The price of Gold


#4181

In practice war and trade sanctions are a typical example where gold is used. During WW2 if you were trying to buy passage to the United States via Portugal you had to pay with gold coins or diamonds, the currencies of the conquered countries were worthless for the purpose. In Vietnam the peasants also used it as their bank during the wars there and many ethnic minorities in south east Asia hold it in case they need to leave quickly as they will be the the first in line for asset seizure from the ruling majority. However in these scenarios they have physical gold on them not allocated accounts in a Swiss bank. Odd that how the Swiss kept all the gold after WW2 until they were forced to make a settlement.


#4182

This is, and always has been a stupid argument. Why is it that gold bears always resort to the armageddon argument to try and prove their point? If I lived in Greece, I’d feel that some of my wealth was at least preserved by owning physical gold, outside of the banking system. I was glad I had gold when the Irish banks were nearly collapsed and Im pretty sure I’ll be glad I own it again in the not too distant future. Sure their are alternatives to owning gold, but everything
carries risk regardless which is why you need to diversify.


#4183

Would they not accept dollars? I assume they didn’t accept paper proxies for gold.

Wouldn’t foreign currency do? Or even German euros. Or even Greek euros, as physical currency, at a push.

The core goldbug theme is distrust. Distrust of governments, distrust of banks. Fine, but the downside is massive volatility as the value depends on other people’s hugely varying distrust of those same institutions. Seems like there must be much more efficient proxies for doom like deep out-of-the-money puts on treasuries.


#4184

I actually agree, there are lots of ways to hedge your bets, gold is just one. It’s not for everyone, which is just as well as there isn’t an awful lot of it to go around which makes it completely impractical as a currency. However it could be used in a basket of commodities as a peg. By the way, I expect distrust of governments to rise over the next years which is why I continue to own gold.


#4185

So how does average Joe in Ireland go about selling physical gold at the current prices?

I have always wondered this since gold doesn’t seem to be very liquid to me

Is there some jewelers or something one can go into (in Ireland) with their goldbars :smiley: and get cash? And what about Revenue I am sure the be very interested in this type of carryon

What I am trying to say is, are people actually buying and holding physical gold here or are yee guys buying Gold IOUs for some gold that might or might not actually exist in some vault somewhere. Gold just doesnt seem very practical to me…


#4186

Sell? No Mr Satechi, I expect you to buy. . .

I got involved a few years ago using Perth mint certificates and I’ve since exited. In Ireland if you want to buy and sell gold coins or bullion you can do it by an auction house or a numismatist here or in London or an online broker via the link above. FYI in Ireland all items of gold, silver or platinum are subject to compulsory assay and hallmarking. They must bear an Irish hallmark or an International Convention hallmark or an approved hallmark in order that they can be legally offered for sale. Most of the “we buy gold” shops have shut down, I never dealt with them so I can’t comment on what sort of prices you get. The revenue will allow you hold Perth mint certificates in your pension fund, and I don’t think there is any tax on gold sovereigns though I’d have to check.


#4187

Think you can buy physical bullion bars through Goldcore.


#4188

If you’re holding Gold as a buffer against some Apocalypse then you are probably best looking at those people in our Society who face the Government taking their money every day, criminals. Keep it on you, with the violent means to keep anyone but non state agencies from taking it. TBH that seems like to much hassle and stress, I can brew passable Beer so in the unlikely event of societal collapse in the morning I hope to be able brew my way out of trouble 8DD


#4189

There’s no tax on gold sovereigns. Silver is taxable though so be careful, grinds my gears.

Gold is money, but it’s not a currency. You can’t pay your taxes in it but that’s what currencies are for. You can however travel anywhere in the world and cash in your gold for whatever currency you want.

The markets are going through a tantrum at the moment as they are trying to bend the Feds arm for September. This wealth effect could quite quickly evaporate.
The world will be loosing patience with the US having the world reserve status if they keep creating these crisis.

The good news is I think the euro will be sound long term, if we can keep the peace with Russia.
All in my humble opinion of course - for every buyer there’s a seller.

For anyone thinking of buying mining shares, be sure to buy them in the right country/currency.


#4190

Gold is not money because you cannot buy goods and services with it. It’s a commodity. “Cashing in your gold” is no different than selling any other fungible good. You could equally claim pork bellies are money.

