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XMFSinchiruna (28.57)

Now Do You Understand Gold?

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May 11, 2010 – Comments (33) | RELATED TICKERS: GOLD , CEF , AUY

If gold were really just a "fear trade" as so many persistently presume, then would it have notched a fresh new nominal high within hours of Europe tossing a trillion-dollar bailout onto their portion of the debt crisis?

If gold were really just a commodity as so many persistently presume, then would it have notched a fresh nominal high even as virtually every commodity dipped lower on the day? Commodities that dropped today include: oil, natural gas, copper, nickel, zinc, tin, lead, cattle, hogs, pork bellies, etc. If you think gold and silver are no different in fundamental nature than any of those items listed above, then today might just be a little confounding for you.

If gold were really just single-currency (USD) hedge as so many persistently presume, then would it have notched a fresh new nominal high even as the U.S. dollar index climbed $0.40 to $84.55?

If gold were really a "barbarous relic" of an abandoned financial structure as so many persistently presume, then would it have notched a fresh new nominal high just as the pundits victoriously proclaimed an end to the risk of European contagion?

If gold were really doomed to collapse before looming deflation and rising interest rates, then would would it have notched a fresh new nominal high even as Europe's horrid economic state threatened prior (mythical) models of global recovery?

If gold were really a poor investment as so many persistently presume, then would the mining share ETFs have appreciated 7% in a single day on a flat day for the equity markets?

If gold bulls were merely a fringe group of irrational wack-jobs as so many persistently (and irrationally) presume, then would they have been consistently 100% correct about the fundamental staying power of this multi-year bull market throughout the last 10 years?

Perhaps now, finally, a larger proportion of investors can begin to understand gold for what it truly is and always has been: the only currency in the world that carries zero counterparty risk, zero debt, zero credit risk, zero risk of devaluation through quantitative easing, a structurally limited supply, and indeed uninterrupted status as the de facto reserve currency of the world.

$1,650 gold comes during the next 12 months, $2,000 gold comes during the next 24 months, and I dare say $3,000 gold is looking increasingly likely to come within the next 36-48 months. It could all happen much faster than that depending upon how the destruction of the bullion banks' naked short positions unfolds. This is one bull market you do not want to miss. If you think it's too late to acquire gold exposure, then I certainly don't want to press anyone into making a move they're uncomfortable with, but please prepare to kick yourself in three years' time.

Fool on!

TMFSinch

 

 

 

 

 

33 Comments – Post Your Own

#1) On May 11, 2010 at 5:24 PM, dbjella (< 20) wrote:

I kind of like my fiat currency :)  If I don't have enough for spending needs, then I just print more.

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#2) On May 11, 2010 at 5:29 PM, binve (< 20) wrote:

(thunderous applause from the peanut gallery).

I agree with everything you wrote my man. Here is an update on my count in case you are interested: Update on Short Term Gold Count.

Thank you my friend, Fool on!

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#3) On May 11, 2010 at 5:31 PM, outoffocus (24.47) wrote:

I kind of like my fiat currency :)  If I don't have enough for spending needs, then I just print more.

If you do it, its criminal.  If the Fed does it, its a healthy coating of inflation.

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#4) On May 11, 2010 at 5:48 PM, XMFSinchiruna (28.57) wrote:

http://www.fool.com/investing/international/2010/05/11/gold-fields-is-a-true-bank-vault.aspx

In one of the year's most ironic pairings of headlines, JPMorgan Chase(NYSE: JPM) has announced the opening of a new gold bullion storage facility in Singapore ... even as a New York Post article appeared over the weekend reporting a possible criminal investigation by the U.S. Department of Justice (Antitrust Division) into alleged manipulation of silver prices.

 

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#5) On May 11, 2010 at 5:51 PM, chk999 (99.98) wrote:

Perhaps now, finally, a larger proportion of investors can begin to understand gold for what it truly is and always has been: the only currency in the world that carries zero counterparty risk, zero debt, zero credit risk, zero risk of devaluation through quantitative easing, a structurally limited supply, and indeed uninterrupted status as the de facto reserve currency of the world.

