Gold price rises above $2k for first time
bbc.com
bbc.com
"While sitting in the shoeshine chair, Kennedy Sr. was alarmed to have the shoeshine boy gift him with several tips on which stocks he should own — yes, a shoeshine boy playing the stock market.
This unsolicited advice resulted in a life-changing moment for Kennedy Sr. who promptly went back to his office and started unloading his stock portfolio.
In fact, he didn’t just get out of the market, he aggressively shorted it — and got filthy rich because of it during the epic crash that soon followed.
They don’t ring bells at the top, but apparently when shoeshine boys start giving stock advice it is time to head for the exits."
https://www.businessinsider.com/how-to-spot-stock-market-bub...
Even if some of the guys at the top couldn't get out in time, they are unlikely to get ruined by playing the game. The guys at the bottom on the other hand, usually end up literally paying the price for their risk-taking.
It should be pointed out that this is true mostly of the _US_ _stock_ market.
Empirically, this isn't true of non-stock markets and isn't true of many non-US markets.
Buy-and-hold is a popular advice in the US because of the rather unique bull run over the past few decades in this market.
Disclosure: I own gold.
[1]https://twitter.com/stoolpresidente/status/12728866210300149...
Gold is a commodity, not an equity; gold behaves just like other commodities.
I consider it like the DEFCON level.
DEFCON 5 - Technical people who were aware of Bitcoin speaking
DEFCON 4 - New technical people who were not aware of Bitcoin (we are currently here)
DEFCON 3 - Business people
DEFCON 2 - Non-technical people
DEFCON 1 - Bathroom chats (last time I saw this was around the $17,000 mark)
It's 2020, who isn't aware of bitcoin?
Be careful of people asking where to buy a large amount of Bitcoin... since they probably just re-mortgaged their house.
I’m not sure this line of reasoning applies to altcoins whose maximum quantity can be set by the creator.
You have to look at market cap, not individual price. Why would all the BTC that’s around be suddenly 10x the value it was a year ago? What would drive that?
Because currencies can collapse in value, and some of them will. I lived in Russia in the 90s. The hyperinflation was so bad they had to revise price stickers in the stores upwards _twice a day_ at one point. Some stores even switched to electronic price displays back then to make this easier to do. This also drives up the prices more because merchants have to factor in the hyperinflation with the latency of replenishing the stock, meaning that by the time they need to buy more stuff, that stuff could easily cost twice as much, so they'd increase prices further to account for that future cost, and their supplier would, of course, do the same, and so on and so forth, further driving the inflationary spiral.
That wasn't because stuff was getting more valuable, that was because the ruble was collapsing through the floor. Those who had money either spent it on something right away, or converted it to dollars and exchanged only as much as they would need in the very near future. Except this time you don't get to do that because _dollar itself_ could collapse. A lot of the economy turned to barter deals by the way, where one type of goods was exchanged with another, often as a part of a multi-way deal, with little to no actual monetary component.
That's not to say that BTC won't collapse along with the currencies though. It's just that you can't print more BTC on a whim.
Armed with that experience, though, if you have a reasonably stable job, the best thing you can do right now is borrow a shit ton of money at historically low interest rates. If inflation hits (which it looks like it will), you will be able to pay back pennies on the dollar. All of the Russian oligarchs have gotten rich through a combination of hyperinflation and corruption.
I thought that was implied, but yes you're right.
So if some idiot says that stonk X is hot at 1$, the amount of money that is available to buy that stonk and pump it’s price up is much higher than for a stonk that’s at 1000$ and that only 1% of the population can put money in.
Lots of places offer the ability to buy partial stocks. Also, BTC and company all allow partial coins. Lastly, idiot retail buyers who can only afford a few bucks of anything won’t move the market.
Let's imagine we're in the future and bitcoin made up 5% of global wealth. In that case, do you think it would be easier for bitcoin to go up 10x than it was back in the early 2010s?
In particular, the huge bull run in crypto happened because mass retail and institutional money came into the market, bidding the price up. Arguably, if TSA agents are already bought into bitcoin (the implication being that TSA agents, as a class of people, are very unsophisticated investors) there isn't a lot more money waiting on the sidelines that could flood the market (not completely true, as there are still untapped pools of institutional money).
Picked up 200 shares right before the peak? a modest gain, if that. Maybe you miss the worst of the downturn, though.
Bought 200 shares 10 years ago and now it's peaking? Get them ducets, son.
gold, which he later used during the depression to purchase distressed assets like real estate.
The parallels between the 1929 crash and now are chilling.
I think we're at the cusp of a giant financial movement which will surpass the 1929 crash. And in times of upheaval like this, a lot of fortunes will be lost but a few will be made.
I just hope that we're generally richer now, especially with technology, that we can find a way to minimize the suffering.
