Author Topic: Why buy gold?  (Read 15319 times)

broxburnboy

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Re: Why buy gold?
« Reply #20 on: August 28, 2010, 08:08:40 AM »

you are talking about something that is valued by collectors not metal recyclers. Those coins were removed from circulation quicker and more aggressively because of their metal content and so those coins became rarer and therefore worth more.

Wrong... I'm talking about the current melt value of silver and other metal coins. Check this out :  http://www.coinflation.com/
for the current melt value of metal coins.
You may notice that even the humble copper penny of the 1980's is now worth over 2 cents current money. This has been the  trend since the unpegging  from the Gold standard in the early 70's and the very definition of debasement of currency.

All the monetary metals have increased in terms of the US dollar since then... gold by the most because its new supply is severely limited.
Again you are free to believe that the US dollar is the ultimate store of wealth and by extension that government and central banks have discovered the source of all wealth - the printing press ....good luck with that.
« Last Edit: August 28, 2010, 08:10:54 AM by broxburnboy »


biaggio

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Re: Why buy gold?
« Reply #21 on: August 28, 2010, 08:29:23 AM »
Slightly off topic though, I found it interesting that Andrew Carnegie one of histories great capital allocators, according to the biography I read several months ago sold his empire for Gold-backed security yielding 5%(he was fearful of governments printing currency). Now I would interested in that. I don t suppose that these exist today.

ERICOPOLY

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Re: Why buy gold?
« Reply #22 on: August 28, 2010, 09:35:15 AM »
5.3 billion troy ounces -- global supply of gold
6,700,000,000 -- global human population

There is 8/10 of an ounce of gold per person.

$9,117 -- global GDP per capita 2008  (don't have more recent figure)

So, on a gold standard, each person in the world has a maximum cash supply of $960 (if all gold were equally distributed as coin).

I'm not an economist of course.  But would global GDP fall if the global money supply were roughly 1/10 of global GDP? 

Once I get my $960 and allocate 100% of it to the family budget, how do I have room to purchase more things next year if somebody invents a new widget?  Is there room for a new widget?  If no money available for new widgets, does this deter innovation? 

Final question -- has fiat currency changed the pace of innovation?  I really don't know -- but it's something I wonder about.








rick_v

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Re: Why buy gold?
« Reply #23 on: August 28, 2010, 10:14:00 AM »
SmallCap

Platinum is a precious metal as well and its fundamentals too are favorable. The issue with platinum is that its not as ubiquitous as gold and its even more scarce so the distribution of the metal is not as robust as that of gold.

I see Silver/Platinum/Gold/Copper as all in the same boat. Over time they cannot be manipulated by central banks and they are in constant demand or must be consumed (in the case of copper) by humans. Thus they are really the only true currency.


But again I don't advocate buying the ETF's or straight bullion on any of these that is not how I generate alpha.

There are better ways to gain long-term exposure!
« Last Edit: August 28, 2010, 10:25:54 AM by rick_v »

broxburnboy

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Re: Why buy gold?
« Reply #24 on: August 28, 2010, 10:22:34 AM »
5.3 billion troy ounces -- global supply of gold
6,700,000,000 -- global human population

There is 8/10 of an ounce of gold per person.

$9,117 -- global GDP per capita 2008  (don't have more recent figure)

So, on a gold standard, each person in the world has a maximum cash supply of $960 (if all gold were equally distributed as coin).

I'm not an economist of course.  But would global GDP fall if the global money supply were roughly 1/10 of global GDP? 

Once I get my $960 and allocate 100% of it to the family budget, how do I have room to purchase more things next year if somebody invents a new widget?  Is there room for a new widget?  If no money available for new widgets, does this deter innovation? 

Final question -- has fiat currency changed the pace of innovation?  I really don't know -- but it's something I wonder about.


If gold were cash and allocated equallly to each of the world's inhabitants, the US buck would have zero value and all your measures of GDP would be in goldgrams or ounces- the yardstick would have changed. Because the total wealth of the world can be measured in US dollars now, there is no need to actually have that many dollars in existence.
There is no claim that the gold is the only store of wealth, there are others - barrels of oil,  bushels of wheat, acres of farmland, but gold alone amongst all the commodities has been used as money, because of its high intrinsic value, its finite supply (cannot be inflated), its indestructability and its portability. It is used as the ultimate store of wealth and indeed is used as a partial backing of all major currencies. It has the same convertible value in India, Peru, Timbuktu and Wall Street. Either you get it or you don't.

rick_v

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Re: Why buy gold?
« Reply #25 on: August 28, 2010, 10:26:37 AM »
Great Article out today about Tom Kaplan one of my favorite gold investors of all time!

http://www.businessweek.com/magazine/content/10_36/b4193058839907.htm

shalab

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Re: Why buy gold?
« Reply #26 on: August 28, 2010, 10:39:05 AM »
One should read Ben Franklin's autobiography about currency and his thinking about this topic.  Franklin thought about this problem and came up with a solution. A lof the arguments made by hacks today can't match the genius of Franklin, a great polymath and practical person who lived in the 1700s.