This is the paragraph I don't agree with. Gold prices peaked at 800 in January of 1980 and bottomed at 250 in 1999. If you look a the purchasing power parity of gold, it really dropped over that 19 years. Kellogg's Corn Flakes were $.0521/Oz in 1980 and $.1661/Oz in 2000. You could buy roughly 1/9th as much Corn Flakes per ounce of gold in late 1999 as you could in early 1980. So as a store of buying power over that run it was as bad or worse than most fiat currencies.

I am currently long gold and silver, but I don't see them as "money". They are commodities with quirky demand structures that will benefit them as investments for a while.

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#6) On May 11, 2010 at 5:54 PM, rofgile (98.98) wrote:

I think many people are still afraid of a double-dip, or a Euro lead crash, or a Chinese Bubble.

Until each dragon is slayed, the fear is still there -

 -Rof (being patient for the fear to end).

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#7) On May 11, 2010 at 7:02 PM, ChrisGraley (31.57) wrote:

I think that the insanity has to end before the fear does.

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#8) On May 11, 2010 at 7:18 PM, walt373 (99.85) wrote:

I still think gold is stupid because it's useless in the real world. But it broke out to new highs today, and you have to respect that, even if you don't like or agree with it. At this point, I'd rather be long than short.

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#9) On May 11, 2010 at 7:23 PM, tobernator1000 (< 20) wrote:

Gold is still a fear trade, there's just a lot more fear in the world than there is gold, thus people are willing to pay for it and it increases in value (relative to the fiat currency you might use to buy it).

Being a fear trade doesn't make it a bad investment though. As long as people are willing to pay more and more dollars (or Euros or yen or what have you) for it, what you have will yield more dollars for you than you paid for it.

If you're buying gold to actually HAVE gold, as opposed to making money off of it, that's the thing that's silly, because it WON'T become useful (except for electronic devices, and a few other highly specialized functions) unless the world's currencies become worthless (aka, the only way we'd ever go back to using gold as currency), and in that case the metal you'll probably be wanting to hold on to is lead (appropriately shaped and filled with gunpowder).

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#10) On May 11, 2010 at 8:25 PM, hybridinvestor (81.42) wrote:

#5  Great great points about the real purchasing power of gold, silver, etc. at times which has been proven time and time again to not return over long periods of time to return more than investing in companies that can actually "grow" their markets many, many magnitudes.  Folks forget the boom and bust cycles of all commodities.  As demand increases folks at some point will pour a ton of money into extracting more of it until finally it reaches a tipping point and suddenly there is more of it and not as many want/need it.  Then projects aren't well so profitable anymore and you start the bust cycle until enough capacity and production has been cut that eventually it swings back to boom.  Talk to Rogers.  He will glibly say this is "how markets work".

#9  Ha ha....think I will load up on lead as well...in the right shape and size!

And okay gold went up a couple percent today to me as both the continued fear trade and now likely the fast money and technicians climbing onboard as it hit new "highs" which from my observations is always a time to start being very cautious in practically any investment.  Silver went up more. SLW went up even more....but me...what do I like and own and will pit against gold, oil, silver, wheat, anyday?

Sun Hydraulics (SNHY - up 15% on a good report) and other great little companies like this that can literally double, triple, or more their output without becoming a behemoth as the world grows.

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#11) On May 11, 2010 at 9:02 PM, fewl10 (37.71) wrote:

I loaded up on gold for 1000 - 1200.  It is almost 1300 now.  I think a pullback will come soon, giving people additional opportunity. 

My long term target is 2000, and I think it will hit in a couple years.  

Debt problems are going to be solved by monetization, which will lead to hyperinflation.  This is how the true taxes will come: higher prices for everything.  Gold will protect you from all of this, despite what morons such as KARL DENNINGER think.  

What is Alstry and KARL DENNINGER's solution?  HOLD CASH like an idiot, forever?  Selling out of Ford stock at $5 because its about to collapse.  What a couple of morons.

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#12) On May 12, 2010 at 3:27 AM, XMFkmoney (99.66) wrote:

Given the strength and conviction of your arguments, you seem awfully conservative to me on gold pricing.   $3,000 in 4 years? If all you want is a double in 4 years, heck, that's just the return of any decent small cap stock.