"After all, the price of gold soared from 2007 to 2011... So why did gold soar? The main answer seems to be plunging returns on other assets, especially bonds, which were the product of a depressed world economy."
https://www.nytimes.com/2019/07/13/opinion/goldbugs-for-trum...
So we should expect the price of gold to rise while the pandemic is out of control. Once the coronavirus is defeated, we should expect the price of gold to fall.
But I would not hold my breath that this changes much after Corona. In 2019 the Fed tried quantitative tightening, which resulted in the December stock market correction, and a big overnight lending spike. From there they resumed QE (Which was one day supposed be a temporary measure in the great financial crisis). They did drop interest rates again in response to Corona, though. Not before.
J Powell already promissed rates would stay as low as they are for 2 years.
But right now the yields of the 10 year, e.g. are going below what a new issue should yield I believe.
Gold/Silver should lose some steam when the DXY goes up, or bond yields increase. (Both of which should also have a negative influence on stock and bond prices).
Also don't marry the idea of inflation to the CPI. There is asset inflation (think housing market and stock market), and inflation in certain products like food. But other things like transportation (perhaps of lower importance to poorer than for rich). It's not a black and white matter.
"Massive indirect unguided subsidies of money by the government."
Where the government does something directly, the results can be good. Look at Medicaid, which is generally thought to be the most cost effective form of health insurance that exists in the USA. The government overseas that directly.
But everywhere the government tries to offer end consumers a subsidy, so they can then try to use it toward some social goal, the result seems to be inflation.
If the dollar hyperinflates, where would people go? Crypto is obviously interesting, but gold is the supreme form of money that requires zero trust (while crypto is near trust-less, you still need to trust the cryptography to be secure).
[1] https://reuters.com/article/gold-cme/102-tonnes-of-gold-chan...
Gold hasn't always or everywhere been real money, I've personally worked on an archeology site where I sifted out a tiny shell bead with an even tinier hole punched in it so it could attached to a string like ancient Chinese coins and so on.
I once read a claim that J.P. Morgan said something like money is only worth the character of the person who wields it.
I feel more like interactions with other people are more precious than precious metals.
If the dollar hyperinflates, some people will go into bunkers. I'd maybe starve or hide... I don't have a plan, I'm way behind on stuff as it is.
"Gold Plated Tungsten Bars - Alibabawww.alibaba.com › ... › gold › gold plated tungsten 570 products - Alibaba.com offers 570 gold plated tungsten bars products."
The dollar is inflating right now, where are people going, besides gold? Why would the dollar hyperinflate?
As with stocks, the acronym TINA applies. As in, There Is No Alternative.
Yes, there are literally plenty of alternatives, but most of them have (dealbreaking) shortcomings.
As a very simple example of why this may be misleading, consider that house prices are not considered in the “basket of goods” that Americans buy, despite this being literally the most expensive purchase most people ever make.
The formula itself is also changed from time to time. If we were using the “old” formula, inflation would be MUCH higher (shadowstats.com for current numbers).
This is (widespread) mis/disinformation. The CPI carefully distinguishes between houses as capital goods and shelter/housing as something people consume. If you Google it, you will find that the equivalent rent for homeowners is incorporated in the CPI. Even if they ignored homeowners, the index would be very little changed if it was based on renters alone.
See https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
In order to compute the CPI-U, the people doing the work essentially call up 14,000 people and, if they own a home, they ask them how much they would theoretically charge in rent if they rented their home out.
The problem with this is obvious - most people do not do rent income estimates for a living and so the numbers are often quite far from reality.
More importantly, people find it very difficult to estimate future interest rates and they fail to take into account things like the sunk cost fallacy (see: 2008 financial crisis, where people in crashing markets still guessed they would be able to rent their homes based on pre-crash prices).
There is also the issue of a negative feedback loop, where low interest rates lead to lower than expected inflation, because “house prices only every go up baby!” - or in other words, people are perfectly willing to accept $3000 in rent even if the mortgage is $5000 if the house is increasing by $8000 a month in appreciation. This appreciation is hidden from the CPI because only theoretical rent is considered. The net result of the negative feedback loop is the fed sees that inflation is low, so it thinks it can keep rates low too, which leads to asset bubbles like in 2008. (And, likely, in 2020 with stocks too...)
That is not actually what hyperinflation means.
> We already have extreme asset price inflation...
Sure, but we don't have asset price hyperinflation.
> In my opinion it is only a matter of time before people realise what is going on, start dumping their dollars/euros/pounds/etc., and use something else for their daily transactions and savings, probably crypto at first.
Dump the dollars for what? Most people have no savings, they have a monthly paycheck that goes right to expenses for the most part. That alone greatly limits the velocity of money and therefore the rate of inflation.
Those people that (rightly) expect inflation (not hyperinflation) have already piled into other asset classes.
