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Author Topic: Buying Gold to hedge against inflation  (Read 130889 times)

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Offline JeanClaude

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Buying Gold to hedge against inflation
« on: March 10, 2010, 11:38:49 AM »
Gold is at 1150 usd and rising, .......anyone scared yet?
http://www.youtube.com/user/geraldcelente#p/u/8/1pOC0eHaeA8

By the way, I have read somewhere that only Ukrainian nationals can buy farmland? Or is this the wrong country to invest into assest like that?


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Offline Chris

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Re: Buying Gold to hedge against inflation
« Reply #1 on: March 10, 2010, 12:05:21 PM »
Gold is at 1150 usd and rising, .......anyone scared yet?
http://www.youtube.com/user/geraldcelente#p/u/8/1pOC0eHaeA8

By the way, I have read somewhere that only Ukrainian nationals can buy farmland? Or is this the wrong country to invest into assest like that?




The third biggest land holder/farmer (farmland) in Ukraine is a British Company, not sure how they go about buying it though. I was going to buy some 2-3 years ago but having a Ukrainian wife would have sorted out any problems, not sure if you as a foreignor can buy/own land or not and even if you could, it is still risky owning something where the rules can change on someones whim.

Chris
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Offline JeanClaude

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Re: Buying Gold to hedge against inflation
« Reply #2 on: March 10, 2010, 12:53:56 PM »
Gold is at 1150 usd and rising, .......anyone scared yet?
http://www.youtube.com/user/geraldcelente#p/u/8/1pOC0eHaeA8

By the way, I have read somewhere that only Ukrainian nationals can buy farmland? Or is this the wrong country to invest into assest like that?




The third biggest land holder/farmer (farmland) in Ukraine is a British Company, not sure how they go about buying it though. I was going to buy some 2-3 years ago but having a Ukrainian wife would have sorted out any problems, not sure if you as a foreignor can buy/own land or not and even if you could, it is still risky owning something where the rules can change on someones whim.

Chris

Hey Chris, that is really weird, do you have a name of that company, so i can ask some questions in the legal forums
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Offline shakespear

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Re: Buying Gold to hedge against inflation
« Reply #3 on: March 10, 2010, 01:19:09 PM »
Gold is at 1150 usd and rising, .......anyone scared yet?

I'm not a huge alarmist, but I have been buying 1 South African Krugerrand every three months for the past 3 years - more to provide a bit of diversification than a fear about the collapse of the worldwide financial markets. 
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Offline Manny

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Re: Buying Gold to hedge against inflation
« Reply #4 on: March 10, 2010, 03:38:46 PM »
The Sovereign Society were tipping gold years ago.

The boat has sailed. When everyone knows about it - as with everything - it is time to sell.

Bill Hill once said, "When the Dummies are getting rich is the time you sell" - he was right.

Tech stocks, property bubble, the dollar (for us)........ when everyone knows, its time to bail. Everyone knows about metals right now.
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Offline JeanClaude

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Re: Buying Gold to hedge against inflation
« Reply #5 on: March 10, 2010, 05:59:32 PM »
Manny,

All things equal you would be right, but i believe it is not a bubble as bubbles are artificially created by low interest rates.

Low interest rates-> your savings decline because  inflation surpasses interest on savings-> people run to the stockmarket-> overinvestment in stocks-> bubble.

Gold has been riding steadily since 2002 and sharply since 2006 (The Fed stopped publishing M3 numbers in 2006 so nobody knows how much USD is out there)

I hear Gold rising to 2000 easily, but it all depends on the action of the central banks, and it is not looking good! 
Your lucky the UK is not in the Eurozone, (Greece situation)
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Offline Herrie

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Re: Buying Gold to hedge against inflation
« Reply #6 on: March 11, 2010, 12:27:58 AM »
....
Your lucky the UK is not in the Eurozone, (Greece situation)
I wouldn't be too sure about that. Stories go already that UK *might* be the next Greece. Pending elections and insecurities about the future policies of the government steer investors away from the UK. The GBP has been dropping again in the past few weeks due to this...