And with the whole "increasingly likely" bit, you don't even sound sure of it!  If you really think gold is a good investment and not just an average or below average investment, why not $5,000 or $10,000 in 4 years? 

If fiat currency becomes worthless then doesn't gold become infinitely valuable?  Why is it going to take so long for gold to reach $10,000?

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#13) On May 12, 2010 at 8:12 AM, XMFSinchiruna (28.57) wrote:

XMFkmoney

Given the strength and conviction of your arguments, you seem awfully conservative to me on gold pricing.

Thank you.

$3,000 in 4 years? If all you want is a double in 4 years, heck, that's just the return of any decent small cap stock.

A double from here in bullion prices will translate into plenty of five-baggers and ten-baggers among the gold and silver mining stocks that constitute my principle investment focus. You may also be forgetting that the USD over the same period would suffer a decline of roughly half of its purchasing power. 

And with the whole "increasingly likely" bit, you don't even sound sure of it!

Oh I'm plenty sure of it. It's just the timing aspect to the calls that is an unusual transgression for this dutifully conservative Fool.

If you really think gold is a good investment and not just an average or below average investment, why not $5,000 or $10,000 in 4 years?

Nowhere did I suggest or infer that those sorts of price levels were not on the table. After the years of ridicule that I have endured for maintaining even a $2,000 price target, you are not permitted to twist my bullish sentiment into criticism that it's insufficiently bullish. For that I will not stand.

I set my initial conservative price target precisely where I thought it needed to be for people to grasp gold's trajectory when it was almost universally misconceived as a frothy speculative bubble back when gold was below $600. I have held that $2,000 price target publicly on this website, without interruption, since 2006. I will not permit you to come along at this juncture and belittle the achievement. Find another sucker to absorb the unwarranted criticism, cause I'm not biting. 

Finally, Fools will note that I consider those time-based projections just as conservative as the price targets that go with them. They represent what I consider wide margins of safety for achieving the respective marks. Given the impossibility of predicting exactly when or how the leveraged paper games of the bullion banks will unravel, and also when or how that critical loss of confidence in the USD as any manner of safe haven takes shape, those timeframes that I offer are only as aggressive as I think they ought to be. When gold takes out $2,000, I will of course update my forecasts accordingly.

I fully expected the naysayers to lash out at this juncture. Their periodic whimpers of defensive attack are becoming as predictable as Bernanke's helicopter. There is a large and perturbed majority out there that's been wrong about gold from the very start, and not all of them will concede their error with grace and honor.

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#14) On May 12, 2010 at 8:31 AM, XMFSinchiruna (28.57) wrote:

The CAPS archives reads like a trail of tears, with mile after mile of fully debunked criticisms of the bullish investment case for gold.

Here is one fine example from just a few short months ago:

http://www.fool.com/investing/general/2010/01/27/todays-best-bargain-in-gold.aspx

 

XMFkmoney

The problem with this argument is that gold isn't tied to inflation, it's tied to fear and now speculation.

What currency is the dollar going to be devalued relative to? So everyone starts using Euros or Yuan, how does that make gold more valuable?

What confuses me most, is that your advice isn't even to buy gold. If you are really talking about world currency devaluation, your advice is to buy worthless pieces of paper which represent ownership in something related to gold. If we really have massive currency devalution why would those worthless pieces of paper suddenly be worth anything? What exactly are you going to cash them in for?

 

TMFSinchiruna

Gold is 'tied' to nothing. Gold is no more tied to fear or speculation than it is to your shoelaces.

The USD is the most significant of the impaired western fiat currencies due to its reserve status, and the proportion of global derivatives denominated therein places it in an extremely precarious position. The USD, the Euro, and the GBP are each structurally impaired to a severe degree, but the scale of deficit spending and the specter of fiscal largess that will be employed to combat further deleveraging places the USD on particularly unstable ground.

As the USD devalues, gold as denominated in USD rises. As fiat currencies writ large come under increasing strain from the $600 trillion derivatives monster, then gold as denominated in all fiat currencies rises.

I can not be certain, but my guess is that you have never considered gold as a currency. In my experience, those who grapple most with the relationship between dollar weakness and gold strength misunderstand what gold is.