Either way, there can't be hyperinflation without a commensurate increase in money supply, which can't be achieved just by people spending their money more quickly.
> It is worth noting that every fiat currency throughout history, without exception, has hyperinflated and collapsed to nothing.
That is untrue. Hyperinflation is exceptional. Inflation over a long time can erode a lot of the value, but that isn't hyperinflation and it's not necessarily a problem either.
Nitpick. It limits the potential increase in velocity of money. Spending your money as soon as you get it is pretty much as fast as possible. The reason why there is little inflation is that these people don't have enough money to buy all the things they want to buy, meanwhile someone else is sitting on a fat stack of wealth and wondering what to do with it.
What follows is that people lose trust in the currency and convert their currency into assets that cannot be taken away. This is hyperinflation. The "currency based" economy shrinks and there is less wealth to extract from it. Since there are a lot of fixed government expenses the amount of money that needs to be printed grows exponentially.
I$ = inflation dollar
The economy = the part of the economy that still uses I$
Inflation dollars are equivalent to dollars (I$ = $) in the beginning.
The economy is worth $1000 and has I$1000.
Government doubles money supply by printing I$2000. (100% inflation)
The economy is worth $1000 and has I$2000. I$ = $0.5.
$500 worth of value has been extracted but it circulates in the economy.
Hyperinflation begins: People start losing trust and put half their wealth into gold or something else.
The economy is now worth $500 and has I$2000. I$ = $0.25.
The government still wants to extract $500 of value out of the economy so they need to print money at a much faster rate than before.
Government quadruples money supply by printing I$6000. (300% inflation)
The economy is now worth $500 and has I$8000. I$ = $0.0625.
$375 worth of value has been extracted.
More people stop using the currency which means the economy shrinks again forcing the government to become even more aggressive.
Right now the central banks are following strategies that eventually demand every penny back that they have handed out. If inflation happens they can easily reverse their policies.
There are plenty of definitions, just none that are universally accepted.
It’s similar to “recession”, which in the USA means two quarters of negative GDP growth but isn’t a universally agreed definition.
Colloquially, in the USA, “hyperinflation” refers to Average price increases of over one hundred percent per year for a “basket of goods”.
I actually have a blog post https://cryptm.org/posts/2020/07/09/alt.html where we create a minimum variance portfolio using gold and the S&P 500. And even though gold has high volatility and poor returns, this approach generates a higher risk adjusted return than the S&P 500.
Especially in an age when bonds are no longer countercyclical, gold is an attractive component of a portfolio.
https://jamanetwork.com/journals/cardiology/articlepdf/27689...
I won't touch the market with a stick because it's going in the opposite direction to the economy. There has to be a correction coming. I know there aren't good alternatives, interest rates are so low, etc. But I still think there's a correction coming, that's my two cents.
However, couldn't this be a sign that people are getting ready for if/when the current financial system fails?
Even barring a catastrophic nosedive in the level of civilized trading, regular people aren’t equipped to store gold in their homes. The problem of securing such holdings isn’t something the average Joe will be able to solve well, and he knows it.
The issue with doing that, is it is an insurance policy and not a immediately liquidate-able asset that can be traded in seconds. I think it is a sound strategy to take possession and store enough gold that in the event of a reset you can reestablish yourself. It is the closest thing to a guarantee that, that portion of your wealth will carry over into what comes next, in the unlikely possibility that it happens in your lifetime.
I don't know if I buy that. Show me how I can guy a commodity on the market and have it delivered to my house. And the guarantee that process will work when the global financial system starts imploding. For the vast majority of people holding gold, their holdings are only on paper, and that's all they'll ever be.
If I'm stocking up on items with physical value to hedge a complete economic collapse, I'd rather have butane lighters, buckets, vacuum sealed sugar/salt/grains, water storage, and ammo.
Also for myself personally, I purchased a simple test kit that most jewelers use. It is an electronic test kit that is very accurate for gold and platinum and when I look to reallocate some of my wealth to gold I buy scrap gold and test it. The kit was about a $200 investment but It allows me to buy the gold at a deep discount (deeper if it is not 24K) under the spot price for the day, you can melt it with a propane torch, that can be purchased from Home Depot and they make plenty of bar molds. It takes me about 5-10 minutes effort (short of procuring the gold) to turn scrap into bars. But if one does not want to go thru the effort, it's pretty easy to buy gold bullion at the spot price for the day + shipping, even on ebay there are plenty of reputable sellers. I don't trade in millions of dollars in gold and I have yet to liquidate any that I hold as I only hold about 3% of my total wealth in gold and I try to keep that pretty stable. Again I view it as insurance, not an investment, that being said if I liquidated it all today, it would have turned out to have been a pretty good investment.