Mmmm, pork bellies.
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#4191

One of the requirements of money is that it retains its value. Pork belly wouldn’t retain its value very long due to its shelf life.
Especially if I eat it :smiley: . So, they are far from equal.

The world will revert back to a gold standard in the near future.

My mate greenspan recently said:
“Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can macth it.”
[/quote]


#4192

:laughing: you don’t do much to help stem the view that gold bugs are economically illiterate


#4193

Money is a “universally employed” medium of exchange. The function of money in is to facilitate exchange by making indirect exchange possible, without money there are no savings that can be liquidated, capitalism and the division of labour and welfare state we experience today are not possible. Socialists in theory don’t need money because they can’t do economic calculation (no private property and forced exchange), in practice anyone who tries socialism absolutely needs money to interact with capitalists or they will quickly revert to a hunter gatherer society. For example the dollar is the de facto reserve currency in the world today (Sterling was in the past), because it is marketable, you can quickly liquidate a commodity like oil, gold or pork bellies for dollars or virtual equivalent. It is that liquidity that makes it attractive to the modern state as a means of taxation and theft (bailouts and inflation), and it is from this manipulation that we get severe boom and bust cycles as economic calculations fail because of the earlier misinformation spread through the expansion of credit (i.e. promise of future goods in exchange of present goods), the error has to be corrected eventually so we experience the bust.

In practice today you cannot exchange a gold coin to buy the Sunday Independent, you have to go to an auctioneer first to liquidate it. So gold fails the primary function of money as a universal medium of exchange, secondary functions like store of value don’t matter when you fail the first test. Value is entirely subjective, how else do you explain the wildly fluctuating purchasing power of a gold ounce since the price fixing of Bretton woods agreement ended in the 1970s. It fails as a hedge against inflation and even with the current run up in value versus the dollar it never exceeded the 1980 high in real terms against the dollar and during the 2008 panic it’s price fell as it needed to be liquidated to meet margin calls.

You can certainly argue that gold retains some value compared with a unit of paper currency which tends to 0 in the end and that’s true over a long enough time period (how long do you expect to live?), you cannot argue that it protects against inflation otherwise you would need to explain what happened to the Spanish empire (gold money supply inflation destroyed their productive capacity) and they went bankrupt.


#4194

There seems to be an overriding consensus among the majority of posters here that Gold is a fools errand. I’m sure I’ll get some hate but here’s what I’m pretty sure is going to happen.

Collapse is happening right now, American, European and Chinese markets in a downdraft. Scrap Metal, Baltic Dry, Dow Transports, Caterpillar, Oil all indicators flashing red.

Currency war, Japan : Abenomics , Europe QE :will do whatever it takes Draghi, Fed QE1, 2, operation twist, QE 3, Taper, Belgium buyer suddenly buys BN400 Tbills, BLICS take over T Bill buying. The FED is trapped, it needs to raise rates to get some credibility but can’t with the Stock market crashing and China’s devaluation.

Cyprus precedent, bank bail in. This has been placed into banking law via G20, Europe getting last few countries signed up to this before end September. Greece capitol controls. You are no longer a depositor in a Bank you are the lowest ranked creditor, you’r money will be locked in while the currency is devalued.

I see folk here to saying gold has lost it’s value over the last few years, if you look back at the 1970’s bull market you’ll see there was a 50% correction from $200 to $100 in 74-75 before pushing through to $800. Sure it dropped from $1950 to $1100 painful in $ but not so bad in €, think it was 1290€? to €999?.

People say that you can’t spend Gold, course you can, any jeweler will pay you close to spot for a Government minted coin, if you hold silver you could trade some 50% pre 1947 British coins with that guy who sells Duck eggs, bigger things you could use 1oz coins.

When this collapse eventually concludes, the only way one nation will trust another is by going back to a Gold backed currency, much better than the current Oil/War backed model. If you are still lucky enough to be holding some Gold at this point, the banks that re-open will accept gold as a collateral for loans and you will be set up well to prosper in the new, real economy.

There you go, that’s my 2 cent. Think about it and do some research before you Gold deniers troll my head off.


#4195

You forgot about the zombies?

Edit:
I actually think gold looks reasonably priced – but for the rational reasons in my post above… not this mad shit: “going back to a Gold backed currency…” It only reveals underlying economic illiteracy. Half this thread was people saying that QE was money printing extraordinaire and would bring ze hyperinflation - all wrong - the ‘gold backed currency’ stuff is exactly the same and anybody who wants to hear reasonable investment advice should ignore it completely, it’s utter gobbledeegook.


