, right?

If by let down you mean that profligate countries can't murder the "medium of exchange" to dig themselves out of a consumption hole at the expense of taxpayers? Then yep, the Euro has been let down.

But on the other hand, all those people using/trusting Euro as a medium of exchange/unit of account haven't been let down, the ECB has fulfilled their stability mandate, and any dilutions/liabilities added to the balance sheet are announced to the market every month/quarter in the ConFinStat. i.e. the market can discount/markup the price of the Euro to match what they see on the balance sheet.

 

[CanOz]

Define let down, right?

If by let down you mean that profligate countries can't murder the "medium of exchange" to dig themselves out of a consumption hole at the expense of taxpayers? Then yep, the Euro has been let down.

But on the other hand, all those people using/trusting Euro as a medium of exchange/unit of account haven't been let down, the ECB has fulfilled their stability mandate, and any dilutions/liabilities added to the balance sheet are announced to the market every month/quarter in the ConFinStat. i.e. the market can discount/markup the price of the Euro to match what they see on the balance sheet.

Well i suppose it hasn't completely calved it yet...

CanOz

 

[Uncle Festivus]

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I Beg to differ, Gold changes in value every day, less than a year ago it was over 1900 USD now it's closer to 1600 USD, do you really think that the USD has improved in value by that amount

Well yes, it has been a major influence - although it's been relatively benign when compared to the rise in the DX. It is expected that the POG would decline as more money flows to the USD as other currencies implode up until the point where the USD is itself under threat from implosion.



Oh, thanks for throwing in the Buffett Bomb, again - the poster boy for compounding inflation investing.

As has been repeated before, if you hold Euro's do you still trust them to still hold any 'value' in a years time?? What is a 1913 USD dollar worth today? Be carefull how you measure growth & wealth because it usually doesn't account for the diminution of value of the measuring currency as opposed to inflation?

As soon as you receive a dollar note in your hand it will start losing value, unless you do what Buffett etc do and get rid of it into something that will benefit from inflation and loose liquidity by central bankers, which up until now has been equities & housing. It's different this time, ie the 'X always goes up' paradigm has already shifted, but unfortunately Buffett probably won't be around to see that his old rules don't apply anymore?

 

[explod]

Nomura Securities cut its gold price target this year to $1,754/oz from $1,791/oz, but lifted its targets for 2014 & 2015. Nomura said that central-bank buying, continuing strong Chinese demand, persistently negative real interest rates, and a growing bunker mentality for those investors who see dark scenarios on the horizon, were all positive for gold.

Today from:- https://twitter.com/#!/goldcore

 

[Joules MM1]

..... unfortunately Buffett probably won't be around to see that his old rules don't apply anymore?

is this part of a stand-up routine......Charlie Munger would find it funny and most of the BH shareholders.....as do i......

classic......

 

[Joules MM1]

for the times i've watched equities and gold decline and incline together, it's all the necessary evidence to suggest the power of credit debt withdrawal...in other words liquidity via gold instrument or equities instruments are not distinctive in a deflationary collapse......money does not auto flow to gold and you can see that event show in the oct 08 low gold declined 1030 zone through 700 zone.......not long afterwards equities rejoined the incline ....think on that fear period and think on the % of loss.....

at the worst deflationary end you would find equities at their worst prices.....and yields at the their best.......if current yields are 4 or 5% what are they likely to be at with equities at 90% below fair value? What is the yield going to be on gold.......

what gold holders dont agree with is that in a major decline everything declines.....you wont know where it will end just like the holders who gave up as gold hit $255 in 2000......faith in proven cycles that produce earnings is one thing and blind faith in a centuries old tale of promise is quite another.....a government is unlikely to confiscate your yield and most definately confiscate or regulate the value of you gold holdings......if that deflationary period comes to pass very few will have the purchasing power to accept your gold and such a severe event gold will be sold at heavy discount to pay down debt.......it's a liquidity vehicle not sure-fire concrete guarantee

 

[explod]

Washington Blog is a site well worth checking out for gold holders in my view.

The following on gold would indicate it is a sound investment.

http://www.washingtonsblog.com/2012...gulations-would-drive-gold-prices-higher.html

 

[Uncle Festivus]

is this part of a stand-up routine......Charlie Munger would find it funny and most of the BH shareholders.....as do i......

classic......

Cracks me up too

 

[Uncle Festivus]

if that deflationary period comes to pass very few will have the purchasing power to accept your gold and such a severe event gold will be sold at heavy discount to pay down debt.......it's a liquidity vehicle not sure-fire concrete guarantee

The purchasing power will be in the form of what they own, & willing to exchange for what they need.

If indeed central banks get to the point hat they have to sell the gold they may or may not have in their vaults, as it is not audited, then there will be more than enough willing to swap their, say, Euros for some other form of value store rather than for the money in their pocket to evaporate completely.

It's always been an interim device. There are even less guarantees with the alternatives??

Do you trust bankers & politicians to fix this? They have had more than enough time historically - we should be well out of recession when compared to past recessions - yet here we are on the verge of another global recession.

Patiently awaiting QE3.....4......5......6......?

 

[CanOz]

Perhaps GLD would be a better comparison, is the index reweighed? would there be survival bias in it?

CanOz

 

[Joules MM1]

Cracks me up too

........you'll benefit....as in, avoiding fitting for the sake of defending and there's a major plus to that idea

read the whole piece

http://www.trade2win.com/articles/1738-how-lie-financial-statistics

one final point .....as i keep saying that gold as a liquidity vehicle is like any other trade, simply a trade .....and if youre new to the auction arena, that is, the person to person sense of value within an auction, then, you'll do well to read that article and store it for future reference......i am of the opinion that in all instances where emotive logic dictates asking all the questions that'll lead to confirming a bias is not the same as asking all the right questions that lead to a balanced position that allows the trader to be both sides of the fence without having to defend one or the other.......

 

[Joules MM1]

The purchasing power will be in the form of what they own, & willing to exchange for what they need.

therein, is the key; in a severe deflationary period; what one owns is falling in value with everything else, yet, that is not the challenge, the challenge is finding someone who'll exchange your goods for gold, while, in the meantime, actual fiats gain in buying power......so having ownership is only of value in so much as you can utilize them, vastly different to trading them.....once values fall in tradeable prices, your past sense of their future worth falls away......you see, fiat currencies operate now and in the event that gold bugs dreams come true there'll be the kind of upheaval that will not be wirth the upside once the battle is over......afterall, how would gold benefit us once youve taken away the ownership of the masses and put it into the hands of the people who currently rely on fiats?

anyways, not sure the reason i got involved in this convo, least to say, if youre acting on cognizant faculty and not fear, then, good luck to you holding onto the dream......

 

[explod]

Gold is real money.

Very interesting takes coming through now but the punch line is at the end of this short article.

http://www.marketoracle.co.uk/Article35347.html

 

[Joules MM1]

http://www.zerohedge.com/news/will-india-implement-first-executive-order-6102-21st-century

gold, India, currency

excerpt

It appears that finally after months of "being long of Gold in Indian Rupee terms" having proven to be quite a resilient and profitable strategy, the Indian state has also figured it out. And they are unhappy. Because to them, the key reason for the rupee weakness has nothing to do with the actual economy, and all to do with the Indian population trying to protect against currency debasement coupled with inflation: i.e., purchasing gold. And they will no longer allow it.