Do you write a letter to your broker asking, "Dear, Schwab, I have $1000 in a gold ETF and shit is crazy now! Can you please have one of your customer care folks briefly stop stocking up on water and food, use a generator to turn your servers back on and verify I have that security? Then please deliver the equivalent amount of physical gold to my address via the postal system which is partially working? Thank you and look forward to continuing business with you!"
Point is, if you ever really need the physical gold behind the security it will not be available. To me, that makes the security worthless.
When society collapses gold will be completely worthless as well.
I don't see why not?
I have never had a break-in, but if I did I'm sure I could hide a few kilos well enough that a regular burglar would never find it.
Either way, my gold is in a bank vault, which seems safe enough, but I honestly would not be too worried storing it at home.
Not on their own, but once they've found you, they've found the gold.
They could set up a trusted storage facility to hold the gold in a vault for them. It isn't that hard to imagine. They could call it a "bank" if they really wanted to be traditional.
Just because you don't feel like being imaginative doesn't mean that people won't be when large amounts of money are on the line. People are downright ingenious when it comes to securing their wealth.
https://www.reuters.com/article/us-markets-saft/saft-on-weal...
>perhaps fearful of confiscation by a successful enemy or a government tax on capital, a plan that was mooted in Britain in 1920 ...
Hard asset confiscation, in the US case of gold, has been mooted, passed into law, and enforced:
There is no difference except that in a crisis gold will retain its value, and the stacks of paper money will only remind you of the better days.
Now, of course neither of them is optimal. The best way of maintaining your purchasing power is with a competent government. But that is even more rare.
Most consumer gold trading is done in grams, tenths quarters and half an ounce, outside of numismatic (old real gold coins, not bullion) due to its insane cost, it's easier to move assayed grams@$50 than $2000 single ounce coins for "regular" people. Also because it's easier to fake in larger ingots and XRF devices are very expensive, smaller assayed quantities move fast and are traded heavily.
Also, IIRC, gold quickly lost its trading value in post WW2 Germany because, uh, you couldn't eat it.
Does that mean dumping money into Vanguard or something else?
But unless we are in global civilization ending circumstances gold is good longterm bet, physical gold though.
If solar flare wipes out all electronics, your 100tons of gold in Switzerland are meaningless.
Crikey. What performance counts as good in your eyes? Gold has been a pretty rewarding investment for the last 20 years. I think the median annual performance for the last 20 years has been something like 10% in USD (worthless metric for an investor I know, but the point is that most years are very solid up years). That is a pretty reasonable performer in my low-risk book. 2010-2014 represented an unusual bad time to buy gold in a decade long trend of great years to buy gold.
In terms of actual return it depends when you pick your start and end date; but the fact that we sometimes have major crisis was always totally predictable and the major governments responses have been reasonably predicable. The only surprise at the moment is the specific fact that it is a pandemic and in 2020. The price pattern on the charts is not surprising.
Now it’s currently above the historic average so you do get 1% real returns from 1900 to 2020. But, stop in say 2010 and things look even worse.
Exactly. The 20 years range is cherrypicked for to make gold look good, it doesn't generalize.
If you had bought stock (and reinvested dividends) at the top of the market in 2008, you would've been better off with stock today. If you had bought gold at the top in 2011, you would've been better off with stock today. If you had bought gold at the bottom in 2008, you would've been better off with stock today.
Really, the only times where gold would've outperformed (to date) in the last 50+ years is around the time of the dotcom bubble and the last ~2 years.
Realistically though, you're going to buy the market at its highs and lows, you're going to exit at some point when you need to, so it's highly subjective.
Sure. And a horrible investment over the last 40 years. You’d still have a negative return if you bought in 1980.
In a normal environment it will not outperform.
That said, I don't know how much the gold price is affected by gold ETF vs physical transactions.
[1] example of gold coins that are very popular with easy liquidity: https://catalog.usmint.gov/coins/precious-metal-coins/gold/
[2] example of liquidity via ebay sales: https://www.ebay.com/sch/i.html?_from=R40&_nkw=gold+eagle+co...
[0] https://www.royalmint.com/invest/bullion/discover-bullion/ca...
It all went well for him until he started a payroll company to do the same thing in multiple states.
https://www.fff.org/2013/12/09/the-u-s-vs-robert-kahre-a-hor...
That said, I'm mainly playing with a hypothetical here. I'm highly skeptical the system will outright fail simply because the majority of the wealth (and thus power) belongs to those with a deeply vested interest in not letting it fail and there's generally not much power owned by those who actively want it to fail. Fiat has worked this long, so why not longer?
When the chairman of the Federal Reserve becomes a prepper, then you know it's time to find a shelter.
For total meltdown SHTF scenarios soap, alcohol, cigarettes, chocolate, and maybe seeds are much more practical as barter currencies.