#4196

Collapse, paradigm shift or creative destruction? If you are dependent on the existing system then it seems like collapse when you no longer benefit and are kicked to the sidelines, if you are sitting in the middle of the creative destruction then it’s boom time, if you’re a politician then it’s a paradigm shift and you’ve got to figure out how to market yourself. At any point in time all of these are happening at once. Imagine you are in Ireland in August 1916 what does the picture look like then? Chances are the losses in Gallipoli, and the battle of the Somme weighs more heavily on your opinion than the nut jobs who got shot in May. Does it look like collapse when you get the notification than your son and heir is dead? Would you have foreseen the power struggle and vicious civil war a few years away? Would accumulation of gold or the reserve currency of the day (pound sterling) been of much use to you?


#4197

Deniers and trolls, sure.

To take one glaring example of something you posted that’s trivially refutable…

europa.eu/rapid/press-release_MEMO-14-297_en.htm


#4198

Not trolling, but I’d be surprised if that was true. I know a guy who went to sell a coin and the pawn shop only offered him 60% of the spot price at the time. Are you saying most jewellers in Ireland would offer a vastly better deal?


#4199

Agreed, unfortunately the busts never occurred fully, nor was capitalism allowed to fully take place, so we have a system that is half right.

Come on boy racer, I don’t expect people to melt coins in their back garden before heading down to buy the indo - I expect a gold backed currency. Which is somewhat flexible, the money supply can be expanded and contracted. However expand the currency supply too much and a creditor will request gold instead. Which means gold passes the first test, the only issue with this is it isn’t politically friendly.

70’s there was huge amount of inflation so the price of gold went up, Paul Volker raised interest rates so the price of gold came back down, taken from Fed article;

stlouisfed.org/publications … ht-us-much

  • On Oct. 6, 1979, Fed Chairman Paul Volcker took dramatic steps to rein in the runaway inflation that had been sapping the strength of our economy since the mid-1960s. Without his bold change in monetary policy and his determination to stick with it through several painful years, the U.S. economy would have continued its downward spiral. By reversing the misguided policies of his predecessors, Volcker set the table for the long economic expansions of the 1980s and 1990s.

Golds price since the 80’s would typically be downwards as western societies gradually became primarily FIRE economies - interest rates were reduced to push up other asset prices. Problem is with FIRE economy is there is no currency flowing into the country, cash flow is circulated with some being siphoned off to creditor(manufacturing) countries. The problem arises when the FIRE economy tries to tighten - they cant as the dollars are held externally. Hence why the Germans are anal about manufacturing.

Gold price fell in 08 as it was liquidated - so basically there was a currency/credit crunch which means the value of the currency goes up due to demand. I’ll sell the pm’s when I see CB’s tightening.
Initially, in the next crash/recession, I expect the dollar to get stronger, stocks & real estate will be sold for dollars initially. Then the Fed to announce QE to try weaken/stimulate. Try and time that if you want but I think the next leg of the crisis is going to be more aggressive. Just like 08 was worse then 01, but effectively they were the exact same thing. The next one is going to be the Daddy of all crashes - thing is, the Fed must know this, so are unlikely to want to prick them. Just like they must have been aware of the bubbles they formed previously.

Sorry - but having a gold backed currency is a lot sounder than creating money out of thin air. I had a quick read of the Spanish empire and it collapsed due to the amount of silver discovered - so the money supply caused inflation. I would like to think that in the 21st century we have a good understanding as to the amount of gold in the world specially after the US had a gold backed currency not so long ago.


#4200

There was a huge amount of inflation pre 1970s, the price of gold went up because the price fixing arrangement ended, In 1979 the typical price was circa $300 and by 2002 it was still around that level, in real terms you lost if you held gold in that time period and we had massive inflation in that same time period the money flowed into telecoms, .coms, housing bubbles, south east Asia. Since 2002 gold prices rose in line with other commodities, most notably oil and they are now falling as are other commodities. Paul Volkers action made it attractive for people to liquidate their gold and silver holdings and hold cash in savings accounts and that provided the capital needed for the booms that followed as the same time the communications revolution and implosion of socialism opened new markets and increased the demand for labour in these markets. The value of gold does not rise in line with the expansion of money supply (inflation) and it’s purchasing power is subject to major fluctuations depending on the needs of market participants at any particular point in time.