Consider Alan Greenspan's definition: "Gold still represents the ultimate form of payment in the world". Gold = money. The USD was devised as a proxy for gold, and was later divorced from gold in a grand global experiment in unbacked fiat currencies. Once Fools understand that gold in fact stands still while the paper currencies shuffle around it every which way, then they are better equipped to correctly interpret the gold market.

You toss around a notion of mass abandonment of the world's reserve currency as if it would not be a game-changing event for the global economy. We have seen reserve currency transitions through history ... they are not smooth. That is far beyond the scope of this article, but since you brought it up ... :)

If you understood from this article that my "advice isn't even to buy gold", then you have not dutifully explored the dozens of links that I went to great lengths to amass for the benefit of my fellow Fools, and you have misunderstood my message in a very fundamental way.

Your final questions lead me to conclude that you have not carefully thought through the impacts of currency devaluation upon equity markets. Amid currency devaluation, equities can offer better protection than bonds because nominal share prices correct for inflationary currency movements over time.

I am happy to answer any further questions you may still have. I get that gold is misunderstood by many, and my sincere wish is to help people understand this rather complex market more fully.

 

XMFkmoney

"As the USD devalues, gold as denominated in USD rises."

This is where the crux of your error lies. It's an error of fact, not reasoning.

In theory, as the dollar becomes worth less, things should cost more. That is actually pretty true of things with value. Bread, for example, never drops in price.

In 1980 the price of gold was over $600 an oz,

In 2000 the price of gold was under $300 an oz.

Over that time period a dollar in 1980 was worth 0.44 dollars. So, from 1980 through 2000 your statement of fact is simply untrue.

Now, 1980 was a high for gold, but that's besides the point. The price of gold fluctuates while the dollar gets increasingly devalued over time. There is something else going on with gold other than some sort of relationship to the dollar.

So, empirically the foundation of your argument isn't true. It's not even true recently. The huge rise in gold price actually corresponded to several months of deflation.

I have absolutely thought of the value of equity markets during devaluation. Owning Gold or gold stocks isn't any better a way of protecting yourself from devaluation than owning technology stocks or energy stocks or real estate or anything but cash.

The error in reasoning is that there is some future in which gold can again have value as a currency.

I was giving you the benefit of the doubt in not believing there was going to be a total collapse of all world currencies. To put it more clearly, my question was, if your gold stocks suddenly go from $100 to $100,000 because all the currencies become devalued and we have to transition to something else, presumably gold, what exactly are you going to tell your broker, who is somehow still in business, when you decide it's time to cash in on your brilliance, "Write me a check"? What currency will you ask for? Will it go into a bank account? Will you just trade that stock directly for food at the grocery store?

And, assuming you're really going down this road, if gold somehow became the a new non-governmental currency and you owned a large company pulling this cash out of the ground would you even consider honoring your stock obligations? How exactly do you plan on enforcing that contract?

As far as I can tell, gold supporters have to hold a lot of very weird and inconsistent beliefs about what the world would look like in which gold becomes valuable.

 

TMFSinchiruna

I appreciate the friendly debate:

Your interpretation of gold's performance relative to the USD relies upon a cherry-picked timeframe. Cherry-picking as your starting point the biggest price spike in modern history will of course yield your desired result. I would counter with an objectively more salient historical moment to render a test of performance in gold vis-a-vis the USD: the termination the dollar's peg to gold, and the subsequent closing of the international convertibility to gold at about $35. And this isn't exactly taking the discussion back into the stone age ... we're talking the early 1970s here.

Additionally, your measures of dollar devaluation over time are not my measures by any means. You appear to rely upon official inflation data, which has been systematically understated through carefully massaged metrics for decades. I highly recommend a subscription to 'shadowstats' for a more reliable measure of the dollar's pitiful performance as a store of value since the abandonment of Bretton Woods.

You claim above that no correlation exists between gold's recent strength and the dollar, which you conclude again via CPI. You are again tracking the wrong metric. Might I suggest a look at the USDX as a measure of the dollar's purchasing power vis-a-vis the world's leading currencies? Here's a chart:

http://1.bp.blogspot.com/_tq4bCFqe0sA/Sw1XEIath9I/AAAAAAAAA6...