Even without SHTF scenarios, physical gold is a poor store of value because selling physical gold to a broker is an expensive business.
A lot of prestige gold coins are sold at a price premium which brokers will just ignore when buying from you. Even on weight alone, you're very unlikely to get anything close to your purchase price unless the price has gone up by at least a double figure percentage.
The real question is how bad the Covid recession/depression is likely to get. If you're assuming there's a depression-scale downturn then "paper" gold makes more sense than a lot of other investment classes.
There are many, many scenarios other than Business-as-usual and Mad Max. Look at how hyperinflation has played out historically. In Argentina in 2001, imported things like medicine became very expensive. People sold small amounts of gold for fiat when these kinds of expenses came up.
Depends on what you mean by food. If you have enough time, food can be multiplied. One potato, properly handled, can turn into a field of potatoes. One walnut, properly handled, can turn into a forest.
I think the idea behind an apocalypse bunker is it will remain unsafe to go outside / farm using solar power for a few months to a couple of years but not forever.
I agree. You have to start farming at some point.
It's guaranteed not to happen in the short to mid-term.
Rising interest rates during a recession when the economy is massively over-leveraged and even the low-interest debt can barely be serviced would result in an even greater wave of defaults.
Low interest rates and QE are here to stay. The dollar will depreciate significantly, easing the burden of debtors and making American labor more competitive. Good for exports, bad for people who earn a dollar salary.
Gold appreciating (in dollar terms) is just a side-effect of this development.
You can have high interest rates, but if the market believes you are going to increase the money supply, that may not be enough to stop depreciation. That's why debt monetization through QE without QT is such a dangerous game.
Interest rates in the US right now are higher in the Eurozone, yet the dollar has depreciated against the Euro.
Lastly, while it is possible that the dollar will not depreciate against other currencies, currencies will still depreciate against assets.
The upwards trend of 2020 is due to Covid-19. There will be a correction when that crisis ends.
Krugman's first piece post 9/11 was about how getting to rebuild a skyscraper was somehow going to be a tremendous economic stimulus, as if the loss of so many knowledgeable and wise people being murdered all at once didn't occur to him... AT ALL!
In college I read the NYT everyday, thought it was the best paper in the world. Then one morning I opened my copy to see a full color photo of my rapist attached to a hagiography of how she had been elected to public office.
Now the NYT CEO is still Mark Thompson, who got the job because as Director-General at the BBC he covered up Jimmy Saville's... I don't have a word for it yet.
Walter Duranty won a Pulitzer for using the NYT to cover up Stalin's genocide of Polish people so that American media didn't seriously cover it until the 1980s.
Don't get me started on how many people with Gilead financial ties are acting as if financial incentives might somehow statistically significantly effect their behavior because it seems to just give me sleep deprivation.
He represents everything that’s wrong with government excesses and theft of its citizens via inflation.
50 years ago an ounce of gold was $35/oz. Today that very same 1 oz gold coin is at $2000.
That is, the price of gold in 1970 was highly distorted. It was not a market price. You can't use that price as your starting point.
And since the world is progressing in a direction of depletion of natural resources, the next deep recession might be the last.
We have seen many recoveries after many recessions, but there is no guarantee that there is a recovery. Sooner or later the earth will be in such a bad condition, that it will be impossible to recover.
Gold has been rising steadily for years, interest rates have been low for years. That's a lot of excess liquidity already in the market, it's just exacerbated.
Coronavirus disappearing from the news won't make all that excess liquidity disappear.
Gold and other assets will drop when that excess liquidity is removed through rate hikes and QT.
When will that happen? My money is on "never".
Investors generally don't like gold and would rather put it into any other asset class. When the fear wanes, the liquidity moves from gold into other assets.
'Stealing' it for 30 Billion? Give me a break... TikTok is not the hill to die on...
Except the amount is peanuts, peer countries are doing 2k/mo without issue but its somehow a struggle or hyperinflationary for the US to do 2400 over 6 months?
https://bitflate.org/post/2019/11/29/how-gold-became-money.h...
DEC technologies are still around. They just got replicated and extended into other technology stacks. It's not easy to replicate gold. The easy way is to mine more gold. Technologies are ideas. Gold is physical.
Bronze and iron became less popular after BC. Will steel go away any time soon? No. Humans have worked with gold much longer. Gold has had its ups and downs. It has always come back for thousands of years. This suggests it's not going away (Lindy effect).
A HAM radio and the skills to operate it would be worth more than its weight in gold in many disaster scenarios.
The three precious metals for a balanced portfolio. Gold, silver and lead
Not knowing how much this is true, my impression, as a layperson, is that the claims would mean investment gold was more of a financial mechanism that only works because everyone is playing along that it has certain value governed by certain rules. If that's true, I don't know when the rules would stop or change. I decided I'd rather just plow my savings into total-market index investing of US stocks, than blindly guess about how and when gold would help.
