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Who's Buying Gold

Discussion in 'Speaker's Corner' started by fester, Feb 4, 2009.

  1. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    I think a better way of looking at it is paper has constantly decreased in value over the last several hundred year only now the decrease in value due money creation with out the discipline of any kind of gold standard is now exponential.By the way the world came of the last vestiges of a gold standard in 1971.

    http://www.aboutinflation.com/inflation/united-kingdom---inflation

    [​IMG]

    [​IMG]
     
    Last edited: Jul 20, 2011
  2. Nerusy

    Wise Guy

    Joined: Jul 12, 2010

    Posts: 2,470

    Well I was talking more about when buying gold is not a mistake.

    I don't understand the point of your post, are you suggesting we go back to the gold standard? After all there's a reason we moved onto fiat money, gold standard was inefficient.

    Also that first graph does not look exponential. And during the conditions prior to the financial collapse gold offered lower return on investment after taking into account the inflation.

    Sure gold offers 0.1% inflation but it is so so inefficient and so weak to monitory shocks and all other bunch of problems.

    So are we talking about investment opportunities in gold or are we talking about the wrongs of the fiat money problems :confused:
     
  3. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    The forex market's with over 4$trillion a day volume much larger than the Dow ,NASDAQ or ftse are the where currency or money £ $ € yen traded for profit and the top traders are "bulion Bank's that sit on the LBMA the twice daily gold fix.

    I like Central Banks although they will not admit it also consider gold to be currency .

    Feel free to take the thread any where interesting but relevant.
     
    Last edited: Jul 20, 2011
  4. Nerusy

    Wise Guy

    Joined: Jul 12, 2010

    Posts: 2,470

    Erm I like forex action myself, a bit of fun speculating but it is not a long term investment (well, perhaps* the gold pairs but* under normal economic conditions and not volatile uncertainty would still be one of the worse long-term investments) I am not sure why you are bringing this up.

    I was originally replying to what's been going on on the last page, then read the whole thing and yeah I regret coming here lol

    Congrats on big gold profits nonetheless and best of luck.
     
    Last edited: Jul 20, 2011
  5. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    The reason they shun gold is because of its crap long-term returns. Hinting at nonsensical stuff about them somehow being 'pro-big-government' is bloody stupid because there are large numbers of non-state actors who follow the exact same philosophy - see Jack Bogle and the Vanguard group, they are the gods and founders of this strategy.
     
  6. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

  7. silversurfer

    Capodecina

    Joined: Jul 13, 2004

    Posts: 18,817

    Location: Stanley Hotel, Colorado

    It offers no returns and its not an investment.
    An ounce of gold was recorded as buying a field of corn in ancient Egypt same as it would do now.
    So that makes its the worlds worst 'investment' to not gain any value over thousands of years but also the worlds best as its the most proven reliable long term store of wealth.

    If its more in demand tomorrow then today then price will probably rise and there is the profit but its basic worth never grows and never gives a return so it cannot be an investment.

    I think its ok to treat it like cash and hold a small amount but it makes sense that a pension fund would not normally hold any though they hold government bonds which are also close to a form of cash so its very possible for demand to switch from bonds which have risen in price for 30 years now to other asset classes

    Most people should own the miners and producers of commodities. Oil firms especially if you drive, you will gain one way or the other

    http://wallstcheatsheet.com/economy/heres-what-warren-buffett-says-about-gold-and-commodities.html/
     
  8. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    You say that, but as per fester's charts above in the years from about 1980 to 2001 we had relatively high inflation but the price of gold fell in real terms over that period.

    So for a 20 year period gold failed to do its job of acting as a hedge against inflation, you lost out both ways.
     
  9. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Summary

    The bottom line regarding commodity funds is that we believe long-term expected returns will be lower than T-Bill returns. Even though the correlation with stocks and bonds is small, no asset class belongs in a diversified portfolio if it has a return expectation below T-Bills.



    I like to think of gold not as a commodity rather as a supper safe alternative to T-bills.


    If you have 100% confidence in T-bills and believe there is absolutely no counter party risk then it is very easy to dismiss gold.


