I think the point of reference varies for those who buy gold to make money, and those who buy gold to save money. It's the same purchase, the same fiat, and the same ounce, but leaves the buyer in a different state of mind. I feel unless you have big money, or small aspirations, gold is a poor investment strategy. Granted no-one wishes to lose money, but for those who go long, the asset held has greater wealth than just the dollar value.
If you're talking about investment strategies, then how much has a stock like Apple gone up since the late 90s? I saw somewhere that $10,000 invested in Apple in '03 was worth over $667,000 by 2013.
For a store of wealth to rise 300% indicates money supply has gone up massively. Gold is not an investment as it does not produce a return......to compare it to a stock means that you don't understand that. I'll be buying in the 900-1300 USD range when I see value or a bargain.
The comment was about state of mind, and your comment implied you were thinking about profit with gold as an investment... A rise the price of a commodity (we're still talking about gold, right) does not automatically indicate expansion of the money supply. There could be: * increased demand for whatever reason (e.g. sentiment, fear, or some new technology) * a decrease in supply, lowered ore yields * an increase in extraction costs, higher energy prices etc.
You can still generate revenue if your timing is right and gold's price goes up. Why are so many people buying silver over here, then? Well, quite a lot of them are actually doing it for the sake of later profit.
"If relative demands and prices change in the Angel Gabriel model, they will change much more in the course of real-world increases in the supply of money. For, as Mises showed, in the real world an inflation of money is alluring to the inflators precisely because the injection of new money does not follow the Angel Gabriel model. Instead, the government or the banks create new money to be spent on specific goods and services. The demand for these goods thereby rises, raising these specific prices. Gradually, the new money ripples through the economy, raising demand and prices as it goes. Income and wealth are redistributed to those who receive the new money early in the process, at the expense of those who receive the new money late in the day and of those on fixed incomes who receive no new money at all. Two types of shifts in relative prices occur as the result of this increase in money: (1) the redistribution from late receivers to early receivers that occurs during the inflation process and (2) the permanent shifts in wealth and income that continue even after the effects of the increase in the money supply have worked themselves out. For the new equilibrium will reflect a changed pattern of wealth, income, and demand resulting from the changes during the intervening inflationary process. For example, the fixed income groups permanently lose in relative wealth and income.*46 " http://www.econlib.org/library/NPDBooks/Dolan/dlnFMA12.html You may disagree but I think ultimately Austrian economics will assert itself as entirely vindicated as it did previously in the 1980s. Greenspan in his recent book 'the map and the territory' has a novel page on gold where he addresses it's dual use as a medium of exchange without counterparty risk which also has the property of a store of wealth without counterparty risk (my bold). The counter party in the case of FIAT is government (see Greece) and due to this it is a poor store of wealth Fiat is by necessity like many modern assets managed in a manner that makes it most fit for it's primary purpose - the payment of tax. Gold acts as a store of wealth independent of government. It is in the physical form the supreme mechanism of intergenerational wealth transfer in the event of unusually acquisitive government (e.g. the Soviet Union). Countries with expanding estate or inheritance tax regimes cannot intercept percentages electronically or at the point of legal arbitrage on the deceased's estate. In it's physical form it lies outside that. Along with gold, traditionally wealth (which is rarely accrued in one generation in actuality) art and antiques can fulfil some of these functions of intergenerational transfer and - but not with the same liquidity as gold. They lack counterparty risk only when the recipient has sufficient expertise to assure their merit. I could elaborate, a store of wealth is one thing - an investment is something which produces a revenue stream - a different matter entirely. As I illustrated with coffee above - the price of gold and other commodities does in fact indicate an increase in money supply. The direction of this supply towards the financial and real estate sectors has produced massive inflation and price distortion in these areas.... Be aware that some nations have already introduced taxes and limits on what a parent may give to a child per year, 33% inheritance taxes, capital gains taxes which apply on inheritance and a vast range of property, employment and business taxes which reduce the viability of these as stores of wealth. Gold should be 10-20% of your wealth for many reasons. As regards speculation - it is simply gambling and while I love silver to bits speculating on ETF funds is in the end of the day no better or more informed than playing the lottery compulsively. I owned MSFT stock from 1993 to 1999 and am simply at a different point in my life - however I believe apple has run its' course and would be an extremely mediocre buy today.
Why did gold during 2004-2012 rise against all other currencies? Because the demand was temporary higher than the supply. Why did gold during 2012-2014 drop against all other currencies? Because the demand was temporary lower than the supply. Similar stories can be given, for euro, dollar, ... About your last sentence: even with the current record low euro, the gold price in euro's is still lower than golds peak price. 1100 versus the 1300-1400 of 2011-2012. Your Euro fall is still "overruled" by other factors in the gold price setting. And if you have doubt about ECB's "QE", check it yourself: http://www.ecb.europa.eu/mopo/implement/omo/html/key.html These were / are the ending loans: 20120034 LTRO EUR 01/03/2012 26/02/2015 1092 529.53081 bn Ann. All. 20110149 LTRO EUR 22/12/2011 29/01/2015 1134 489.19075 bn Ann. All. The last is already removed / paid back. This "new" QE of X billion / month program just replaces them, or in another words: extend existing loans. It's not 'extra'. That would require new loans together with existing.