Offline Chris

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Re: Buying Gold to hedge against inflation
« Reply #7 on: March 11, 2010, 01:23:17 AM »
Gold is at 1150 usd and rising, .......anyone scared yet?
http://www.youtube.com/user/geraldcelente#p/u/8/1pOC0eHaeA8

By the way, I have read somewhere that only Ukrainian nationals can buy farmland? Or is this the wrong country to invest into assest like that?




The third biggest land holder/farmer (farmland) in Ukraine is a British Company, not sure how they go about buying it though. I was going to buy some 2-3 years ago but having a Ukrainian wife would have sorted out any problems, not sure if you as a foreignor can buy/own land or not and even if you could, it is still risky owning something where the rules can change on someones whim.

Chris

Hey Chris, that is really weird, do you have a name of that company, so i can ask some questions in the legal forums

Jean Claude

Read this thread

Quote from: Chris
Ukraine  has a huge farming potential, but it is clogged with small farms, growing patch-work quilts of near-subsistence crops, in between thousands of hectares of land abandoned years ago.

The soil is superb black loam and the rainfall in Western Ukraine at least is a very adequate 600mm - 700mm, long hot summer days ensure 6tonnes per hectare of milling wheat and 4tonnes per hectare of oilseed rape can be harvested under long summers clear blue skies.

However,  there is virtually no investment. Nobody will back what was the former breadbasket of the Soviet Union. Nobody, that is, apart from a few British entrepreneurs here and there who have already secured over 60,000ha of prime arable land and their goal is to secure over 500,000 hectares over the next five years.

This group of British entreprenuers are already the third largest farmer in Ukraine and soon it will be the largest.

Western Ukraine offers ideal growing conditions. Three hundred kilometres further east the soil is still as good, but rainfall is half what it is in this region.

Of course these British entreprenuers are using the latest farming equipment, and are therefore much more efficient than the horse and cart are in the pictures above. I have never seen Ukrainian farmers using anything as modern as this tractor below.


then check out Landkom

Sorry away on business no time to search for anymore at the moment.

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Online andrewfi

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Re: Buying Gold to hedge against inflation
« Reply #8 on: March 11, 2010, 03:14:24 AM »
Manny,

All things equal you would be right, but i believe it is not a bubble as bubbles are artificially created by low interest rates.


Investment bubbles are not created by artificially low interest rates but low rates are commonly found in bubble conditions. At their base markets are driven by what people think will happen and much less by underlying real factors and it is this that is the root cause of a bubble. A bubble is, IMHO, an expression of a group fantasy about some commodity or another. The fantasy being reinforced by the entry of new players into the market which leads to artificial scarcity and thus price inflation. It is this reason that leads to the commonly held (and pretty truthful) belief that once the man on the Clapham omnibus is talking about the bubble commodity then it is already time to exit the market because once the mass enters the market there is nobody else to drive the price upward.

Gold is intersting stuff because its trading price, like most oil, is usually denominated in US dollars and thus gold is much more a hedge against currency depreciation for holders of US dollars than it is for holders of any other currency. The effect of this is that if the dollar decreases in value then the price of gold, for dollar holders goes up but for holders of other currencies gold can actually stay stable or even get cheaper. Exactly the same process can be seen with gasoline prices at petrol stations.

So, for you Jean Claude as ( I am guessing) a holder of currencies other than the USD, what is happening to gold when denominated in your main currency? I suggest that for the recent past it HAS been appreciating but that could change.

For most buyers of gold the deal is more like a game of musical chairs. Most people will end up losing, money a few will win and those entering the market now are VERY unlikely to have the resources or skills to manage their investment well, after all, if they had they'd have been buying in yonks ago and would be selling round about now, or in the very near future, depending upon their degree of risk aversion.

Interestingly, the same thing happened on a forerunner to this forum in respect of real estate. RE became a topic of interest with loads of newly minted 'experts' touting their favourite strategies or peddling free advice. Within a matter of months they were all eating their shirts! The fun bit was that one could look at the fundamentals and say, with confidence, that they were going to become short eaters.