That said, the gold price has barely moved compared to how much silver has skyrocketed the past few weeks.
The question I'm pondering is, is the value of gold/silver skyrocketing, or is the real tangible value of the USD crashing? I guess only time will tell ️
A strong decline in the value of USD would be reflected in the prices of all commodities and their is no general commodity price inflation at the moment; the gold and silver price increases are an outlier. The price of gold and silver is increasing because the demand for gold and silver is increasing.
If our currencies and financial system were completely based off the value of gold and/or other precious metals where the amount on the planet is finite, wouldn't this eventually cause the opposite of inflation where the prices of goods and services go down as less and less gold is available as the population grows?
Wouldn't that also mean that wealth inequality and hoarding of gold make things even cheaper as less and less can afford to buy/sell at higher prices?
The real problem isn't the amount of money in the system, it's the amount of useful work being done, and the way the gains from that work are distributed throughout the economy. The ideal is a virtuous circle where distributed gains create more activity which creates more opportunity and invention which creates more gains.
The current system is based on control of the money supply, and is the opposite of that. Effectively it's just the Gold Standard without the gold. It leads to the same kind of hoarding and rent-seeking, both of which are economically destructive.
Nixon had to either devalue the dollar or completely default, and he chose to default and abandon fractional reserve banking altogether (though at the time promised it was only a temporary suspension of gold redemptions).
"The price of platinum changes along with its supply and demand; during periods of sustained economic stability and growth, the price of platinum tends to be as much as twice the price of gold; whereas, during periods of economic uncertainty,[7] the price of platinum tends to decrease because of reduced demand, falling below the price of gold, partly due to increased gold prices."
https://en.wikipedia.org/wiki/Platinum_as_an_investment#:~:t...
My general impression is that gold is going up because of its use in electronics. Platinum is also used, but in smaller amounts.
A typical iPhone is estimated to house around 0.034g of gold, 0.34g of silver, 0.015g of palladium and less than one-thousandth of a gram of platinum.
https://www.bbc.com/future/article/20161017-your-old-phone-i...
Of course gold's speculation value is essentially memetically driven by history and platinium tends to lack that.
* The practical uses of it are totally diminished because of this "novelty premium".
* Can't use it online
* Can't use it offline either (Can I buy a starbucks with it?)
* Securing it and moving it around is risky
I don't get it, who's buying this crap?
Edit: In response to child comment, I mean in the sense of the Lindy effect, not in the sense that age implies realness
There are untouched tribes out there in the Amazon who've been around for 1000s of years, it doesn't make their way of life better.
Just like those tribes in the Amazon, they will exist, but most of humanity will fork off that, it's already happening. Like someone else in this thread said: "You seem to be under the impression that only 'better' things exist. That is wrong." -> I agree with this 100%, old things will continue to exist, but they will be left behind.
The fact of the matter is that for literally millenia, humans have considered gold to be valuable. That is unlikely to change any time soon, though obviously the extent that we value it is always in flux.
It doesn't have anything to do with 'better'. It's a description of reality.
edit: I actually agree 100% on "You seem to be under the impression that only 'better' things exist. That is wrong."
Worse things will also exist, but won't be adopted by the majority.
There are many (better) arguments against the readoption of a gold standard. This one doesn't hold its weight (heh).
Is there proof that people are more anxious today than in the past? Is there proof that religious morals and expectations didn't have a negative impact on folks' anxiety levels in the past? What about religion means individuals would be less anxious, and how do you prove that?
My original point was that discounting past things like "religion" in black/white terms ignores that these things were the basis of advanced civilizations that led us to today and managed to withstand circumstances much worse than what we're facing today. Tons of horrible issues, but focusing on the bad parts is too easy and narrow-minded.
My point being, Gold is a delusion, just like paper.
Notice how this entire system depends on the government's monopoly on violence. The real modern delusion is the many layers of indirection that insulate us from the real source of power in the natural world. Whether the thing that has value is gold, silver, paper, or bottlecaps doesn't matter. What matters is that the one holding the guns says it has value.
> Indeed, money is probably the most successful fiction ever invented by humans. Not all people believe in God, or in human rights, or in the United States of America. But everybody believes in money, and everybody believes in the dollar bill. Even Osama bin Laden. He hated American religion, American politics and American culture — but he was quite fond of American dollars. He had no objection to that story.
https://bitflate.org/post/2019/11/29/how-gold-became-money.h...
A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.
A bit pedantic but even if the value of gold rises from increased demand the fact one can mine it and get in on it means they would have gained from it while being newer. Furthermore it technically takes from the older holders by reducing the demand slightly.
Gold as a commodity is almost exclusively priced in dollars globally. If the dollar plunges, gold will spike higher accordingly.
