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as I can tell based on albeit very limited research) gold is used in industrial settings, but in general tends to have been replaced by more useful elements.)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.
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.
it has been a fair while. I'm getting back in to pms after a long hibernation and much restructuring in my financial life. 