Gold is getting to be a bit of a gamble now because, apart from the market reaching saturation, many major currencies are engaged in a battle of beggar my neighbour by trying to devalue in relation to other currencies, this makes the forex markets much more volatile and harder to predict and so using a currency proxy (gold), priced in a secondhand currency (USD) becomes a distinctly dicey deal.

Don't forget that historically gold's value as a store of wealth was its portability and relative scarcity. Hiding a decent value of gold in one's personal clothing is not hard. Hedging against inflation (currency devaluation) is a much more recent phenomenon since we moved away from the gold standard toward fiat currencies.

WRT farm land in Ukraine as I understand it there is a moratorium on land sales for Ukrainians AND foreigners so you'd have to lease the land. This is a big issue as it means that farmers are unable to access finance as securitisation of their major asset (land) is pretty much impossible so acquiring capital for investment is difficult. This has been an issue since the 1990's and one which should have been dealt with by now but the government is afraid, with justification, that free sale of land would lead to agribusinesses moving toward a new form of collectivisation where the landowners would not be Ukrainian and owner ship would be taken out of the hands of the current landowners, the former collective workers. Ukraine agriculture is an odd business. The government is in a catch-22 they KNOW what needs to be done to improve productivity but can not do it because the almost inevitable result would be the loss of most of the agricultural land to foreign control (de facto collectivisation) and, as policy, this is anathema to governments of all colours and has been for many years.
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Offline shakespear

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Re: Buying Gold to hedge against inflation
« Reply #9 on: March 11, 2010, 05:30:06 AM »
Don't forget that historically gold's value as a store of wealth was its portability and relative scarcity. Hiding a decent value of gold in one's personal clothing is not hard. Hedging against inflation (currency devaluation) is a much more recent phenomenon since we moved away from the gold standard toward fiat currencies. 

Exactly !  The fees involved with assaying gold each time you want to change title to the property make it a rather inappropriate short-term trading vehicle.  My overall retirement portfolio is close to $500,000 with no exposure to precious metals.  I thought a little diversification in these uncertain times might prove beneficial.  In the next three years I'm looking to have 5% of my total portfolio in gold coins, preferably Krugerrands, appraised by a recognized services as real, sealed in plastic, rated as to condition and therefore highly liquid. 
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Offline JeanClaude

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Re: Buying Gold to hedge against inflation
« Reply #10 on: March 11, 2010, 01:56:29 PM »
 
Quote
Investment bubbles are not created by artificially low interest rates but low rates are commonly found in bubble conditions.

No that is not true, "pump and dump cycles" are caused by central banks (government) and their manipulation of the money supply by creating wealth out of nothing through the fractional reserve banking system on "irregular deposits contracts" (Note: this is different then savingsaccount!!). The "dump" cycle is the free market (the real market) destroying this fake wealth!

Although the practise of banks using the "irregular deposit contracts" as a source for investing was very illegal (till 1934 in Europe at least) it has now been sectioned by law as government uses the "primary banking" institutes as subsidiaries in the money creation process.

It is just a delayed form of Mugabenomics! Since 1970 the USD has lost 75% of its value through inflation.

Quote
Don't forget that historically gold's value as a store of wealth

Gold is the real value, the rest is just ink on paper (fiat) money (the government uses force of arms -law- to let your forcefully accept this paper as a "store" of your labor) , the reason why politicians hate gold, its because you cannot create gold out of thin air as you would paper fiat Money by running a printing press and thereby stealing your savings via inflation
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Re: Buying Gold to hedge against inflation
« Reply #11 on: March 11, 2010, 06:21:31 PM »
Jean, you need to read history. Speculative bubbles have been going on for centuries, before central banks existed, two that you may not have read about (coz you'd not have written as you did if you knew this stuff) but that illustrate the point are the Tulip Mania in the Netherlands in the 17th century and the South Sea Bubble in the 18th century. Neither were due to central banking or even low interest rates. The latter case was actually enabled by HIGH interest rates which in turn enabled a company with a monopoly to offer the prospect of uncharacteristically high rates of return on investments. It became fashionable to own shares in the Sough Sea Company and even though the company printed more and more shares a shortage caused prices to rise unfeasibly high and there was an inevitable crash.

