The return of gold

[Tom Yossarian Joad]

Published : January 2, 2004

By all mainstream accounts of the global economy, the year 2003 marked a turnaround. The United States economy posted a rise in GDP of 8.2 per cent in the July to September quarter, the long-suffering Japanese economy saw a return to growth and business confidence improved even in sclerotic Europe.
The Asian economies grew at a sizzling pace. But if the world economy is going to do so well, why is gold, the traditional safe haven, such a favourite with investors?

Why has the price of gold risen by 20 per cent in 2003, and why is it poised to breach an eight-year high? The bull run in gold stocks sits uneasily alongside the bull run in equities, or the rise in commodity prices.

Gold is also an unlikely candidate for investment, because there are no dividends or interest to be earned from it.

More: http://www.business-standard.com/today/story.asp?Menu=27&story=31143

Hmmm.

[Birthmark]

1. People like shiny rocks!

That's the least conspiratorial answer I can give.

[101 Proof]

13. shiny minerals...

sorry, I'm picky with that. I'm a geologist. :)

[54anickel]

2. It's a facinating subject to research. n/t

[twilight]

3. actually that isn't true

You can invest with companies that deal stictly with precious metals. They are probably saying this because they want people to invest in the stock market and lose their arses once again.

Gold will always have value.

The gold I own I can sell back to the place I bought it from at any time - right now its at about a 25% profit over what I paid when it bottomed out in March, 2003.

So, BS!!!

:dem: :kick:

[LastLiberal in PalmSprings]

4. Where do you buy gold and not gold stocks?

Inquiring minds want to know?

[54anickel]

5. Reputable coin dealer in your area, or there are a few good dealers

on the net.
Couple that I know of, but do your homework first!

http://www.coinguide.com/gold.shtml
http://www.usagold.com/

Might want to check out some of the gold related discussions in the economics forum as well.

[Art_from_Ark]

6. Buying gold

You always have to be careful about where you get your gold. For starters, you can buy some copies of numismatic publications like Coin World or Numismatic News to get an idea of who is sellling gold.

[Art_from_Ark]

8. Follow-up reply

The regular advertisers in these publications sometimes do a little fudging with the grading of collector coins because of the subjectivity involved with coin grading, but they are quite reliable when it comes to bullion coins (they lose their advertising privileges if they break the rules). What's more, you usually don't have to pay sales tax when ordering through the mail.

[Voltaire99]

7. This was predicted a year ago by...

...skeptics who foresaw the dollar's plunge.

[abelenkpe]

9. US not worried about dollar drop

Has anyone here read this article about how the US is not worried about the dropping value of the dollar?:

http://story.news.yahoo.com/news?tmpl=story&cid=568&ncid=749&e=1&u=/nm/20040101/bs_nm/economy_usa_dollar_dc


I find it bizarre that our officials would state that they are unconcerned about the very thing they claimed to be very concerned over earlier in the year. How does the devaluation of the US dollar hurt Europe more than ourselves? This article makes it seem like our government planned to let the value of the dollar drop. And as if this devaluation is a good thing. How can it be a good thing for the average American? Won't it make it more difficult for us to pay off our debts or purchase anything new when our money is worth less? On a larger scale isn't it a bad sign that our money is worth even less when our country faces such huge deficits? Or am I missing something? Anyone understand money out there? Any help understanding this would be appreciated!

[twilight]

10. their minds .... what "they" say ...

The analcysts claim that the drop of the dollar is good for trade. Other than that, I cannot see a good side to it either.

Gold is a hedge for the dollar dropping is one viewpoint. No matter how bad it gets, gold will always have value. Now that is really pissing off these Wall Street types big time. They are hoping that the sheep never awaken and get out of the stock market as it now lingers around 10,400. It is a joke!

:dem: :kick:

[54anickel]

11. Spin, spin, spin......

They HAVE to say they intend the dollar to drop and that it's good if they say anything contrary, confidence in the dollar will drop world-wide. Confidence is the only thing that gives value to a fiat currency. No one will buy our debt if they have no confidence in the dollar.

It will help somewhat with the trade deficit as our exports will go up along with domestic sales - export more, import less trade deficit decreases.

Their claim of an "orderly" decline could easily be disputed. If it were not for the Bank of Japan intervening, the drop could have been anything but orderly. Yet they continue to complain publicly about Japan's intervention there have been a couple of times that it saved our butt's.

As for the "strong dollar" policy, there really isn't such a thing. Just buzzwords.

on edit add this link which was the original one I was looking for while posting the lower 2 links. Found It!!! :D

http://www.gata.org/StrongDollar.htm

http://www.cato.org/research/articles/hanke-030203.html

http://www.thestreet.com/markets/aarontaskfree/10072942.html

[abelenkpe]

14. so basically the world needs our dollars

to be valued highly so that they won't go into a recession as well? That would explain why yahoo's article suggested other countries would cry 'uncle.' (That statement is in such bad taste though) But the first article you mention suggests that the price of gold being held down is what made our dollars seem like they were worth more. Would that mean that the price of gold going up is a symptom of the value of the dollar dropping? If foreign investors leave the US won't it be financially damaging to them as well, or is that just the spin our financial institutes put out to stop the average citizen from panicking about the economy? I'm trying to understand this financial stuff so thanks for the links! Hopefully I'll get a handle on this subject yet.

