Don't buy Gold SELL, SEll at once!

[Mega]

http://finance.yahoo.com/banking-bud...5&asset=&ccode=

Am not EJ, but even i can pick holes in this:-

Fiat "Unlimted" Production
Gold very limted !

Mike

[Starving Steve]

Re: Don't buy Gold SELL, SEll at once!

http://finance.yahoo.com/banking-bud...5&asset=&ccode=

Am not EJ, but even i can pick holes in this:-

Fiat "Unlimted" Production
Gold very limted !

Mike

Dear Mike: "No tree can grow to the sky." Every bull market plants the seeds of its own destruction. With oil all along the shores of North America just waiting to be tapped, and with China buying Euros and supporting the world economy; with North America floating on natural gas (literally), and with atomic power now in its rennaissance, gold just might be nearing a top. And North America has tar sands that hold two centuries worth of oil in them. [Sic,] "The sky is always darkest just before the dawn.".... Funny how so few are able to see the dawn coming, nor even the possibility of a dawn coming; that too, is an indication of a top in the gold market and a tulip-mania at hand.

[Ben]

Re: Don't buy Gold SELL, SEll at once!

Gold-Dow is ~8 and Gold is $800 below its inflation adjusted high. My impression is that most mainstream investors have 0% in precious metals, and those who are interested only have 5%. It's not a mania.

The suggestion that we will hit a new era of US growth due to a bunch of energy discoveries seems a bit far fetched. Didn't EJ deal with the natural gas thing in his peak oil piece? Tar sands are expensive. I quite like atomic power, but it would still be very difficult to replace our liquid fuel infrastructure and nuclear still faces a lot of oppositon. China is supporting the world economy now, but their real estate bubble is crashing.

My "gold disappoints" scenario is more on the lines of a muddle though. We have a bit of inflation, a bit of currency devaluation and a bit of economic growth. The developed nations gradually reduce their deficits. The emerging markets continue to grow. The oil price doesn't spike. Interest rates rise but not too much. So, we never get a flight into gold. Gold peaks at gold-dow=6 and slowly declines for years afterwards.

If someone has a more plausible "gold does badly" scenario, I'd be very interested.

[unlucky]

Re: Don't buy Gold SELL, SEll at once!

Warren Buffett put it well. "Gold gets dug out of the ground in Africa, or someplace," he said. "Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Unlucky puts it even better: "Fiat currency gets created out of thin air, or someplace". "Then we loan it out, pass it around, pay it back, and award people ENORMOUS BONUSES to stand around managing it. It has no utliity. Anyone watching from Mars would be scratching their head."

[Minion]

Re: Don't buy Gold SELL, SEll at once!

Dear Mike: "No tree can grow to the sky." Every bull market plants the seeds of its own destruction. With oil all along the shores of North America just waiting to be tapped, and with China buying Euros and supporting the world economy; with North America floating on natural gas (literally), and with atomic power now in its rennaissance, gold just might be nearing a top. And North America has tar sands that hold two centuries worth of oil in them. [Sic,] "The sky is always darkest just before the dawn.".... Funny how so few are able to see the dawn coming, nor even the possibility of a dawn coming; that too, is an indication of a top in the gold market and a tulip-mania at hand.

Manias don't rise at 18% a year for a decade. The rate itself rises exponentially.

[raja]

Re: Don't buy Gold SELL, SEll at once!

If someone has a more plausible "gold does badly" scenario, I'd be very interested.

Government intervention . . . e.g., tax or confiscation.

I'm not saying it's more plausible . . . but government meddling in general is not a rare event, and when it's desperate for money, who better to victimize than the "wealthy gold hoarders".

[LargoWinch]

Re: Don't buy Gold SELL, SEll at once!

Manias don't rise at 18% a year for a decade. The rate itself rises exponentially.

Well said Minion.

Also, "bubbles" don't get taxed at a special "collectibles" rate; they get tax breaks and subsidies.

[Ben]

Re: Don't buy Gold SELL, SEll at once!

I suppose if things got so bad governments considered monetizing gold, then they might try to confiscate it, but if gold merely does well, it seems pretty unlikely.

Gold confiscation took place in the 30s in the context of a gold standard. As EJ says, today devaluing against oil is more important.

Also, as far as I can see, the government wouldn't confiscate or tax gold purely to raise money, because the market is too small. A gold tax wouldn't raise much revenue (though I lack the figures for this).

The other problem is that the wealthy, influential people own gold, or will own gold if inflation gets high.

It's more plausible as part of a populist backlash, which I suppose could happen if the economy gets really bad. But, so far the bankers seem to have gotten away with it, despite having much more to answer for than owning gold. There has been noise and small scale action, like a one-off tax on bonuses in the UK, but not much more.

And note, if the gold rush turns mania, then a whole load of people would be pissed off by a tax.

Just some thoughts.