It has become fashionable to blame all ills in the world upon FRB and central banks but it simply is not true. FRB has its problems but market prices are only ever a reflection of the belief of buyers and sellers. It is true that general price levels tend to follow money supply but that is a more general effect and is called price inflation.  However you in your subsequnet post posited a new reason for bubbles, forgetting about your first idea.

It IS true to suggest, as you did, that a fall in prices after a speculative bubble reflects a reallocation of investment to more sensible places but that is entirely obvious and rates a big DUH? on the scale of insightful thought. ;)

Gold has NO intrinsic value. Its only value is what we choose to believe. We could choose, as other cultures have done, to value certain kinds of sea shells. Gold has some advantages, it does not break and it is convenient to divide and subdivide but gold is not even particularly rare. As I noted, historically its value was as a store of wealth as generations numberless of refugees can testify.
This article explains in simple terms about the palce of gold in our economy and psyche: http://biz.thestar.com.my/news/story.asp?file=/2009/11/23/business/5146864&sec=business you might want to note that in very general terms the value of gold expressed in dollars follws the CPI, ie, in the long run the value of gold in real terms remains fairly constant which is its true 'value'. In the short term there will always be arbitrage opportunities but you can see from that chart that the arbitrage opportunity right now is very small.
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Offline Maxx

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Re: Buying Gold to hedge against inflation
« Reply #12 on: March 11, 2010, 06:28:06 PM »
I have been in the gold biz for the past thirty years. Self employed in it for twenty of that. Probably one of the few people you have known who can say they get paid in gold. I am going post the following in plain speak.

Quote from Shakespear:

Quote
Exactly !  The fees involved with assaying gold each time you want to change title to the property make it a rather inappropriate short-term trading vehicle.  My overall retirement portfolio is close to $500,000 with no exposure to precious metals.  I thought a little diversification in these uncertain times might prove beneficial.  In the next three years I'm looking to have 5% of my total portfolio in gold coins, preferably Krugerrands, appraised by a recognized services as real, sealed in plastic, rated as to condition and therefore highly liquid.

and:

Quote
I'm not a huge alarmist, but I have been buying 1 South African Krugerrand every three months for the past 3 years - more to provide a bit of diversification than a fear about the collapse of the worldwide financial markets.

So you have about 12 "Rands" plus the self assurance that they are real by getting an authenticity certificate from some sort of recognized service. As someone who buys coins for my customers I give you a few comments on this. I have never seen a counterfeit gold coin but I have seen counterfeit silver dollars. I seen some last Monday. Usually a magnet will detect them as they are made of steel. Also they are tumbled to age them. Mostly they come out of China. In regards to gold coin it would be easy to tell a fake from the real thing. Gold coins have a specific density that is next to impossible to reproduce. One could do it with tungsten but the cost would be prohibitive. Tungsten has been used with gold bullion (bars) in the 400 Troy Ounce range to rip off the big boys. One ounce gold coins no one would bother with. So it's just a matter to take a good look at the coin and feel it's weight (density) and that will tell you if it's gold or not. Roughly a present day coin is about half the weight of a same size silver coin and a gold coin is about twice the weight of a silver, roughly. A gold coin looks and feels like it is worth something unlike the slugs we call coins now. Frankly I do not see the need for documentation. Of course there are those who make a living appraising things who might disagree...

The preferred coin among myself and my peers in the business is the Canadian Maple leaf. Reason being is that it is 99.99% fine gold and not alloyed with base metals like the US Eagle (90%) and SA Rand (91.66%). The later two have to be refined (what I do) to pure metal (like the Maple Leaf) in order to be used for where gold is usually consumed (dental and jewelry alloys).