[54anickel]

19. Boy, you ask the tough ones don't you ;-)

so basically the world needs our dollars to be valued highly so that they won't go into a recession as well?
A simple answer would be, In today's current situation, yes. Japan is just coming out of a long bout of deflation. To keep their exports cheap, they need to keep their Yen down, our dollar up. That is why they keep intervening and buying up our debt (Treasuries and bonds). China has their currency pegged to our dollar, so our dropping dollar doesn't necessarily help reduce the trade deficit, their currency is dropping right along with us and they are the largest part of our trade deficit balance. The Euro keeps gaining value against the dollar which makes their exports to here more expensive. They can buy dollar based goods, like oil, cheaply. But their exports are more expensive for us, China and Japan to buy.

I'm not sure where you are getting the gold/dollar info from. But there are two takes on this. If you believe in "The Powers That Be" then yes, the price of gold has been manipulated for years to be held down. But we are not a gold-based system anymore, simply fiat dollars. It's not so much that keeping gold down brought the dollar up. Keeping gold down is partially phsycological, reinforcing the idea of gold as a simple commodity rather than a currency for exchange. But that whole "Powers that be" or not would be a whole nother discussion. You are correct that the rise in gold is due to the drop in the dollar. 2 reasons, first it is the "flight to quality", a store of value. We saw it begin to rise with the threat of War in Iraq (actually 9/11 saw a bit of a rise as well). Uncertain times and now lowering confidence in the dollar. Second is simple inflation. Gold is a commodity used in jewelry and electronics. Our dollar is worth less (because there are so damn many of them now), so it takes more of them to buy an ounce of gold.

If foreign investors leave the US won't it be financially damaging to them as well, or is that just the spin our financial institutes put out to stop the average citizen from panicking about the economy?
And that's the million dollar question. Yes it will hurt them somewhat, but who will it hurt more? If the dollar continues to decline to the point that Europes exports drop and their deficit grows to greatly (the EU has limits to how much of a deficit the member countries can run - that's why Germany is in a bit of hot water right now) something will have to give.

Hope this helps, think I got it right. I'm trying to find a good link on the whole inflation/deflation supply/demand/scarcity idea. I've got it somewhere. Meanwhile here's a paper from the EPI on the benefits of the dollars decline.

http://www.epinet.org/content.cfm/briefingpapers_bp140

[abelenkpe]

22. Ooo great link!

I can see I've much to read and learn. Thank you so much for the info. I'll be reading up during lunch since it is so rainy outside. Hopefully the bad weather will lead to some insight!

[tritsofme]

12. Dropping dollar doesnt affect you personally

one bit, unless you plan on vacationing in Europe anytime soon.

You don't even notice that the dollar has dropped in value because you buy things in dollars so it is basically all relative.

For now it is a good thing for us and a bad thing for Europe. It is good for our ailing manufacturing sector because our goods cost less to foreigners so they can buy more of them.

It has probably kept the European economy stagnant since their exports cost foreigners more, and are less attractive in the global market.

If the dollar breaks through 1.50, which would be about another 20% I would look for some major action from the ECB, as the strong euro would start to be crippling to their economy.

I say this is good for now, if the drop gets out of control we could face some major problems. The one I am most concerned about is OPEC and other oil producing nations leaving the dollar and selling oil in euros.

[54anickel]

15. Doesn't effect me if I don't buy any thing imported. n/t

[tritsofme]

16. The things that most people buy that are imported are from the Orient,

and in many of those countries, especially China, their currencies are pegged to the dollar so appreciation or depreciation really have little effect on what you end up paying for their products.

[54anickel]

20. The orient imports raw materials as well to make their products,

they are dealing with rising costs of production. Not as severly but rising none the less.

[0rganism]

17. Gold is the hedge fund of widespread disaster

IMHO, people are buying it up because the current "growth" is another takings-based bubble, a recovery without an upturn in employment to solidify it as real growth. There is little confidence. Once the offshoring is complete, and no further gains can be had from firing American workers, the profits will be tapering off as well. At that point, we'll see gold skyrocket as the dollar drops through the floor.

Al Martin recommends metals-based mutual funds that invest in Canadian mines, which are well-managed in his opinion. He says he realized 20% growth at a time when other mutuals were giving goose-eggs.

[GOPisEvil]

18. As an economics professor once said: Gold is not an investment;

it's a hedge against inflation. Anytime there's a run on gold, that means "big money" expects inflation.

[abelenkpe]

21. 'big money expects inflation'...

see, that's what worries me. Wouldn't it be wise for individuals to follow the trends of big money so they don't find themselves out of luck? Or do the very wealthy have so much money that they can be more speculative and take larger risks?

[JNelson6563]

23. Flight to quality

Today's wealthy are not fools, they know better than to listen to the whore cheerleaders on CNBC.

If this were a couple hundred years ago they'd be sewing their jewels into their clothes.

I see dark clouds on the horizon. Have for a long time, as long as I've been bullish on gold. ;-)

Julie