He started the first franchise ( printing press ) in the US, understood the magic of compounding, the importance of education/training, a rebel who fixed the errata in his life, a true democrat who had no trouble inviting the imam from istanbul to Pennsylvania,  who gave away his inventions without patents for the good of the world, figured out the monetary policy, learned several languages and is in the world chess hall of fame!

Anyone who is an investor must read Franklin's autobiography and his biography - a remarkable person who achieved much and stands out among the founding fathers of the United States.

cheers!
Shalab

Eric50

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Re: Why buy gold?
« Reply #27 on: August 28, 2010, 03:34:07 PM »
Another good article on gold in the Financial Times. What I find interesting is that China is now the largest producer of gold and it quietly buys all the gold that it produces. Rogoff mentioned for this article that "Emerging market central banks will probably want to raise the share of gold in their foreign exchange reserves, bringing them closer in line with advanced country central banks."

http://www.ft.com/cms/s/2/e9378c6c-b0b8-11df-8c04-00144feabdc0,dwp_uuid=a712eb94-dc2b-11da-890d-0000779e2340.html

ERICOPOLY

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Re: Why buy gold?
« Reply #28 on: August 29, 2010, 12:59:11 AM »
5.3 billion troy ounces -- global supply of gold
6,700,000,000 -- global human population

There is 8/10 of an ounce of gold per person.

$9,117 -- global GDP per capita 2008  (don't have more recent figure)

So, on a gold standard, each person in the world has a maximum cash supply of $960 (if all gold were equally distributed as coin).

I'm not an economist of course.  But would global GDP fall if the global money supply were roughly 1/10 of global GDP?  

Once I get my $960 and allocate 100% of it to the family budget, how do I have room to purchase more things next year if somebody invents a new widget?  Is there room for a new widget?  If no money available for new widgets, does this deter innovation?  

Final question -- has fiat currency changed the pace of innovation?  I really don't know -- but it's something I wonder about.


If gold were cash and allocated equallly to each of the world's inhabitants, the US buck would have zero value and all your measures of GDP would be in goldgrams or ounces- the yardstick would have changed. Because the total wealth of the world can be measured in US dollars now, there is no need to actually have that many dollars in existence.
There is no claim that the gold is the only store of wealth, there are others - barrels of oil,  bushels of wheat, acres of farmland, but gold alone amongst all the commodities has been used as money, because of its high intrinsic value, its finite supply (cannot be inflated), its indestructability and its portability. It is used as the ultimate store of wealth and indeed is used as a partial backing of all major currencies. It has the same convertible value in India, Peru, Timbuktu and Wall Street. Either you get it or you don't.

I think every "gets it" if you are going to make those kinds of statements.  Does anyone think dollars would have value if the world abandoned it and went to gold coin?  Who here doesn't realize that gold is traded in Timbuktu, India, and Wall Street?  Did anyone say that gold is the only commodity?  

That had nothing at all to do with what I wrote.
« Last Edit: August 29, 2010, 01:02:54 AM by ERICOPOLY »

niels12think

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Re: Why buy gold?
« Reply #29 on: August 29, 2010, 03:00:30 AM »
To me it seems that gold is in a bubble. My thinking is that silver has the same characteristics as gold (plus some additional). Silver have been used since the beginning of time as a currency, and even in so called gold based currencies, it would mostly be silver coins that were actually used as a means of normal payment. The total silver ever mined would fit into a cube with sides measuring 55 meter as opposed to golds's 20 meter. So both historically and naturally there is a relation between gold and silver. For thousands of years the ratio was in the range 10-20. Now the ratio is 65. This indicates to me that gold is in a bubble even when measured "on it's own terms" so to speak.

Btw, Even the US dollar started out in 1792 to be defined as 27grams of silver, with an eagle (10 dollar) defined as 17 grams of gold pegging the ratio of gold and silver as approx 17. http://en.wikipedia.org/wiki/United_States_dollar

Allthough I'm convinced that gold is in a bubble, i'm equally convinced that the bubble might get bigger  :'(

Cheers