US spending being out of control right now (pointing to aggressive dollar debasement as the Fed 'prints' - runs QE infinite to monetize the ever expanding debt) and concerns about the condition of the US economy near-term with the virus, have pummeled the dollar lately.
So the price of gold is up due to the drop in the dollar, and there is a considerable fear premium on gold right now as well (likely to the tune of several hundred dollars). As that fear fades you'll see a drop in gold, from whatever new high it puts in, as in 2011-2016. It'll set a new higher low due to the dollar losing real value it will never recover from the spending spree going on (there is probably going to be $5+ trillion in unexpected spending that will occur over several years due to the virus, which was not baked into the dollar or price of gold previously).
so, in "lures investors and pays profits to earlier investors with funds from more recent investors", the mechanism of "luring" is fear.
> 2) the USD is falling rapidly
seems to be a part of 1)
> Gold as a commodity is almost exclusively priced in dollars globally. If the dollar plunges, gold will spike higher accordingly
Isn't gold priced by a market? if the market has to move, the people must be willing to pay more dollars (or to say it another way: they have access to cheap dollars). It seems like people are exchanging their cheap dollars for gold, this is the part that doesn't make sense to me.
* It’s relatively rare and production is naturally very limited (in contrast to e.g. diamonds that can be produced from carbon)
* It has a special tax-free status in some legislations.
* It can hardly be destroyed (you can easily loose your bitcoin when your hard disk dies)
* it’s beautiful and you can use it for jewelry and art
Seems like a good choice if you see the risk of inflation, or of a state taking your money.
don't you mean jurisdictions?
>* It can hardly be destroyed (you can easily loose your bitcoin when your hard disk dies)
>Seems like a good choice if you see the risk of [..] a state taking your money.
This doesn't really make sense. Sure, you'd lose your bitcoin, but only if it was the only copy. Since bitcoin is stored as information, you can store as many copies as you want. You can't do that with gold. The non-physical nature probably makes it better than gold if you have a proper backup plan. Also, if your goal is to guard against someone (including the state) taking it, bitcoin is also hard to beat. Gold takes up space proportionately to how much you have, so it becomes harder to hide the more you have. With bitcoin you can hide an unlimited amount anywhere - between the pages of a book, under a rock in your garden, even inside your head.
Also, to add to the jewelry point, humanity has a nearly unlimited desire for luxury and will always seek out status, which is why so many thousands of years later humanity still has such an immense desire for gold jewelry when we very obviously don't need it. Status seeking is not going away.
The continued expansion of human population, rising living standards and finite quantity of gold, ensures it will grow more scarce per capita (driving up its perceived value persistently).
At the median our soon to be eight billion people will have a higher standard of living than when we had only one billion people. There isn't nearly enough gold to match that extraordinary change.
you are correct, but what is high status now may not be high status in the future. For example: it used to be high status to have gout, but not so much now.
* It's soft enough to divide
* You can carry a lot of value in a small volume/weight
* It doesn't corrode (you can bury it, burn it) so it can be passed along generations
So, you're telling me that I go up to buy something that is worth .25 oz in gold with a 1 oz gold coin, I can break it up on the spot and hand it the cashier?
i've seen it go down to 1g of gold for ~$90 in today's prices.
Of course this requires the gold coin is made of pure gold and not alloyed with another metal.
What about the gold-rich asteroids we can mine?
> It has a special tax-free status in some legislations.
This is a non-starter for me, someone can lobby the government to undo this easily
> It can hardly be destroyed (you can easily loose your bitcoin when your hard disk dies)
You can literally lose gold, just like how you can "loose" your bitcoin (who stores bitcoin on their hard-drive now anyway, it's 2020, there are paper wallets too, in fact, I can literally memorize 12 words)
> it’s beautiful and you can use it for jewelry and art
Sorry, I don't wear jewelry.
Which asteroid(s) are you speaking of?
The price is based purely on speculation that it will go up. Which is frankly not much different from Bitcoin in its current form.
In order for gold to have more utility it either needs to be used as a medium of exchange or other new uses that utilize its precious metal properties.
But I don't really have any evidence to support my position. Do the nutters have enough money to move the price?
The point is that Bitcoin reach as a medium of exchange is limited. I would argue on a global scale, it's as limited as gold.
You realize you can manage a bitcoin wallet yourself right? I'm a software engineer, I trust the code that I can verify myself. And, regarding the brokers, I'd rather trust a decentralized public ledger than some dude's private ledger. Thanks.
Like, keeping gold in your house is gonna prevent you from being hacked (to death)
Compared to other "real" things, gold can be liquidated into dollars VERY quickly if you need to make a transaction, and since it's a real thing, it cant disappear.
Also, often gold is stored by the company you bought it from on your behalf, so you can sell it back instantly online. So no need to have to have a home safe.
