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What's gold's true edge?

This is Green Bay Packer country. I am a Packer fan. Certainly, though, I am not the biggest Packer fan in this building. I am happy when they win the weekly football game, especially when they beat the Chicago Bears. I am disappointed when they lose, and make that double when it is the Bears that beat them.

During uptrends for gold, the longer they go on they come more and more to resemble a sporting event rather than a market or economic event. Prices rise, the gold crowd cheers. Prices fall, they are disappointed.

With each gain of the past seven and a half years, advocates cheer and predict even higher prices. After each Packer win there is a discussion about what it will take to get into the playoffs and ultimately the Super Bowl.

This is human nature.

But how high is up for gold, really?

I think it is safe to say that gold will have a higher dollar price in 100 years, in 50 years, or even in 20 years, than today, but the closer you get to tomorrow, the harder it is to predict gold’s price with any accuracy.

Gold’s price fluctuates.

If I ever state that the Packers will beat the Bears in the next game by 100 points, people will correctly conclude I am either nuts or don’t know the first thing about how a football game is actually played.

If I write the Packers will win by 7 in the next outing, I will be slapped on the back and someone will probably offer to buy the next round of beers because the group, Packer fans all, will have something to drink to.

With gold, what current forecasts are the 100-point Packer equivalent and what forecasts are the 7-point edge?

That’s the true test for gold buyers today. Everybody is a gold fan, but there are limits even to gold.

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2 Responses to What's gold's true edge?

  1. Matthew says:

    Frankly, I think you’ve got your head screwed on backwards, Dave. (Is that why they call you cheese-heads?)

    This is a typical point of view. That is to say, thinking of gold in terms of dollar value. What you should be doing is thinking of the dollar in terms of gold value.

    In 1950 (although it was illegal to own gold during that time) $1000 worth of gold would have bought you a new car. Today, that same amount of gold will still buy you a new car – a really nice one, think Lexus/Mercedes/BMW…

    Gold is a true store of value. A dollar is a worthless piece of paper unless folks continue to maintain their blind faith in its value.

    Since 1980, the dollar has lost over 80% of its buying power. Gold, on the other hand, has increased in "dollar value" by over 65% and Silver by 150%. Despite the "increase in dollar value" of precious metals, it bears mentioning that our gold and silver values have long been manipulated to keep the dollar looking strong (artificially).

    Not so long ago, $35 would buy 1oz. of gold. Today, if you divide the total number of U.S. dollars in circulation worldwide, by the total identified above ground gold reserves worldwide (about 5 billion ounces), gold would need to adjusted to roughly $60,000 per ounce. Let’s add to that, the fact that our new president’s hope and change have resulted in over 1.3 Trillion new dollars being printed… (those bills are currently waiting in the vaults of nervous bankers who will flood the market with them once the economy looks like its coming back for real)

    Now, if the Federal Reserve is able to magically throw the vacuum switch on and withdraw all that new money in time to prevent inflation… hahaha! who are we kidding, not once have they ever done anything effectively…

    …back to reality. Let’s revise that statement, shall we, Dave? Prices rise, the gold crowd cheers. Prices fall, the gold crowd happily buys more at a discount. There are striking limits to most Americans’ understanding of monetary policy and the nasty effects of Federal Reserve bailouts, but the saavy gold buyers will always be there, ready to trade their dollars for your "limited" gold.

    But don’t take my word for it. Look at history. Every single fiat currency ever used has been completely devalued by inflation, loose fiscal policy and corrupt governments… since the beginning of time. Its not a matter of if the dollar will fail, its simply a matter of when… Gold on the other hand, has always had value, since the day it was first pulled from the ground, in every market since the dawn of recorded history.

    Look at Zimbabwe, you see what they’re doing to feed themselves? Do you know how they got there? Its the same path we’re on currently. Keep hoping for change, it will soon be all you have left.

  2. Eadoin says:

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    Thanks for the help :p, Eadoin.

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