The answer of this question is very easy because precious metals is money in its purest most liquid form. If it wasnt we wouldnt be holding in central bank vaults instead we might replace it with guchi handbags,wheat or ammo. Dont let those idiots at wallstreet fool you that the colored paper that you hold in your wallet is money it is not, it is a federal reserve note that is in virtually unlimited supply.
Gold and the other precious metals have a very particular quality from an economic point of view their marginal utility is constant this means that the first krugerrand brings you the same utility as the last one. With normal goods marginal utility is declining the 1st car is very useful, 2nd is an offroad vehicle somewhat useful, 3rd much less useful etc. You may object by saying that this is the case with your colored paper and it will be true however if we look at utility in time we will see that the marginal utility of all goods paper money included falls with time. Your house brakes appart and provides less utility each year unless you conduct repairs, your paper money looses value by some understated percent each year etc. Gold and silver and the PGMs usually maintain their value in time the exception is the last 2 decades where due to heavy central bank sales and lots of leasing to bullion banks the price of gold has been kept in check in face of declining mine production in the last 3 years. With silver the situation is even worse 16 years of production deficit and 39,5 out the 40 billion ounces of silver ever produced is gone in industrial applications and photography, no wonder why Warren Buffet cornered the market by buying about 25% of the phisical above ground supply (around 140 million ounces).
Imagine that you lived in Germany in 1913 and had lots of reichsmarks (paper) some gold and land in western Poland. By the end of the war you ve lost your land because Poland gained its independence and conficated and sold the land of the germans that left to live in Germany, the reichsmarks you ve had are worth less than the paper they were printed on but you can spend your gold as money. Imagine that you didnt touch it and wait for the end of WWII. Now the reichsmark is still worth less than the paper it is printed on. Germany is kaput there are no more Reichsmarks and yet your gold is spendable and purely liquid. If you find a treasure on some island full of spanish gold coins it would be spendable money although the gorvement that issued it is long gone. Can you say the same about paper money or other goods from that century they would be pretty worthless by now wouldnt they. All fiat currencies are inflated into extinction even the most stable like the dollar or the swiss franc lose some 90% of their value every 30 years. Precious metals are always choosen by the market as money the stuff that you have in your wallet is money by decree of law, it is an illusion.
People and gold have a very long history, gold is the 1st metal known to man. Gold's beauty and grace were the reason why man became interested and started working with metals in the 1st place. Virtually everybody that has seen a gold coin with high gold content (22karats) recognises it's value. I will tell you a personal story I was in a restaurant with 3 friends and the bill came it was about 100$ I forgot to take some cash with me and I didnt have a credit card but had 10 soverigns in my wallet (a sovereign is a bit over 100$ it was a bit over 100$ back in the late 80s when I was in the restaurant) So I took out the sovereign and left it on the table to see what happens the waiter immeadiately recognised the coin and paid the bill from his wallet and kept the coin for himself.One of my friends looking at the other sovereigns said "lol this is money we used to have" and the other one said "it is the money we should have". If there are still humans in 1000 years there would recognise the value of gold and mine it long after the stupid keynesianism is dead and forgotten
Now the choice is not between gold and land it is both gold and land and I have lots of them a bit less than 300 hectares of which 100 forest 200 farmland and 2000 ounces of gold + 25000 ounces of silver + 500 ounces of palladium that I am waiting to arrive soon. I save 95% of my income 1/3 of that goes to precious metals. If you dont have enough money to invest in large quantities of gold you should try silver which is undervalued even campared with gold as Geology guy pointed out silver is the best metal in electronics virtually all that you have uses some silver somewhere in its production.Gold above ground supplies are about 2 billion ounces (virtually all the gold that we have ever produced is stored somewhere) as for silver 0.5 billion ounces of above ground supply you get the picture. Historical gold silver ratio is 1:15 today it is 1:60.
If you want to buy gold but can only afford small quantities for the time being you should not buy phisical gold because you would pay a lot for mail and insurance instead put you money with a stock broker with a 2:1 leverage and buy a gold ETF when you gather enough money (~40k) sell the ETF and buy the gold thus you would insure yourself against some rapid appreciation in the price of gold you can to this with a futures contract too. However I should warn you that an ounce of gold today would probably buy less tomorrow not because gold would be worth less all the contrary but there would be much less to buy.