Offline Maxx

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Re: Buying Gold to hedge against inflation
« Reply #13 on: March 11, 2010, 07:38:08 PM »

It is just a delayed form of Mugabenomics! Since 1970 the USD has lost 75% of its value through inflation.

 its because you cannot create gold out of thin air as you would paper fiat Money by running a printing press and thereby stealing your savings via inflation


and from Andrewfi quote:
Quote
Gold has NO intrinsic value. Its only value is what we choose to believe. We could choose, as other cultures have done, to value certain kinds of sea shells. Gold has some advantages, it does not break and it is convenient to divide and subdivide but gold is not even particularly rare. As I noted, historically its value was as a store of wealth as generations numberless of refugees can testify.

BTW I do not need to be reminded that price increases are not the same as inflation.

Anyway being old enough to have lived over the years in question I can add something here. It was the summer of '65 when I helped my parents paint their way into for a down payment on a new house. Three bedrooms, one bath, hardwood floors throughout ranch home with basement. Brand new, $20,000. Five years later they sold it for $25,000. A candy bar was 10 cents. A gallon of gasoline 25 cents. Today that home now sells for $200,000. A candy bar is a buck. Gasoline $2.50. What happened? Starting in the mid sixties was the Vietnam war and Johnson's "Great Society". France decided they wanted their gold back from America who had been holding it. They sent warships to escort it back. Europe and elsewhere were turning their US dollars reserves in for gold at it's fixed price of $35 an ounce. The US gold reserves dwindled from 21,000 tons to just 7,000 when Nixon slammed the gold window shut in August '71. Take a look at the chart to see what happened next,



I disagree with Andrew that gold has no intrinsic value, that it is not particularly rare and that the central banks are not particularly to blame for our currency devaluation.

Gold has many uses besides it's use in storage of wealth, jewelry, dental and electronics etc.

It is rare enough the argument is made that it is useless as a medium of exchange as there is so little of it. The illustration is that all the gold mined throughout history would barely fill two Olympic sized swimming pools. ?

The Central bankers and with their cover the politicians, control the money supply. They have done a disgraceful job of it these past 40 years. This is why with the soon-to-be multi-trillion dollar annual deficits people are turning to gold. The IMF does liquidate some of their gold holdings to suppress the price but the gold keeps getting gobbled up. Eventually our entitlement society will understand that we cannot maintain our standard of living by printing up money or borrowing it from Japan, China and the OPEC nations. Then the new gold rush will begin.

Andrew buddy, you should have more respect for the noble metal.



Maxx









Offline hector

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Re: Buying Gold to hedge against inflation
« Reply #14 on: March 12, 2010, 05:00:45 PM »
Gold is a suckers' bet that is fed to you by traders who own gold and wish to see it appreciate so they can gain from your investment. You only want gold if you have over a million dollars and want to invest 3% of that million.

If you live in the U.S., I would avoid buying Gold for concerns of inflation of the U.S. dollar. Inflation has been flat over the past six months. You're not going to gain anything in short.

In the long run for the past 30 years, Gold has not appreciated in value to match the U.S. consumer price index that tracks inflation. You are not gaining anything in the long term if you lay the gold price curve over the CPI curve. If gold was inflation adjusted then it would be over 10 times the actual price that it sells for today. That's a suckers' bet.

Offline shakespear

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Re: Buying Gold to hedge against inflation
« Reply #15 on: March 12, 2010, 05:15:34 PM »
So you have about 12 "Rands" plus the self assurance that they are real by getting an authenticity certificate from some sort of recognized service. As someone who buys coins for my customers I give you a few comments on this. I have never seen a counterfeit gold coin but I have seen counterfeit silver dollars. I seen some last Monday. Usually a magnet will detect them as they are made of steel. Also they are tumbled to age them. Mostly they come out of China. In regards to gold coin it would be easy to tell a fake from the real thing. Gold coins have a specific density that is next to impossible to reproduce. One could do it with tungsten but the cost would be prohibitive. Tungsten has been used with gold bullion (bars) in the 400 Troy Ounce range to rip off the big boys. One ounce gold coins no one would bother with. So it's just a matter to take a good look at the coin and feel it's weight (density) and that will tell you if it's gold or not. Roughly a present day coin is about half the weight of a same size silver coin and a gold coin is about twice the weight of a silver, roughly. A gold coin looks and feels like it is worth something unlike the slugs we call coins now. Frankly I do not see the need for documentation. Of course there are those who make a living appraising things who might disagree...