Its not the forum, its your focus. No matter what the market is doing it seems there is always a mix of bulls, bears, perma-bulls, perma-bears, a sideways guy, and a smattering of the utterly insane.
Again you are fully entitled to your opinion however 1) The economist disagrees - Euro QE had a direct impact on the Euros exchange rate and this impact is not attributed to 'supply and demand' "The third effect is on the exchange rate. The euro fell in the wake of the announcement and is around 1.125/$ now. Capital Economics says that "We have long insisted that a weaker currency is the primary channel through which QE might work in the euro zone so the further drop below 1.13 (at the time of writing) taking the total fall against the US dollar since May to almost 20% and even the trade-weighted decline to over 10% is clearly welcome. On paper at least, these falls could have significant economic effects, particularly when combined with those of the drop in oil prices." A fall in the euro will of course push up import prices and add something to inflation expectations on its own. In market terms, it seems clear that 2015 is already set to be dominated by currencies. Last week's Swiss shock was such a surprise because it was a revaluation, not a devaluation; it has had a knock-on effect today as Croatia decided to tie its currency to the Swiss franc as a way of helping out those citizens who had taken out mortgages in the Swiss currency. (Why on earth would you mismatch your assets and liabilities in such a way? Who advised these people?) The Swiss decision was clearly taken in anticipation of the ECB's move. " http://www.economist.com/blogs/buttonwood/2015/01/ecb-and-qe 2)The Financial Times disagrees "ECB action sends euro to lowest for 11 years" http://www.ft.com/cms/s/0/54ffd40c-a2d3-11e4-ac1c-00144feab7de.html Again the fall in the Euro against other currencies and commodities is attributed (I think correctly) to the ECB QE. 3)The Swiss and Swedish reactions are not to 'supply and demand' but to the ECB 4)The current bearish attitude to PMs has no legs other than the usual seasonality. However given the average 25% gain in trading seasonality it is barely worth it in physical due to purchase premiums which enable PM dealers to eat.. throw in the personal effort 'work' in selling and re-purchasing PMs and it is definitely not worth it for me. This seasonality exists - has always existed and does nothing to undermine the trading range I specified and exactly because of the current state of the Eurozone (a massive part of the global economy, the Greek situation and risk of political contagion to Spain, combined with the stand off with Putin and drift to a 'new cold war' actually give gold a great deal of potentially unexpected upside this year. Source:http://equityclock.com/pictures/GoldFuturesGCSeasonalChart_2CFE/image_thumb.png "The above chart represents the seasonality for Gold Futures (GC) Continuous Contract for the past 20 years." A selloff of futures in the beginning of March is normal - it is not has is discussed elsewhere a)An indication of the correctness of the laughable suggestion that gold will fall to 400USD b)An indication that geopolitical concerns have been laid to rest c)An indication that the average analysts estimate for the yearly trading range is incorrect d)An indication of a nefarious conspiracy that PM dealers are engaged in. There has most definitely by every measure been a massive increase in monetary supply starting with the 90s tech boom, lending practises relating to real estate and central bank interventions. This is what has caused gold (as a store of wealth) to move from 300 to over 1100. This indicates that monetary supply in the period has gone up over 250%. While indeed supply and demand underpins all pricing mechanisms for goods - Gold has an unusual property in that even more than the VIX that is a barometer of faith in government and geopolitical stability. This is frequently a sentiment based on emotion - fear and adds a dimension to Gold. Its' demand side has a large component that is entirely subject to human emotion regarding their governments and the world. It is as I mention above one of the premium means of storing wealth and intergenerational wealth transfer and will probably continue to be so for another two thousand years. The trouble with bearish sentiment, like bullish sentiment is that it becomes an unblinking consensus that ignores real market conditions and forces and leads to irrational despondence just as bulls are prone to irrational exuberance.
The Euro is falling because it is a dead currency walking and this is why the Swiss broke the peg. Don't forget, the Swiss did not tell the IMF that they were going to break the peg because they know that the IMF would have informed the banks that would have front run the Swiss which would have cost them even more. Anyone with half a brain can work out that half the countries in the Eurozone will never be able to pay back all the money they owe which will cripple the other half. This has been a long time coming. The exit out of the Euro has nothing to do with Q.E. The U.S. also had Q.E. and the U.S. dollar is heading for an all-time high. It is all about currency stability and the Euro has none. The Euro would still be falling today even if Q.E. had not occured.
The Swiss broke the peg as soon as a German court ruling allowing ECB QE to proceed came in. Anyone who cannot see that the ECBs actions and signals relating to QE trigged a fall in the Euro and a wave of activity e.g. Swiss, Sweden, Croatia is flying blind.
It really does not matter for in the end, even $1 trillion euros will not be inflationary for the contraction appears to be massive in the area of at least $6 trillion. All they will do is try to help the banks buying in their bad sovereign debt. That money will not go back into the system to provide lending when demand for loans is still falling inside Europe. This is straight from one of the precious few economists that actually stated back in the 90's that the Euro would fail and explained exactly why and the reason has come to fruition.
Can you provide the name of the economist you mention here please. A link to that particular article would be handy too.(but not essential) If you are going to use "this economist" as your base then his/her name is essential. Thanks
