DislikedThe Greenback is coming back to life, it's not going anywhere. Now for the gold crash.Ignored
I'm supposed to be taking a break from posting currently, but wanted to take the time out to just air a few views on your stance, and in no way am I trying to be pedantic or offensive.
Hear me out.
All assets have a fundamental value. Why is gold valued? Of course it is used in some manufacturing processes and in the creation of jewellry and ornaments, but for a speculator/investor, gold represents an asset that is flocked to as a hedge against inflation. It preserves/retains value.
You seem like a lucky person trigger8990, and tomorrow I think you will win the National Lottery. Let's say for argument's sake, you just plan to sit on this money and draw from it until you pass away - not the smartest, or most likely thing you would do, given your investment savy, but it's just an example. You have $100 Billion US sitting in that account.
Because of inflation, you are going to see that $100 Billion US erode in value with each passing year. After 15 years, it will command the ability to purchase significantly less goods than it could 15 years ago. Had you invested it in Gold, as the price of Gold increases due to inflation, you would be able to sell that Gold and obtain an amount of money, whose purchasing value is approximately equal to that which your $100 Billion US had 15 years ago.
What we are witnessing right now, is a deviation from Gold's fundamental value, in it's purest form. Are we suffering inflation to such a great extent, that such a signficant price increase is warranted? In my opinion absolutely not - the current gold bubble, is being driven by speculation. What is going to happen, as in all bubbles, is that at the peak of the move, informed speculators who have entered earlier on, will come to the realization that the notion of the bubble is becoming more apparent to uninformed speculators, who eventually realize that they are paying way over value for the asset. This will spark massive profit-taking, as the emotions of fear supercede those of greed, and everyone abandons ship. The fear manifests itself as a sudden crash, and since everyone is in the move, previous bids that occupied the market, now being replaced by stop orders only fan the flames of the crash.
The difference between Gold and other commodities, is that the value of these other commodities is heavily influence by the supply/demand side of the equation, in a world of exponentially increasing population.
It is not fair to compare for example, oil, which has a greater intrinsic utility due to its number of uses, to Gold. Gold is in a class by itself, and switched on speculators who realize this, can seek to position themselves accordingly.
If the Greenback makes it's recovery, the FED will stop implenting Quantitative Easing, since it will have achieved it's goal of stimulating economic activity, and creating inflation. To prevent the inflation from spiraling, it will then eventually move to increasing interest rates as a means of containing the inflation. With inflation contained, what reason do speculators have to continue jumping on the Gold bandwagon? Of course, the crash may come before this, but I have difficulty in seeing it coming a long time after the first rate hike...
I hereby disclaim that I have little to no formal background in economics, and that these are just my opinions. I am well aware that there are others who can craft an argument that will slice mine to bits. Hopefully that will happen and my views will become more informed.
Regards,
xXTrizzleXx
Hear me out.
Firstly, don't know what are the reasons for such a statement but I'm definitely a contrarian here.
I'm expecting a much higher price on gold in the long term ,1500 and beyond till 2000 will not be a surprise
Gold crash NO - correction yes. Nothing goes straight up or straight down so there is nothing unusual about corrections, there are allways corections
You seem like a lucky person trigger8990, and tomorrow I think you will win the National Lottery. Let's say for argument's sake, you just plan to sit on this money and draw from it until you pass away - not the smartest, or most likely thing you would do, given your investment savy, but it's just an example. You have $100 Billion US sitting in that account.
Because of inflation, you are going to see that $100 Billion US erode in value with each passing year. After 15 years, it will command the ability to purchase significantly less goods than it could 15 years ago. Had you invested it in Gold, as the price of Gold increases due to inflation, you would be able to sell that Gold and obtain an amount of money, whose purchasing value is approximately equal to that which your $100 Billion US had 15 years ago.
What we are witnessing right now, is a deviation from Gold's fundamental value, in it's purest form. Are we suffering inflation to such a great extent, that such a signficant price increase is warranted? In my opinion absolutely not - the current gold bubble, is being driven by speculation. What is going to happen, as in all bubbles, is that at the peak of the move, informed speculators who have entered earlier on, will come to the realization that the notion of the bubble is becoming more apparent to uninformed speculators, who eventually realize that they are paying way over value for the asset. This will spark massive profit-taking, as the emotions of fear supercede those of greed, and everyone abandons ship. The fear manifests itself as a sudden crash, and since everyone is in the move, previous bids that occupied the market, now being replaced by stop orders only fan the flames of the crash.
I have no idea when or what will cause the corrections. If you go back...
It is not fair to compare for example, oil, which has a greater intrinsic utility due to its number of uses, to Gold. Gold is in a class by itself, and switched on speculators who realize this, can seek to position themselves accordingly.
please give a supporting evidence. anyone can make a statement like that. no offence.
I hereby disclaim that I have little to no formal background in economics, and that these are just my opinions. I am well aware that there are others who can craft an argument that will slice mine to bits. Hopefully that will happen and my views will become more informed.
Regards,
xXTrizzleXx
Why was gold chosen as the effective medium of exchange at Bretton Woods?
Not true. Fiat money has value based on government or central bank decree. The Federal Reserve influences the value of the dollar without taking orders from anybody.
And there are several examples in history when such arrangements have broken down.
What could that be? Any ideas?
You can say fiat money only has value because of government but did people not elect those in government? Didn't people have to actually be the final say in its widespread use? Weren't people getting tired of hauling around assloads of gold to buy stuff? Being robbed easily? etc etc.
Idk I'm no expert I'll admit that I just don't see the world reverting back to gold backed systems.
There would have to be a MASSIVE increase in the value of gold were that to become an option.
Since there have been roughly 10 billion ounces ever recovered, the value of that at today's price is 14.3 trillion. That would be woefully inadequate to cover the amount of fiat currency worldwide.
Unless we were talking about Zimbabwe dollars...
No way I'll wreck this... It's a beer truck!
- #79
- Apr 2, 2011 9:45pm Apr 2, 2011 9:45pm
- Joined Nov 2007 | Status: Conscious Incompetence | 3,274 Posts
The Greenback is coming back to life, it's not going anywhere. Now for the gold crash.
Don't wish it were easier, wish you were better. ~ Jim Rohn
- #80
- Apr 2, 2011 9:49pm Apr 2, 2011 9:49pm
- Joined Nov 2007 | Status: Conscious Incompetence | 3,274 Posts
Don't wish it were easier, wish you were better. ~ Jim Rohn