The preferred coin among myself and my peers in the business is the Canadian Maple leaf. Reason being is that it is 99.99% fine gold and not alloyed with base metals like the US Eagle (90%) and SA Rand (91.66%). The later two have to be refined (what I do) to pure metal (like the Maple Leaf) in order to be used for where gold is usually consumed (dental and jewelry alloys).

Maxx:

What would you recommend as the best cost retail outlet to buy small lots of gold coins?  I understand that by purchasing them one at a time my fees are the highest but I just can't afford to buy in bigger lots.  What is the best place for a small lot buyer like me to buy odd lots of golf coins at the lowest transaction cost?
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Re: Buying Gold to hedge against inflation
« Reply #16 on: March 12, 2010, 05:38:57 PM »
Maxx, there is traded good in the world that is worth anything other than what people are willing to pay for it. Gold is no exception. That is why gold has no intrinsic value.

Gold has uses and so we can place a value on gold based upon supply and demand for those uses. If we broaden 'use' to include as a hedge against currency risk (which includes inflation!) then we should expect that gold will never, over the long term, do anything other than track the CPI. That's because most of the gold in the world is stored as bullion, coin or jewelry; all other uses are not enough to wag the tail of the dog, but even those uses, in the end will tend to track the CPI becasue of the price rises then gold is taken out of storage and used in 'real' use.

In times when I have serious doubts about society - world war, pogrom or persecution of me and mine then I want to have some gold with me when I become a refugee. Absent that situation, whatever I think of how the Fed is manageing the US economy I see no benefit in holding gold in my house and CERTAINLY not in bullion storage.

As I noted arbitrage opportunites present themselves just as they do with real estate, forex or most other traded goods. heck, even a simple retailer is taking advantage iof arbitrage every time he buys from a wholesaler or distributor and resells to a client. ;)

Hector is spot on here.

Oh, Maxx, inflation can be defined as a general rise in prices. Price rises in and of themselves are not a sign of inflation. To be honest, I am at least as comfortable with a definition that links money supply and inflation because in the end prices rise to meet the supply of money. If output does not increase as fast as money supply then we have a general rise in prices and inflation. Thus the price rises are merely a symptom of the inflation not the inflation itself, the inflation is the increase inthe money supply.

Of course the US restricts information about money supply so we do not know in truth what inflation is making the CPI the nearest thing to a deent proxy that we have and the US has been exporting dollars for a couple of generations and thus internal money supply has been restricted in a manner not possible for most other countries in the world.
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Offline Maxx

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Re: Buying Gold to hedge against inflation
« Reply #17 on: March 12, 2010, 07:05:26 PM »
I found an old photo from 1981 of some gold I refined and poured into some bars and shot.




Quote
Maxx, there is traded good in the world that is worth anything other than what people are willing to pay for it. Gold is no exception. That is why gold has no intrinsic value.

Until gold can be made synthetically like diamonds it will always have value. The argument you and Hector are trying make is that it is a fool's investment. I know a number of people who have told me they wished they had put their IRAs into gold back when it was $252 an ounce (10 years ago). Can you imagine where it's going with our huge budget deficits? $1.4 trillion (really 1.88 trillion) in fy 2009 and projected for 2010 $1.6 trillion (plus another 500 billion on off budget items). Where is the dollar going? Zimbabwe?




Quote
In times when I have serious doubts about society - world war, pogrom or persecution of me and mine then I want to have some gold with me when I become a refugee. Absent that situation, whatever I think of how the Fed is manageing the US economy I see no benefit in holding gold in my house and CERTAINLY not in bullion storage.