PeakOil is You
Precious Metals in General
by Malthus » Wed 27 Apr 2005, 17:51:48
$this->bbcode_second_pass_quote('', 'b')ut what about the scenario where economies stagnate but remain intact, where markets struggle and deflate but remain in place, currecies fold and are replaced - happened in brasil and mexico several times over, potholes don't get fixed, but police still patrol. people may cling even harder to their institutions when they are scared of scarecity. the german currency collapse between the wars didn't seem to weaken the law and order contingent. i think we will have a legitimate market for quite a while, esp in commodities.
Crime sky rocketted in Germany during the hyperinflation, everything was worth stealing even doors or gasoline from cars, the cars them selves virtually everything. And yes currencies will be replaced but you will be left holding bag when hyperinflation occurs unless you hold the right currency (gold) I have a 20 billion and 50 billion reichsmark banknotes in my collection. Even without the gloom and doom stuff we would see gold quoted in 4 digits before the end of the decade.
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Malthus - Peat
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by RdSnt » Wed 27 Apr 2005, 21:11:23
It's not just belief that makes gold, in particular, historically valuable. At the most pragmatic level it is valuable because it doesn't degrade. All the gold that has been mind over the past 5000 years is still here. Some certainly has been lost but it is still gold. Steel isn't that valuable because it rusts, returns to it's constituent elements. Gold is unique.
Historically all currencies were supported by gold, meaning that the bills and coins you held in your hand derived their value directly from a corresponding amount of gold.
There's a problem with this system, a country is forced to be prudent with their money, because it was limited to how much gold the government held in reserve. If a country wanted to print more money than they had gold, well the value of the printed money would just drop to match the gold reserves.
The US didn't want to play by those rules, they wanted to print as much money as they chose to. So they abandoned to gold standard. This has worked quit well for the world economy over the past 40 years. Unfortunately what this fait money system is is a giant cheque kiting scheme.
Now of course the US is in such deep debt that all the major economies are forced to prop the whole phoney scheme or face a complete, global financial collapse. All their currencies are pegged to the US dollar which doesn't have any value any more accept the vicious circle of foreign government buying US dollars to keep it from collapsing.
That the US financial system if going to collapse catastrophically is inevitable. It's really simple math. At present foreign governments MUST buy 2+billion US dollars EVERY DAY, to prop up the US economy. That money currently represents 80% of all the daily money supply used to back currencies. As the US debt is growing exponentially, sometime within the next 6 to 12 months the world will run out of money to keep the US debt affloat.
It's like Peak Oil, there will be oil left but no more and it will get worse as the demand for oil increases. It's worse though for the US debt, there is no way to cut back the growth except to collapse the economy.
At the moment, you are guaranteed the gold will, over the medium term, will increase in value simply because the US dollar is loosing value.
When the dollar collapses gold will shoot through the roof, it will be the only money that actually will have value.
Historically all currencies were supported by gold, meaning that the bills and coins you held in your hand derived their value directly from a corresponding amount of gold.
There's a problem with this system, a country is forced to be prudent with their money, because it was limited to how much gold the government held in reserve. If a country wanted to print more money than they had gold, well the value of the printed money would just drop to match the gold reserves.
The US didn't want to play by those rules, they wanted to print as much money as they chose to. So they abandoned to gold standard. This has worked quit well for the world economy over the past 40 years. Unfortunately what this fait money system is is a giant cheque kiting scheme.
Now of course the US is in such deep debt that all the major economies are forced to prop the whole phoney scheme or face a complete, global financial collapse. All their currencies are pegged to the US dollar which doesn't have any value any more accept the vicious circle of foreign government buying US dollars to keep it from collapsing.
That the US financial system if going to collapse catastrophically is inevitable. It's really simple math. At present foreign governments MUST buy 2+billion US dollars EVERY DAY, to prop up the US economy. That money currently represents 80% of all the daily money supply used to back currencies. As the US debt is growing exponentially, sometime within the next 6 to 12 months the world will run out of money to keep the US debt affloat.
It's like Peak Oil, there will be oil left but no more and it will get worse as the demand for oil increases. It's worse though for the US debt, there is no way to cut back the growth except to collapse the economy.
At the moment, you are guaranteed the gold will, over the medium term, will increase in value simply because the US dollar is loosing value.
When the dollar collapses gold will shoot through the roof, it will be the only money that actually will have value.
Gravity is not a force, it is a boundary layer.
Everything is coincident.
Love: the state of suspended anticipation.
To get any appreciable distance from the Earth in
a sensible amount of time, you must lie.
Everything is coincident.
Love: the state of suspended anticipation.
To get any appreciable distance from the Earth in
a sensible amount of time, you must lie.