Finally, we have an apparent disconnect between us in the very paradigms with which we approach the nature of currency devaluation and inflation/deflation. It may be a Keynesian / Austrian divide, but I need not delve into such semantics to make my point. I believe that many people confuse asset price deflation as an absence of inflation, but in an environment of quantitative easing and deep-seeded fiscal imbalance, you have inflation (i.e. loss of purchasing power abroad) through a ballooning money supply even as unfortunate economic conditions precipitate falling prices domestically. This is a classic definition of stagflation, and a scenario which I have discussed at length among these pages. (see my comments to Anand's article here: http://www.fool.com/investing/international/2009/04/23/is-us.... I continue to view stagflation as the most likely scenario looming for our economy, and I worry for those who are solely concerned with deflation as expressed through CPI (or even worse, through estimations of eroded wealth as somehow counteracting changes in the money supply)

"The error in reasoning is that there is some future in which gold can again have value as a currency."

With all due respect, your error in reasoning is in presuming that gold is not presently a currency. Gold is money. You conveniently ignored that portion of my response above in which the former darling of the Keynesians expressly confirms as much. I made no mention of a return to a gold standard or anything of the sort... I spoke only of currency devaluation .. not currency collapse, so I will respectfully leave your last paragraphs alone as lying outside the boundaries of a helpful addition to this important debate.

So, clearly we have a wide philosophical divide between us. We employ disparate measures of inflation, we possess competing paradigms for interpreting monetary phenomena, and we are inclined to focus upon different timeframes to measure gold's historical performance as a store of value. I don't suppose we'll ever bridge that divide, which is fine ... if everybody agreed then perhaps we WOULD have a bubble. :) People must weight the arguments and decide for themselves ... the information is out there.

"As far as I can tell, gold supporters have to hold a lot of very weird and inconsistent beliefs about what the world would look like in which gold becomes valuable."

Back at you: :)

As far as I can tell, gold bashers have to hold a lot of very weird and inconsistent beliefs about what the world would look like in which the U.S. dollar becomes valuable.

Thanks again for the discussion, and Fool on!

 

 

 

 

 

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#15) On May 12, 2010 at 11:44 AM, XMFkmoney (99.66) wrote:

My prediction is that the US Dollar will remain a viable currency, irrespective of gold prices.  I think we can both agree that, at least for the time being, I'm correct on that. 

So it's a little early to gloat yet it seems, since your prediction of the collapse of the dollar is not yet true.  Gold prices may have gone up, but the thesis underlying your prediction has yet to be validated. 

Given the impossibility of predicting exactly when or how the leveraged paper games of the bullion banks will unravel, and also when or how that critical loss of confidence in the USD as any manner of safe haven takes shape, those timeframes that I offer are only as aggressive as I think they ought to be. When gold takes out $2,000, I will of course update my forecasts accordingly.

You still failed to address the question of why $3,000 and not $5,000. It sounds like your argument is that you pick prices which are higher but not so high that they're still plausible. You don't pick $10,000 in 4 years because no one would believe it. Or as you put it, "the target price is set to help people grasp the trajectory".  At the very least, with such a low $3,000 target price this means that you don't believe the dollar will come anywhere near collapse within the next 4 years, right? 

You keep telling people to explain the intrinsic value of the dollar, so here goes.

The intrinsic value of the US Dollar is based at least partly on the fact that even with recent events, the US has an immensely powerful military.

If any of the fiat currency disaster stories occur which leave gold as the main real store of value, how do you expect the vault you're keeping your gold in or the mine which you have invested in to keep out the Marines when they come to get it in the interest of national security? 

And if the Marines don't come and get the gold, do you have an army of your own to go get the gold?  Why on earth would an organization which held the main world currency in a secured vault turn over your share to you just because you held a certificate of ownership?  What are you going to do, take them to court? Where?

You either have gold coins in your basement or you have faith in a piece of paper.