When you see the need to have gold it will be too late to acquire it. It will be too expensive to purchase unless you are rich.

Besides "end of the world" scenarios which sophisticates usually reject there are the two other reasons to have gold. One to maintain the purchasing power of your money. Two for the increase over the rate of inflation when the gold price raises due to it's supply shortage. Gold is brought to the market by two means. Gold mining and gold scrap. Each supplies about 50% of what goes to the market. I and other secondary refiners (scrap and manufacturing refining) I have talked to have noticed a significant drop in scrap buying by our clients. The public seems to be running out of their old gold jewelry. Mining does not seem to be increasing enough to take up the slack. Only gold sales by the Western Central banks are keeping a lid on the price. How long can they keep that up... or... ah down? I see an eventually breakout on the price. Maybe a few drops along the way but the trend is up.

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If you live in the U.S., I would avoid buying Gold for concerns of inflation of the U.S. dollar. Inflation has been flat over the past six months. You're not going to gain anything in short.

Gold is not for short term investment. Inflation being flat (if it is. Food?) for 6 months is something to expect during a recession and people are worried. Deflation might rule the day up into all the money the Fed is creating kicks in. It has been likened to the pull back of the ocean right before a Tsunami rises up (hyperinflation) and washes everything away. Who knows but what other option besides printing up a lot of money to pay our debts and entitlement obligations?



Maxx




Offline Donhollio

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Re: Buying Gold to hedge against inflation
« Reply #18 on: March 12, 2010, 07:45:44 PM »
  I remember when gold was $250 USD an ounce, and marijuana was at par. Now the demon weed has dropped below the $250 CAD mark and gold has soared. It's like kickin a bro when he's down  :LIMP:

 Maxx I have always been into foundry hobby work, however my crucible never held anything close to yours in value. Impressive :8)

Offline Eduard

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Re: Buying Gold to hedge against inflation
« Reply #19 on: March 12, 2010, 07:47:56 PM »
very interesting discussion. Thanks for contributing all of you, guys!  tiphat

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Re: Buying Gold to hedge against inflation
« Reply #20 on: March 13, 2010, 12:24:47 AM »
Maxx, there is no rule of nature that states gold has any value whatsoever. In some places sea shells were thought of as we see gold today. In the Netherlands in the early 17th century they went mad for tulip bulbs. The value of gold is only what you or I are willing to pay.

If you set store by gold then you are, in essence, betting that over time enough people will maintain the collective belief that the price of gold will remain roughly equal to what it is today, in real terms. There is no fundamental economic reason why we should expect gold to become more valuable over time, in real terms.
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Offline curiogeo7

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Re: Buying Gold to hedge against inflation
« Reply #21 on: March 13, 2010, 01:45:51 AM »
Gold in small bits and pieces, are a good thing. Do you really think any one will be able to make change for a solid gold coin? ???
 But true value "objects"?
 toilet paper, bic lighters. tampax. :nod:
As I sell gem stones, in hard times, I say most of these are a joke.
 A diamond is truly worthless, the value is completely fake. :'(
Buy a ruby, or emerald, untreated, good cut.
 Just my 0.02 worth.
  Great posts, informative.
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Re: Buying Gold to hedge against inflation
« Reply #22 on: March 13, 2010, 07:21:51 AM »
Anyone think investing in this part of Detroit might be a better investment?

http://www.telegraph.co.uk/news/worldnews/northamerica/7427691/Detroit-family-homes-sell-for-just-10.html

 
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Re: Buying Gold to hedge against inflation
« Reply #23 on: March 13, 2010, 12:42:25 PM »

Here is some recent gold news.


Self made Billionaire George Soros trash talks gold as an investment:

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Davos 2010: George Soros warns gold is now the 'ultimate bubble'
Gold is now "the ultimate bubble", billionaire investor George Soros has declared, sparking fears that prices for the precious metal may soon suffer a tumble.
 