Also, at an average return of 10%/year over the past 10 years (at least in australian dollars) it's has been out performing many other investment options.
> Compared to other "real" things, gold can be liquidated into dollars VERY quickly if you need to make a transaction, and since it's a real thing, it cant disappear.
What happens when someone sticks you up and takes your gold away?
> Also, often gold is stored by the company you bought it from on your behalf, so you can sell it back instantly online. So no need to have to have a home safe.
Isn't that how the dollar got started and here we are.
If you're thinking about doing this with jewelery: Do you know that gold jewelery mixes other metals to make it a bit more durable? and you pay fees on making it too
if you're using gold bars: How do you make sure things like this don't happen: https://www.bloomberg.com/news/articles/2020-07-15/chinese-j...
I got a quote, yes. It was a little below market, but not significantly.
https://bitflate.org/post/2019/11/29/how-gold-became-money.h...
then in 2019, I saw a chart of asset prices over the last 20 years. Gold, oil, and real-estate out performed the sp500 over that 20 year period (to me, a reasonable 'long period of time').
its actually still true today in 2020, probably will remain so for a long time.
gold aug-2000:aug-2020 = 409:2000 or 4.89x sp500 aug-2000:aug-2020 = 1471:3327 or 2.26x
that is serious under performance over a 20 year period, which has been true for ever a year now. not true with oil anymore though.
I'm not saying you cherry-picked August 2000 as a starting point to make gold look good (20 years is a nice round number and a reasonable time span), but if you were cherry-picking you couldn't do better than that.
[1] https://www.google.com/search?q=sp500+historical&oq=sp500+hi...
[2] https://www.macrotrends.net/1333/historical-gold-prices-100-...
The problem is, someone who is working and saving money away doesnt get to choose the window they are in.
I wouldn't buy gold here, but if gold ever drops around the range of 1500, I am not going to miss that chance again at having some of it in my portfolio.
Aug 2000 was the near bottom for gold and the near .top for the sp500.
If you bought gold in 1980 (the peak) you’d still be underwater even with the current jump in price.
Gold really sucks over long term investing windows (eg 30-50 years) although it, like pretty much everything, will have specific windows of outperforming the s&p.
No window is good at predicting any asset. As in, previous returns can't be used to predict anything.
Nobody cares about 50 year windows if that is well outside of their investment window. realistically, a person has about 20 years to build up assets before they need to switch to more safer bonds so talking about 50 year windows is like me saying I want to live in this geography for nice weather and you saying 'well over geological epochs, this place is far more stable'.
I think the sp500 should be most people's primary investment. but I also hate people who say the sp500 is infallible, when they used research that only looked at 1952 - 1999. so when you see people parrot 'the sp500 beats all asset classes over any long period of time'. well 20 years is a long period of time.
I want a 50 year horizon for intergenerational wealth. For myself, I started at 20 and probably wont retire until 65-75. Although it won’t all be in s&p at 75, some of it will.
The 20 year window is useful for retirement, but the fact that one 20 year window in the past 100 years out performed isn’t that handy as the s&p usually outperforms gold.
That being said:
I have enough Krugerands and similar gold coins in a very secure safe (in ground, in concrete) so I could GTFO if I had to and go somewhere else. All 4 of my grandparents had to pack up and leave suddenly and having something small you can pawn/hock/sell is handy. (Two fled Lithuania, one fled Belarus, and one fled Gaza City in 1929 when all the Jews were suddenly expelled. The families had all been living comfortably in the respective location for hundreds of years--or thousands in the case of Gaza.)
No real dips for the last 60 days. There might be one that goes below current level in the near future but there also might not be.
Insightful.
I truly don't see gold being of any use in a collapse where suddenly food is the most valuable asset.
Maybe some where helped by it, we don't know. But better to have it than not to, unless you announce to the desperate masses that you have lotsa gold
>>I truly don't see gold being of any use in a collapse where suddenly food is the most valuable asset.
You can do without food for weeks, and many will trade food for gold ("I have enough food" etc etc). plus, you can provision for food too. The idea is to make believe you don't have x% of your networth and buy gold/silver/guns/food/land with it for that one moment in time.
[1] https://fred.stlouisfed.org/series/M2V
[2] https://en.wikipedia.org/wiki/Monetary-disequilibrium_theory
I don't think M2 takes into account money going into derivatives, does it??
I'd propose that most of the stimulus is going directly into propping up the US financial market.
My take is that bubble might burst when markets realize that the situation is still getting worse i.e. earnings and GDP continue to decline winter 2020/spring 2021.
Which has very similar market conditions.
I managed to find a company that offers "pool allocated storage" for free, with an option to "cast" it to a shippable product for a small fee. Perhaps it's worth you shopping around for cheaper storage?
I wonder if that's where the programming term cast comes from.