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#16) On May 12, 2010 at 2:34 PM, silverminer (36.91) wrote:

XMFkmoney

I've said a lot of things on here over the past 4 years, so I'm saying I couldn't have said it, but could you kindly provide a link and a quote to where I predicate the argument for higher gold prices on a "collapse" of the USD? I have spoken about the theoretical possibility of an all-out collapse in the dollar, but as far as i can recall I have never suggested that gold's price targets are predicated upon such an event. Now, a sustained devaluation trend, and a loss of confidence by foreign creditors, and a deterioration of the USD's role as the primary reserve currency, etc ... all of those scenarios do bolster the prospects for gold's continued advance, but that is not the same as "collapse".

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#17) On May 12, 2010 at 2:36 PM, XMFSinchiruna (28.57) wrote:

BTW, for those not in the know, silverminer = TMFSinchiruna. :)

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#18) On May 12, 2010 at 2:39 PM, XMFSinchiruna (28.57) wrote:

XMFkmoney

If any of the fiat currency disaster stories occur which leave gold as the main real store of value, how do you expect the vault you're keeping your gold in or the mine which you have invested in to keep out the Marines when they come to get it in the interest of national security? 

As I have said repeatedly, I limit my exposure to U.S. mining operations. I focus heavily upon places like Canada, where the sovereign currency poses nowhere near the same degree of structural impairment.

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#19) On May 12, 2010 at 2:47 PM, rfaramir (30.52) wrote:

XMFkmoney,

What on earth could induce an honorable US Marine to invade Canada, take over a bullion vault, steal the gold (and silver), and return to the US with it?  Your answer, "the interest of national security" is pretty weak.

Even weaker is the motivation of said US Marine to transgress the border to take over a BC gold mine.  What is he going to do, become a gold miner or threaten at the point of his gun the existing miners to continue working but ship the concentrate to the US instead of the lawfully contracted gold refiner?

When a currency collapses, not all of society collapses along with it.  Before paper money substitutes were printed, people used grain, whiskey, tobacco, wampum, any convenient commodity. When money becomes scarce, people return to such dealings (e.g., cigarettes in war camps).  But so long as we have any modicum of trust in each other, and honorability among us, receipts for our property will be honored, no matter if it is tobacco warehouse receipts (legal tender in Virginia at one time) or bullion reciepts.

Seeing an impending collapse, government leaders will have many choices.  If they do not make the (hard) right choices, we will have a collapse.  If they do choose austerity (primarily for the state, but also for the people), there's no knowing when.  When gold reaches $3,000 per ounce they may still think everything is fine, but when it hits $35,000 enough are voted out to change their minds.  Individual choices of humans with free will are not predictable, we can only say what the consequences will be.

If the government were to stop inflating now (including ending fractional reserve bank inflation) and resume guaranteed convertibility from dollars to gold, prices would stabilize at whatever level is warranted for the respective quantities of dollars printed and US gold held.  If they do not ever stop, gold goes to infinity as dollars go to zero.  It's difficult to add $1200 (value now) and infinity (value if inflation never stops), divide by two and come up with the dollar's value where inflation stops.

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#20) On May 12, 2010 at 2:52 PM, XMFSinchiruna (28.57) wrote:

I think you have confused intrinsic value with extrinsic value. If currency's sole source of value is the threat of military force, not only is that an extrinsic trait, but I think that speaks volumes in support of my contention that the impaired currency has shed most of its intrinsic value.

Frankly, I recommend you add a dose of nuance to your analysis. Not everything is as black and white as you would seem to portray it.

And lastly, regarding my price projections, and my rationales for them, they are my own. You may issue your own countering predictions if you wish, but you are kindly asked to refrain from reading things into mine that just aren't there, or presuming to know what it may or may not say about my expectations for prices beyond the scope of the time-stamped predictions provided.

The funniest part about it all is that someone coming around here to question my bullish expectations for gold has the audacity to characterize $3,000 as a lowball prediction.

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#21) On May 12, 2010 at 3:07 PM, catoismymotor (60.25) wrote:

Chris,

Don't let the hiney get you down. Do you remeber this?

Cato

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#22) On May 12, 2010 at 3:07 PM, djemonk (< 20) wrote:

TMFSinchiruna,

Thank you for all the hard work you do researching this sort of thing, and a double thanks for being willing to share your research with the rest of us.  Whether or not people agree with your reasoning, I think we all owe you a debt (in fiat currency, of course) for coming up with and sharing it.