By Edmund Conway in Davos
Published: 6:15AM GMT 28 Jan 2010

http://www.telegraph.co.uk/finance/financetopics/davos/7085504/Davos-2010-George-Soros-warns-gold-is-now-the-ultimate-bubble.html

Three weeks later self made Billionaire George Soros is reported to have doubled his investment in gold.   

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http://www.cnbc.com/id/35428772/Soros_Doubled_Gold_ETF_Investment_Buys_Citi

Soros Doubled Gold ETF Investment, Buys Citi
Published: Wednesday, 17 Feb 2010 | 3:52 AM ET


By: Reuters
Billionaire investor George Soros' hedge fund more than doubled its bet on the price of gold during the fourth quarter, a portion of the firm's total U.S.-listed equity holdings of $8.8 billion at the end of 2009.

Self made Billionaire Jim Rogers and friend of self made Billionaire George Soros says:

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Jim Rogers Gold Bubble 2010

http://commoditysurge.blogspot.com/2010/01/jim-rogers-gold-bubble-2010.html


Jim Rogers was talking investing in 2010 recently, and he said the continual concerns about the possibility of a gold bubble are unfounded, and still maintains the position that gold will eventually reach $2000 an ounce, although when that will happen of course can't be known.



Rogers added that gold is going up in price because of the falling value in the U.S. dollar, concerns over inflation, consumption of gold by China and India, and the buying up of gold by central banks.

The only bubble Jim Rogers is concerned about is one in the U.S. government bond market. Otherwise he said there isn't another bubble he sees emerging anywhere.



If there's a reason for gold prices rising, there isn't a bubble, according to Rogers. It's when everyone starts buying gold without knowing why is when you need to be concerned about a gold bubble.

As of now, the majority of people on the street haven't even looked to gold as an investment, so concerns that way are irrelevant.


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Re: Buying Gold to hedge against inflation
« Reply #24 on: March 13, 2010, 12:55:38 PM »
Maxx, I'd never say there are not arbitrgage opportunities and Soros is less of an investor and much more an arbitrageur. I am a tad uncertain that I, the man in the Clapham onmnibus and even your good self have the detailed market knowledge available to Soros and even less his resources to trade gold in a liquid manner.

I am pretty sure that Soros is well aware of the power of his words and even a fraction of a point shift that might be attributable to a comment about his intent with regard to gold would have an effect worth millions in terms of windfall profits. By commenting as he did and then letting it be known that he was now increasing his gold holdings he would have benefitted from any dip in prices after the first comment and then a rise after the second. Classic arbitrage move. Guess who puts the windfall profit into Soros' pocket? The mug punter buying teeny tiny amounts of gold as an 'investment' Each buyer and seller pays a 'dumb tax' that goes directly into the pockets of those better able to benefit.

OF COURSE gold will hit $2000 and OF COURSE the only question is when. A degree of Master of the Patently Obvious to the writer of that comment! Devaluation of the dollar (inflation) makes it inevitable but I'd bet that the time horizon is further out in the mind of the comment maker than it is in the minds of the sheeple reading it.

One advantage of gold to large investors/arbitrageurs is that the market in gold is very unregulated and so market manipulations such as you pointed out are allowed. The same kinds of comment made in respect of a company stock would likely get the speaker/investor into a deal of unwelcome hot water.

Oh, if the consumer level newsletters on investing that cross my desk are continually bleating on about gold, in one way or another then you can be sure that gold fever is already reaching the mass market. If this forum has posters on such a topic then it is pretty much inevitable that the price is about to drop. The music is about to stop and the mugs will be left holding the parcel that menas they are losing their shirts.
Look back to the a long forgotten forum. By the time we were seeing loads of posts about how great an investment RE was and how much money folks were making the market had already stalled in a few US markets and the jig was already up.

Wanna know how to see when the next big thing is about to go bust? Read this forum. When you see posts on the subject here then SELL SELL SELL as fast as you can, the ride is about to go fast and downhill.
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