I'm thinking of scenarios that could mean ultimately, silver and gold will lose out. I'd like others to reason this through and think a little more critically. Everyone here pretty much wants to buy the gold silver story like a religion, but realistically, there are other possibilities: 1) Commodities crash in a delationary storm and gold and silver are included The world is on the brink of deflation - the ENTIRE world. Most people here assume that the world's central banks are going to print to try and delay the inevitable. But what if...all the money printing isn't enough to stem the deflationary tide? People assume hyperinflation is on the cards but the debt problem may be so big that not even endless money printing is going to prevent everything from losing value, gold and silver included. There may not actually be a hyperinflationary period as we just plunge straight into depression. In the old days, this might not have been so bad for gold and silver because gold at least, was sold at a fixed price so if things devalued nominally, gold would be able to buy more. These days, gold is free floating, so it may go down the gurgler like everything else. Why could this not be the case? 2) The world flocks to the US dollar instead of gold and silver. Everyone here assumes because the US dollar is fiat, it's on its last legs and about ready to collapse. But...fiat currencies exist as long as people have confidence in them. If the US dollar crashes, a lot of people would lose a lot of paper wealth. It is possible that a collapse in Asia and Europe would lead to a massive US bond rally that would leave gold and silver out in the cold. Why could this not be the case? 3) Exchange rate screws us over. Gold and silver is traded in US dollars. If the US hyperinflates, you cannot assume the AU dollar is going to follow it. Remember, the AU dollar has gotten stronger recently because the government HAS NOT intervened in its price. Therefore, Americans may get an advantage when an ounce of gold is worth $10,000 USD but we may still be paying $2000 AUD. Why could this not be the case? 4) Government confiscates (or regulates price). They have the power to take gold and silver by legislating. Would be highly likely if we go to war, since the government would enact "defence of the realm" provisions. We would be forced to sell at a price the Reserve Bank determines. No one will care because most people didn't have the foresight to stack and will lose nothing from a confiscation. Most people here would say that they would simply hide their metals. But, if you do this, you can't sell it or trade it for useful items. How easy do you think it would be to sell on the black market? For those that would simply say "I'd just wait until it all blows over", what happens if silver was worth $150 at the time of the confiscation laws, but after the law is lifted, silver is only worth $5 because the world has created a new monetary system. In short, you got screwed. Why could this not be the case? Now, I can think of some arguments for and against the 4 scenarios I just listed, but I want to know if others here have also given this some thought.
One more scenario to think about: 5) WAR The collapse of the monetary system leads to WW3. Nukes are used. Gold and silver investors then have bigger problems on their hands that whether or not their investment is increasing in value.
Well here is my quick 2 cents. 1) Bernanke was brought in because he was a "student" of the great depression and they want to avoid that scenario. 2) If everyone flocks to the US dollar it would make it much stronger making it harder for the US to pay down its debt. 3) If the US hyper inflates and the AUD stays strong then we can buy a hell of a lot of oil with our money 4) This has a real possibility of happening but I think if we get to that point we probably should have sold before it as the price would be near peak? 5) As for war the price would rocket because I think it is used for a lot of things in the military. but they would probably confiscate it if it came to that.
Here's something else to think about: In other words, if the US wants to keep its "dollar empire", it can do so at the price of a Depression. So the calculation of the US leadership would be one of Great Depression vs Losing Privileged Dollar Status. It is not obvious that the US would choose to hyperinflate because this means the US has agreed to destroy the dollar empire that gives them advantages today. In the end, despite the fear of Great Depression II, it may be possible the US will let everything deflate because at least this way, the US dollar maintains its privileged status. If the US were to hyperinflate, a new reserve currency would need to be chosen, and it would likely be one the US did not have total control over. Do you think they would prefer this? Think about it!
Great topic! I've thought over many of these ideas myself and continue to read and read and read everything I can find in order to stay updated on latest develops. However what I have decided is that I will never be able to truely predict what degree of government or banker intervention will take place and exactly how it will all play out. Which leaves me with only one remaining question: - Would I rather my savings in fiat or real assets? Yes gold and silver may drop in price but they will always retain some degree of value. Can we honestly say that our fiat money sitting on some banks database is a safer option! The recent MF Global event was a big wake-up call to me. The situation is getting more serious.
A bigger concern would be that Iran decides to cut off oil supply to the west in protest over any sanctions that might be placed on them. I wonder what effect $200/barrel oil might have on gold/silver.
Precious metals tend to move with gold somewhat. If Oil doubles, I would be expecting gold to perform similarly
Yes but if no money printing... how do they pay back their loans? Deflation is a BAD options for such a large debtor
^ Good point! All this cause and effect stuff is something stackers should be thinking about more critically rather than just trying to take as faith that the PMs will go parabolic.
