I found this on Reddit. I would be interested to see what you guys think to his argument. There is so much incorrect information in this thread I had to stop listing them and just stick to telling you what is 'true' or what we know for sure. First, think back over the past few thousand years. As civilization developed, gold was used as a currency. As nations developed, they created their own currencies and that is when gold's true decline began. Remember there are no real practical or industrial uses for gold. (Now before I get yelled at, (as far as I can tell based on albeit very limited research) gold is used in industrial settings, but in general tends to have been replaced by more useful elements.) Therefore the only demand is created by people using it for jewelry/speculation/etc. Anyways, since gold now has competition from all these other currencies, the need to hold it as a preservation of wealth is greatly diminished. Gold used to be used as a standard to which these new currencies were once pegged, however no country does it anymore, they just compare currencies to each other (i.e. forex). You can see that even during the global liquidity crisis 5 years ago, it actually lost value. If gold was a safe haven, as the Fed continues to print money, it's price should be skyrocketing. (Sidenote: Canada got rid of all our gold a long time ago because we are awesome.) So where does that leave gold now? There is no industrial/practical demand, there is no monetary demand, then what good is it? To me, gold's only purpose is to show me you have terrible taste in watches. Other than that... it's pretty useless. Private wealth managers, banks, Glen Beck, Ron Paul, people with a lot of gold who want it's value to go up, all believe a certain portion of a portfolio MUST be devoted to gold, but ask them why? Is it because it's a preservation of wealth? Well that's clearly no longer true. Is it because there is some demand like copper/steel/oil/etc.? Nope, not that either. GOLD IS ANOTHER VEHICLE TO TRADE. Nothing more. Nothing less. So if gold is a trade? What happened? The past few crisis, along with the advent of radio/tv/internet (i.e. tools to aid in the dissemination of information (good or bad)), have not only 'educated' more people about gold and why they should own it, but allowed more people to easily buy it through online dealers, etf's, etc.. which is why prices went up. But at some point many people bought gold because it was going up and everywhere you turn someone is saying gold will go to $1500, $2000, or even $10,000, they are artificially creating the demand and that is a incredibly dangerous game to play. Just ask everyone who got into gold at $1300-1800... now they are all underwater because gold isn't doing what they were told it would and they are forced to sell only amplifying the selling pressure and driving the prices even lower. It's a vicious cycle but completely predictable. Anyways, I didn't mean for this to get that long but is all this even the reason why it's cratering? Who knows, what I do know is that there are no fundamentals supporting it which is more than evident. Does that mean it won't eventually bottom and someday hit $1800+ again? Once again, who knows... it entirely depends on the population that has a desire to trade/own it. One thing I do know is I wouldn't bang it with someone else's dick. With regards to mining co.'s and the like, the opportunities I see don't exist on the price of gold, but much more of a secondary play. If I know a company has to pay $1400/ounce for gold, and gold is trading at $1200 right now and I don't see it going back up, that looks like a broken business. Once again, still a very dangerous game to play and you need to be relatively astute to be successful. Anyways I hope that was helpful, if you are looking for unique stores of wealth, look more towards rare stones (not diamonds as they can be manufactured), art, wine, bitcoins (haha), anything that you would think in 500 years, or in an apocalyptic scenario people would want to get their hands on. And for the 3 of you still reading this, I am writing a blog post which contains a lot of this and more called, "The Case for $1 Gold." If anyone is interested I'll post it here when I put it online.
The only argument that I could put against his case is that Central Banks are reportedly buying gold, and they must have a reason.
Gold never had any general practical use in history for humans except as ornamentation. That did not prevent it from retaining it's place as the premiere benchmark of value for thousands of years. Nothing has changed.
If you can take off the pre-conditioned blinders that most of us have due to the way in which, and society in which we were all bought up, and go back to the fundamentals, you begin to realise that money cannot be anything that can be created on demand in order for that money to be honest and have true value. The very concept that a government can simply turn on a printing press and create money from nothing is so abhorrent to reasonable economics that it isn't funny any more. Consider also that any form of money that has been used in the past that has not had intrinsic value/true scarcity has not survived for very long. We are - to put it simply - at the end of the beginning of the destruction of fiat currency as we know it today, and ultimately, something will have to be done about it. I forsee currencies being replaced with "New Dollars", which will be full or partly backed by precious metals (certainly gold, perhaps silver as well). I cannot think of many, if any practical alternatives to gold (and/or silver) when it comes to backing currencies, as nearly everything else on the planet that is rare-ish either isn't that rare, or is able to be duplicated considerably easier that gold and silver (thinking diamonds vs cubic zircona's etc). So, yes, I think ultimately, this guy is full of it.