    I do not have 100% confidence In T-bills



    An other way of looking at it is the dollar was over valued and things are beginning to get back to normal.A mere blip on steady a 5000 year chart.
     
    Last edited: Jul 22, 2011
  10. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Why not? What you're effectively saying is that you have no confidence in the world economy as a whole, because T-bills are effectively the safest investment in the world. The last auction, despite the ongoing debt ceiling charade, they were going for 0% yield - which tells you that pretty much nobody agrees with your assessment. Doesn't that worry you?

    I think you're making a big mistake if you believe in 'end of the financial world' nonsense. It's a particularly bad way to plan for the future.

    It tells you nothing of the sort because the same thing happened with yen, sterling, and various other currencies. Since the end of the gold standard, gold has either been in a bubble (late 70s, now) or failing to beat inflation (the entire period between the bubbles). It's not a sound investment.

    e: to ask the question more forcefully - what are you afraid of? With T-Bills your risks (if you can call them that!) are default, or extended runaway inflation. The US basically can't default because it prints its own money, and runaway inflation is vanishingly unlikely given how much slack there is in the US economy.
     
    Last edited: Jul 22, 2011
  11. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    My confidence is the the world economy is directly related the my confidence in world energy production.Debt based money can not work without growth.

    IE. Print more petro dollars(T-bills) + pump more oil = world economic growth:)

    Unfortunately since about 2005 it has been

    Print more petro dollars(T-bills) + pump the same amount of oil = stagnant world economy:(

    T-bills + Peak Oil not a good mix for the future.

    [​IMG]
     
    Last edited: Jul 22, 2011
  12. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    This makes no sense. T-bills are not petrodollars, petrodollars are dollars obtained by other countries through the sale of oil. T-bills aren't even printed money.

    I genuinely think you should hand over your portfolio to someone responsible, if this is your decision making process.
     
  13. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    Petrodollars are dollars obtained by other countries through the sale of oil.So where do these dollar's originate from ???

    Are you trying to say T-bills play no roll in the global fraction reserve money creation system just what are the main reserves in this system of dollar creation ?
     
    Last edited: Jul 22, 2011
  14. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    Well they don't originate from T-bills.

    The fractional reserve system has very little to do with T-bills either, other than the fact that banks can buy them with the reserved fraction, but it's not something they have to do.

    I think you fundamentally misunderstand how these things work. Your thought process jumps all over the place and you buy into far too many conspiracy theories.
     
  15. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    So your saying oil production has no effect on the world economy, peak oil is a myth and T-bills have no effect on dollar creation at any point of the money creation cycle?
     
    Last edited: Jul 22, 2011
  16. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    No that's not what I said and you are being incredibly disingenuous by suggesting it.

    Peak oil is a statistical quirk that affects any finite resource, whether or not it has actually occured, is currently occuring, or will occur at some point soon, is unknowable and will remain unknowable until after the fact. Peak oil also has incredibly little to do with the use of gold as an investment.

    Correct. The Federal Reserve often prints dollars to buy T-bills, but they can buy pretty much anything else - for example the toxic assets that accumulated during the latest crisis.

    I can't believe you don't already know this stuff.
     
  17. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    It's good to learn better late than never.
     
  18. fester

    Gangster

    Joined: Nov 3, 2005

    Posts: 442

    Location: belfast

    The reason I see gold as a good investment is as a stop gap as countries move away from the dollar to do bilateral trades for resources.
    Ie India and Iran gold for oil.
     
  19. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    My concern is that you appear to have undertaken a highly risky strategy to buy gold based on your beliefs - beliefs that are apparently not based on even a basic understanding of the underlying concepts that should guide your decisions. I hope you understand how irresponsible this is.
     
  20. El Pew

    Wise Guy

    Joined: Sep 1, 2009

    Posts: 1,053

    That's about the 5th different reason you've given for why you see gold as a good investment. Very few of them make much sense, this being one of them. That article is no reason to buy gold, it says quite clearly that gold is a short term 'currency' until they can agree on a more appropriate one. That's no reason to invest in gold, though it might have been a reason to speculate in it.
     
    Last edited: Jul 22, 2011