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RdSnt - Heavy Crude
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by joewp » Wed 27 Apr 2005, 23:42:58
$this->bbcode_second_pass_quote('epononymous', 'I') believe I read somewhere in the past year or two (either MSN or TheStreet.com) that the amount of gold that is produced each year well exceeds what is needed for all industrial and luxury uses. In theory excess supply should push down the value and cause production to slow, but it doesn't because all of humanity seems to agree that gold is inherently valuable simply because it's gold. I suppose that could change but it seems to be so ingrained in our way of thinking that we'll never see that change in our lifetimes. IMHO
This brings up the point as to how much gold can be mined without fossil fuels? I'm no gold mining expert, but I'm sure it's energy intensive. At a certain point, it might become too costly to use the energy on gold mining. More reason to hold onto some gold coins for the long term.
Joe P. joeparente.com
"Only when the last tree is cut; only when the last river is polluted; only when the last fish is caught; only then will they realize that you cannot eat money." - Cree Indian Proverb
"Only when the last tree is cut; only when the last river is polluted; only when the last fish is caught; only then will they realize that you cannot eat money." - Cree Indian Proverb
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joewp - Intermediate Crude
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by Zentric » Thu 28 Apr 2005, 16:10:21
$this->bbcode_second_pass_quote('joewp', '
')
This brings up the point as to how much gold can be mined without fossil fuels?
')
This brings up the point as to how much gold can be mined without fossil fuels?
That is the question, Joewp. If we could forecast which worldwide industries would be most important post-peak, and how much fossil energy (or, conversely, human labor) we'd need to mine or recycle the gold, silver, rhodium, platinum or palladium required for them, then we might be able to calculate the relative post-peak worth of each of these commodities, keeping in mind the following:
1) At some point, could the scarcity of any one metal (or any other input, really) actually serve to capsize the given industry?
2) To what extent could the PGM and other metals be used interchangeably by the post-peak industries, since flexibility - the ability to adapt to shortages of a given commodity - will be paramount in the years to come.
3) Sometimes extraction or recycling processes can be flexible too. For example, when doing a final extraction for rhodium, maybe you use a process that tends also to pickup gold but not silver, since, on any given day, depending on the commodities' relative worths, one process is likely to give you a better yield than another.
Also, is anyone else curious why United States announced yesterday it will soon be getting back bigtime into the gold coining business? I honestly don't know what I'm talking about, but two ideas are that (1) they want to sell the metal they have stashed in reserve to "bolster" the dollar a little longer, since, by now, they're probably desparate. And (2) when they sell you the new gold coins, they'll take down your name and address so that they can collect them back from you later. (Or maybe I'm not just being paranoid.)
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Zentric - Tar Sands
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by joewp » Thu 28 Apr 2005, 18:53:43
$this->bbcode_second_pass_quote('Zentric', '
')
That is the question, Joewp. If we could forecast which worldwide industries would be most important post-peak, and how much fossil energy (or, conversely, human labor) we'd need to mine or recycle the gold, silver, rhodium, platinum or palladium required for them, then we might be able to calculate the relative post-peak worth of each of these commodities, keeping in mind the following:
1) At some point, could the scarcity of any one metal (or any other input, really) actually serve to capsize the given industry?
')
That is the question, Joewp. If we could forecast which worldwide industries would be most important post-peak, and how much fossil energy (or, conversely, human labor) we'd need to mine or recycle the gold, silver, rhodium, platinum or palladium required for them, then we might be able to calculate the relative post-peak worth of each of these commodities, keeping in mind the following:
1) At some point, could the scarcity of any one metal (or any other input, really) actually serve to capsize the given industry?
I look at gold as more of a medium of exchange than a raw material. I don't think there will be that many "industries" as we go down the wrong end of the production curve.
$this->bbcode_second_pass_quote('', '
')Also, is anyone else curious why United States announced yesterday it will soon be getting back bigtime into the gold coining business? I honestly don't know what I'm talking about, but two ideas are that (1) they want to sell the metal they have stashed in reserve to "bolster" the dollar a little longer, since, by now, they're probably desparate. And (2) when they sell you the new gold coins, they'll take down your name and address so that they can collect them back from you later. (Or maybe I'm not just being paranoid.)
Which is why I'm buying Canadian Maple Leafs from independent dealers. Even if they catalog my name and address, I can always say "I lost them", right?
Joe P. joeparente.com
"Only when the last tree is cut; only when the last river is polluted; only when the last fish is caught; only then will they realize that you cannot eat money." - Cree Indian Proverb
"Only when the last tree is cut; only when the last river is polluted; only when the last fish is caught; only then will they realize that you cannot eat money." - Cree Indian Proverb
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joewp - Intermediate Crude
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, they're that soft!