Gold is one of the things on earth which has a demand approaching infinity. One can never have too much, and I can live with the fact it is "useless".
Very few elements on the periodic table have the properties required to become hard money. That will not change. Gold has some pretty unique characteristics and is and will remain highly prized. Every idiot knows gold is worth something. That will never change. As to its value in dollars ...that's a little more complicated.
What about counter-party risk? Unlike nearly every paper/digital asset, gold does not have counter-party risk.
Thanks it has been a fair while. I'm getting back in to pms after a long hibernation and much restructuring in my financial life. I must say that when I 'left' , I had felt fatigued with the whole purchasing of pms. I stopped buying and felt covered well enough that I concentrated on growing my business and just enjoying spending money on things I had been putting off, like a holiday or two, a camera or three, and many many other toys. Now that prices are back almost to where they were when I started back in 2009-10 I want to get back into it all with some more weighting to equities. Anyhow its nice to see the people from back then too Many new people on board and a few missing too.
There's a lot of bears coming out of the woods, being quite vocal about how gold is a barbaric relic. You'll probably find that these individuals are quite young, born after the end of the gold standard. Put yourself in their shoes, the dollar has been around since they were born and gold has never been money. That's their paradigm, to them gold is ancient history. But 1970 wasn't that long ago... Never before has the whole world been on fiat, this is a giant experiment. And it doesn't take a scientist to tell you we're experiencing problems.
You will find gold used in very high quality connectors, conductors, space hardened instruments etc. Gold is resistant to almost anything and doesn't oxidise / corrode so is the only materlal used in many applications usually as a thin layer or coating. It's use is limited mainly by price so if gold was a lot cheaper then it would be used in more applications.
Indeed, that's a strong argument. Many central banks are hoarding gold. Repatriations, massive purchases etc.
Two sides to a coin. We tend to focus on one side of the coin here but you now can view the other side. Australian Aboriginals never used gold and this civilisation exceeded 10,000 years. Some cultures used shells, etc as a form of currency. It really has to do with trust and confidence. A well regulated currency does away with the need for gold but that is probably impossible to achieve once governments take control. Gold is a market, no different than any other. It will rise and fall as confidence ebbs and flows. It will not cure all the currency woes of today as many would like to think. There will be a time to enter and a time to exit the trade. Keep an open mind. I believe we are only weeks away from the bottom and then comes the big wait...
The old adage- "Its always darkest before the dawn" comes to mind. All mainstream media are on the wagon ATM about PMs in bear market, the paper market is dropping hard and fast with massive selling during the least liquid session of trade. The signs are all there NOT to listen to what is being said in the mainstream. Who in their right mind would dump a position with no buyers and cause huge losses for themselves? It can only be large players with very deep pockets interested in lower prices, do the math, it can only be a few institutes that need it to happen. There was going to be defaults, these players need to change positions and suck investors into taking the other side. So everyone is told you need to short PMs but who is taking the other side? Why are they taking the other side? What is their net position? Why are CBs buying big if there is no value to PMs? Why wont the US Fed return Germanys gold straight away if there is no value to it and they have heaps of it and dont care about gold anyway? Why is everyone saying people are selling when in fact, everyone is buying physical PMs? Why are there weeks of waiting for delivery of PMs? Why are mining companies of PMs hurting, not investing in future supply and what is the implecations of this in the future? Has easy money printing stopped world wide? Is there new jobs in your area you can see with your own eyes? Have you noticed things are easier in your life financially? Are things easier in the world finacially? We are told things are recovering - the ears may betray, but the eyes can watch the lies! How much PMs have gone into COMEX etc during this mark down? How much has gone out? These are the questions you need to ask. And always remember, you NEVER realise a loss on PMs until you sell. Those that panic and sell only have themselves to blame. Its funny watching the weak hands start to question their own judgement about getting into PMs. It reminds me of a bloke I knew who was a player in stocks back in the crash of (i think) 80s. He personally lost over 3 mill in under a week as a margin call forced him to sell everything and was left holding nothing. It gutted him and almost drove him to kill himself but he didnt. He personally knew 7 people who did though! They had lost everything due to trading on margin, then their wives lost husbands, children lost fathers. All in a matter of days its all taken away. Can this happen with physical PMs? No matter how bad things get or how low prices go, you can ALWAYS walk away with SOMETHING! Sure you might be hurt, you might be gutted but in the end, you will still be able to raise some seed money to start out again. It is one of the very few investments that can say this. Follow what CBs do, not what they say.