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#23) On May 12, 2010 at 3:27 PM, JeanDavid (83.30) wrote:

Instead of talking about the relative value of gold to the US$, let us consider things we use every day. IIRC, a 2-ounce candy bar in about 1945 cost US$0.05. Now a slightly under 1-ounce candy bar costs about US$0.75. So call that an inflation rate of 30x in 60 years, or an average of around 6% a year in constant-candy-bar terms. In the same interval of time, the price of gold went up about 35:1. So the price of gold seems to me, to vary about the same rate as candy bars.

 Had I kept the money in a cash box under the bed, I would have lost 30:1 to inflation. But in candy-bar terms, I would be even.

 In retrospect, I could have done better to buy Berkshire Hathaway in 1965 or so at under $100/share for the (now Class A) shares. But I might have bought Johns-Manville, or Studebaker, or Retail Solutions Inc. (not the current company that is using that name, but the one I bought in the 1980s (I think) that has vanished).

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#24) On May 12, 2010 at 3:29 PM, ETFsRule (99.89) wrote:

"Perhaps now, finally, a larger proportion of investors can begin to understand gold for what it truly is and always has been: the only currency in the world that carries zero counterparty risk, zero debt, zero credit risk, zero risk of devaluation through quantitative easing, a structurally limited supply, and indeed uninterrupted status as the de facto reserve currency of the world."

Too bad you're going to lose all your money as soon as gold synthesis becomes more economically viable.

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#25) On May 12, 2010 at 3:55 PM, catoismymotor (60.25) wrote:

*chortle*

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#26) On May 12, 2010 at 4:32 PM, XMFkmoney (99.66) wrote:

@rfaramir 

I completely agree with you about getting marines to take over gold assets in Canada.  That's because the US, by law, prices gold at $42.22 per oz. It wouldn't be worth it.

How do you feel about talking about whether Marines might invade a country for oil, something we do actually value? 

If we were reduced to a barter economy would you really accept a receipt for bullion?  You wouldn't be concerned about fraud or simply unwillingness or inability of the lender to pay? Anything you can burn or eat is a far more plausible trade commodity than gold.  

The US currently has 8,000 tons of gold so if gold hit $35,000 an oz. that would be worth around $10 trillion or nearly enough to pay off the national debt.  At that point we would we still be worried about inflationary pressure on the dollar?  What happens when the price of gold is so high that it balances the US's books?

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#27) On May 12, 2010 at 5:14 PM, XMFkmoney (99.66) wrote:

regarding my price projections, and my rationales for them, they are my own.

For the curious, this is the difference between a value investor and a speculator.  You can't tell me I'm making wrong assumptions about your prices and then tell me the real ones are super secret. I'm going to stick with projection = "higher than the current price but not so high as to seem implausible."

The funniest part about it all is that someone coming around here to question my bullish expectations for gold has the audacity to characterize $3,000 as a lowball prediction.

$3,000 an oz is a pretty good four year price if you're a speculator.  That's about a 20% annual return, about what you want from a small cap under normal conditions. If you think that fiat currencies are going to experience meaningful quantitative easing and are somehow a superior investment than small cap stocks it seems pretty conservative to me.  If my Subway sandwich goes from $5 to $10 in 4 years my gold bar better well go from $1500 to $3000.

At $3,000 an oz. there will be no material difference in how world currencies work.  The world will still be using dollars as its currency, not gold. It's certainly not a case of hyperinflation or any debt related crisis.  And you have that at 4 years out. That's pretty far considering what you think of the dollar. If you're so bullish on gold, when does it really take off?  When is oil going to be priced in gold, for example?

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#28) On May 12, 2010 at 5:26 PM, XMFSinchiruna (28.57) wrote:

XMFkmoney

For the curious, this is the difference between a debator and a spin-doctor.

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#29) On May 12, 2010 at 5:45 PM, XMFSinchiruna (28.57) wrote:

Oh ... now I know why XMFkmoney is so grumpy and confrontational with the gold bulls ... he's short a slew of related plays in his CAPS portfolio. Could it be he shorted something in real life as well despite the dozens of warnings I have issued against shorting gold or silver in this environment?