1) Gold is free floating yes, but it is also traded in a Fractional banking and highly leveraged way. We are starting to see disputes over who actually owns the physical bars now. http://www.zerohedge.com/news/gold-...-global-over-disputed-ownership-physical-gold I agree with your premise that we are in a deflationary world with credit contracting and a general de-leveraging. With debts where they are and the need for governments to finance them, I cannot se the market providing the funds so we will turn to the respective central banks to monetise. It is either this or default or restructure by sovereigns. I feel the former is politically acceptable and will lead to the high inflation that many are expecting. If default is taken, while it may be acceptable for greece or italy to do so without catastrophic confidence loss, if (read: when) either Germany, the UK, US, Japan defaults confidence will be extremely damaged and the confidence in fiat currency will be shattered. I believe we are seeing early stages of this now with a lot of emerging markets (china, Russia Venezuela, india et al) buying physical and repatriating existing gold to their own control. Either one of these scenarios I feel is gold positive and struggle to see how gold could go down in either of these scenarios. We would need positive real interest rates, balanced budgets and more equal trade. We are so far away from all of these that in the medium to long term Precious metals will head higher. 2) The US could definately rally in the short term as Europe goes through its problems, I would view any dollar rally or pullback in precious metals as a buying opportunity for the reasons mentioned above. 3) Possible that the US hyperinflates and the AUD remains roughly where it is, I would put as very unlikely. While we are far better fiscally than the US, our money supply is so small on the global scale that it wont happen. While I do not doubt that should the us hyperinflate, the US dollar price of gold will be higher than the AUD, but I feel it will be like comparing a $10,000 price to an $11,000 price. At our current price level the difference is irrelevant. I do not put much weight on the US hyperinflating personally, There will be a new monetary system roll out before then with 1 new dollar replacing 10 old ones with the new ones backed by gold at $3000 an ounce for example. I cannot see a $10,000 US dollar gold price and an AUD price of $2000. We would get crushed internationally in terms of competitiveness and I could see AUs government putting a peg or something in place to prevent it getting this far out of whack. 4) Government confiscates - Definately my largest concern of the scenarios you mentioned. It really does depend on how it is done etc. Personally I think I would have lost mine in a boating accident if it became unfavorable, or getting out of dodge when I can see the writing on the wall. If the economy was 'fixed' and there was solid intent/stability behind the new currency, I would happily hand in my PM's. While I did say this was my largest concern, I still put it at low, particulary in Australia. Far easier to just nationalise the gold mines than worry about the few ounces in private hands, particulary as those private individuals would be unlikely to locate their pms if our government tried it. How would they enforce it. I know the US has done it once before in 1933, but it was radically different then also, gold was money, in circulation and would be like asking us today to hand in all our $1 coins for $2 coins. Very little fuss. One thing in this area I would watch is a possible takeover of the GLD or other bullion etfs, such a large stash in one location, that would be worth going after and just cash settle. 5) War - While there will be more important things on peoples mind if war broke out, the whole world does not stop commerce and if anything, PM's would be worth more rather than the 'faith' of some sovereign printed money that may cease to exist in another month or so. Even during WW1 and WW2 the majority of the world was still carrying on doing its business. South America, Scandenavia, Most of the african continent and other isolated countries not involved. In summary, I can see a few things that would impact PM's negatively short term, but medium to long term I really cannot see pms losing purchasing power, either in real or nominal terms. I hate a one-way bet and being so sure, but at this point I see little reason to see how they would go down over medium to long term. (>3 years.) Now, I can think of some arguments for and against the 4 scenarios I just listed, but I want to know if others here have also given this some thought.
:lol: I am glad this thread has popped up. Whilst we're all keen for the price of precious metals to go up, there's lots of people living in their own bubble surrounding themselves with well wishes, "news" articles, blogs and the like which support their way of thinking and never look on the other side of the fence. Who knows, SMNHTF (Shit might not hit the fan)
Otherwise known as 'Confirmation Bias'. I will admit that I am a victim of this also. A lot of what I read is already aligned with my view and very rarely do I ever get exposed to any 'negative' articles about PM's, and mostly it is preaching to the choir. I do stand by the longer term fundamentals, but try not to get caught up in the OMG its going to double next week crowd. (contrary to what my signature says)...
Well if it will make you guys happier, I'll swap you todays spot in U S dollars for your gold holdings ! But not one of you will!
if there is a war, there are no oil being shipped, so all passenger planes are most likely grounded. people are more likely to be stuck at where they are, may be transport by sea is non conflict areas. its will be a run a way to those far away areas,away from conflict areas. gold and silver will get lost in boating trips again buy some more dry foods and water, can start to stock pile after May Day.... in preparation for October Surprise! 2012 cost of food 2.5k and needs may be 2k... hope that's enough to keep one away from hunger.
If WW3 comes round, gold & silver wont be in the equation. Like I've said before, put your head between your legs and kiss your arse goodbye.
get the kids to kiss the feet and say buy buy. just in case you are still around, need food to live on.