Your disrespectful attitude toward my price projections has gotten out of hand, despite my prior request for you to desist from misinterpreting my remarks through intentional spin. I am happy to discuss topics openly with those willing to exchange ideas in an environment of mutual respect, but that's not what this exchange has become. Therefore, our conversation is over.

My time is as precious than gold.

 

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#30) On May 12, 2010 at 7:08 PM, XMFkmoney (99.66) wrote:

Obfuscation followed by a personal attack.  More trickery.

I see you've been betting that gold is going up?  Could that be the reason you're so bullish about the price?  Could it be that people use the Fool boards to discuss rationale for making real life investment decisions?  Well, those whose rationale isn't super secret.

As the investors who come by your board repeatedly comment, why short gold in real life when you can simply buy good stocks? You'd have been far better off owning Netflix, for example, than gold over the last few years, and based on your $3,000 proclamation, probably over the next 4 years, too.

 

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#31) On May 13, 2010 at 1:08 AM, rfaramir (30.52) wrote:

XMFkmoney,

I seem to recall that we already DID invade an oil exporting nation, and last I checked our marines have not brought any back.  They have more honor than that.

You think it is only the low price of gold keeping the marines from taking over the gold assets in Canada???  Nothing to do with "it's Canada's gold, not ours" (property rights) nor the value of the lives involved, American and Canadian?

Also, the US Treasury's official gold 'price' of $42.22/oz is bogus.  Unless the dollar is redeemable in gold, there is no transaction occurring, and therefore no price.  It is words only, and worthless, until there are deeds.

And no, we wouldn't be worried any longer about inflationary pressure on the dollar if it were to go back to being backed by the gold the US owns (and actually redeemable on demand for it) at say $35,000/oz.  Holders of dollars and US debt (and anything else denominated in dollars) would have already been screwed (defrauded), but the future of the dollar would be a rosy one.  No problems at that point.  You sound like we would fear such a thing, demonstrating that you really do NOT understand us.

Lastly, Chris's recommendations are his to defend, but I can see you were not paying attention.  While he PREDICTS gold to rise, he RECOMMENDS buying gold miner stocks (and maybe a little physical gold, IIRC).  So comparing a stock like Netflix to the price of gold is ignorant on two levels.  1) It isn't what Chris has been recommending.  Check the miners, not the underlying commodity.  2) Going forward, look at what underlies Netflix.  Netflix sells movies, mailed or streamed to your home, versus gold mined by the miners.  Copied-and-delivered movies are a product that can only go down in price as competitors (Apple, Amazon, Wal-Mart, Microsoft) enter the market.  While mined-and-delivered gold will only go up (measured in the same fiat currencies you use to pay for movies) while countries print paper money.  Producers of the more valuable product should do better.  (Only 'should', because the costs of the two products are very different, I'm only looking at their value.)

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#32) On May 13, 2010 at 2:28 AM, SnapDave (73.47) wrote:

TMFSinchiruna

gold in fact stands still while the paper currencies shuffle around it every which way

Surely you believe that's true only over time, not at most given instants. Your reference to cherry picking suggests as much. I doubt the price of anything in dollars, yen or gold is ever at equillibrium for more than an instant. The current price of dollars in gold or gold in dollars is based on market expectations - which are usually wrong.

BTW, I don't discount fear. But just because you're paranoid doesn't mean they're not out to get you. I'd say fear buying is pretty rational right now.

#14 was excellent. Better than the blog at the top of the page.

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#33) On May 17, 2010 at 7:13 AM, XMFSinchiruna (28.57) wrote:

SnapDave

I meant that statement as a reference to the underlying dynamic between gold and paper currencies, and not as a suggestion of fixed value. Thanks for clarifying. The point is that it's the movement of the paper currencies that provides an understanding of gold's rising price, and when paper currencies deteriorate, gold becomes the center of the monetary universe.

Fear has its place within the process of understanding / explaining gold's ascent as well,  but far too many folks believe that fear tells the WHOLE story. In that they could not be more fatally mistaken.

Glad you liked #14. :)

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