Next step silver - over $20.00

gold high $1,058.50
silver high $16.71

 

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gold rebounded. high $1,064.00
an ounce.

 

Gold break all time record high at $1,082.30 per ounce today.

 

gold to $1,100.00 soon. current all time record high at $1,087.60 per ounce.

 

Gold all time record now at $1,089.10 per ounce.

 

So how many AGBs you gonna buy now?

 

gold all time record high - $1,099.00/oz.

 

Gold break all time record high today in other part of the world by just $0.50. Now record high is $1,099.50/oz.

 

Gold pass $1,100.00 barrier to $1,102.30 per ounce. Wow and amazing. Isn't it?.

 

I beg to differ about your statement.

First of all, the price of silver does not rise in tandem with the price of gasoline. Sometimes a dollar in face in "junk" silver might buy 4 gallons, other times it might buy more-- or less.

For example, in 1968 in Arkansas, and I assume elsewhere, silver coins still had practically no premium because they still could not be melted and silver Kennedys were still being minted, but a gallon of gas, during some "gas wars", went to as low as 19 cents. Thus, a dollar in silver coins could buy more than 5 gallons of gas at such times. Four years later, before the first oil crisis, the price of silver had shot up to $4 per ounce (or about $2.90 for $1.00 face value in junk silver), but gas in Arkansas was still a relatively cheap 29 cents. Thus, one dollar in junk silver, if sold to a dealer, could buy 10 gallons of gas. In 1978, when I took my first cross-country car trip, I was paying an average of 38 cents per gallon, in several different states, yet junk silver was selling for about 4 times face value-- once again, about 10 gallons for one dollar face in junk silver. But then in 1979, the price of silver really started to zoom, and at one time I was selling junk silver to a dealer for 13 times face value, and one lucky day I even got 16 times face. Yet the price of gasoline did not rise to $4/gallon-- in fact, it was still in the cents-per-gallon range, probably 75-80 cents. You don't think people were cheering that the price of their silver coins was rising faster than the gas prices?

Then the bottom started falling out of the silver market after the Hunt Brothers fiasco was exposed, and by 1984 silver was back down to 3 or 4 times face. And maybe gas was $1/gallon then, which would be close to the 4 gallon/dollar face figure. But in 1989 and 1990, gas in Washington State was approximately $1.20/gallon, while I was buying junk silver for $3.20 to $3.60 per dollar face, or about 3 gallons per dollar face.

Today, junk silver is selling for approximately $12.50/ dollar face, while gas in Arkansas is less than $2.50/gallon- for a more than 5-to-1 ratio. However, it is undoubtedly more in other parts of the country, because there are now major regional discrepancies in gas prices. Be that as it may, if the price of silver goes up, there is no guarantee that the price of gas will go up accordingly.

 

Not at all. It should have been expected by all here. The only thing in doubt was the date.

 

First of all, I want to make it clear that I like gold and silver a lot as an asset class and I expect both to go higher. But the articles you read on the internet about the dollar going to zero and prices remaing constant in precious metal terms while only the dollar falls are nonsensical. There are people out there who view the precious metals as mystical materials with magical qualities, and the reader must be very cautious about who they choose to believe. In reality, gold and silver prices will probably track the inflation rate over the long run, and as long as you avoid the occasional blow-off tops in prices, it should be a secure and sound long term holding. I presume everyone here has a core position in gold and silver at prices half or less than the current price. This should prove to be a rewarding holding, but there are other things to invest in that are just as good or better.

 

That hasn't been the case historically. When inflation is factored in, gold has underperformed...I believe the kitco article suggested it would be nearer to $2400 in inflation adjusted $$.

The question now is, does gold consistently underperform inflation on the long-term (due to changes in supply/demand, etc..) OR has it just been lagging for the last few decades and WILL perform in line with inflation in which case its wildly undervalued?

 

The dialogue on what and what does not affect the price of gold has continued for decades. What seems to be true is that gold is a "store of value" that is used to hedge uncertainty. It is a form of insurance.

Whether that uncertainty comes in the form of a catastrophic natural disaster, war, plunging currency, inflation or a combination of these is generally not completely known before the event actually occurs.

At this point in time, it's generally agreed that primarily the price of gold is going up as a hedge against a dollar that is losing purchasing power vis a vis other currencies.

Rising gold prices are also a result of increased buying by individuals, investors
and as of this last week, the Central bank of India. What isn't often mentioned is that it doesn't take much of a spike in demand to create a shortage of gold and hence a big spike in prices. There simply is not that big of a supply.

Another reason for the rise in gold prices is the expectation that inflation, although not a problem now may be a significant problem 1 to 3 years from now due to all of the excess money the fed has put in the system. A lot of that cash is sitting in banks doing nothing. If it starts to circulate before the Fed can pull it out of the system, inflation is a real possibility.

In closing, I can tell you that my day job is at an investment firm. Very few portfolios hold any precious metal investments. More common are investment vehicles that hold broad commodities (usually in the form of a mutual fund) which have also risen along with gold since they are also defined as "real assets".

The point here is that at some point if the price of precious metals continues its march upwards, there will all of a sudden be a stampede by financial advisors and their clients to get into precious metal related investments. There are a lot of financial advisors who while being great salespeople are not so hot at recognizing market trends until the trend is slapping them in the face. When this feverish activity occurs, I will start paring my positions, because the top of the gold market will be near.

 

Inflation and gold

What are you using as a basis year for the inflation rate?
In 1932, gold was 20.67 per ounce. According to the inflation calculator

http://www.westegg.com/inflation/infl.cgi

one dollar in 1932 would be equal to 15.62 today. Multiplying 20.67 by 15.62 gives $322.88, which would be the inflation-adjusted price of gold per ounce today. One dollar in 1970, when gold was $35 per ounce, would have the equivalent purchasing power of $5.49 today. Multiplying 35 by $5.49 gives $192.15. So, between 1932 and 1970, gold underperformed the inflation rate. But those were unusual circumstances, because the possession of gold bullion was restricted during that time. But since that time, after the restrictions on gold bullion possession were completely lifted, gold began to rise. Since that time, the price has fluctuated, but today's price of more than $1000 is far outpacing the inflation rate-adjusted gold price of $192.15.

 

Mea Culpa

Too little time in analysis and an 8:30 meeting caused me to fire off a not completely analyzed answer. Partly based upon what I recalled (which appears to be incorrect) and a quote from Nadler stating ...."But gold's correlation to inflation is about 10 percent. So, perfect inflation hedge? Far from it. In fact, it's rather ineffectual against the mundane, everyday 5 percent (or sub-5 percent) inflation that we had for 25 to 30 years. It is very effective against Zimbabwe- or Weimar Republic-style inflation—and if that's what you see the U.S. coming to, then be my guest: Overload on gold."

Further reading, suggests there is a stronger correlation than 10% . Its clear I need to do further analysis....so thanks for "reminding" me (as my Dad used to say) "Put my mind in motion before putting my mouth in gear".:hammer:

 

I was thinking prospectively. Also, I'm not sure I trust the Kitco calculation. If they are measuring from the 1980 peak, then the result is not typical of the price paid by the typical gold holder. Also, you used the word "consistently." I'm not in the camp that believes any investment must behave consistently. There is a time and place to own and not own just about everything.

 

Clearly there is a time and place for certain investments -- is it golds time now or has it already passed? I talked to several coin dealers in our local area today. Pretty consistently, they have said that bullion continues to move briskly. Key dates/ high value coins are also doing well. Common date coins, even in MS63+ are not.

So lets talk GOLD. It seems like the Kitco article is right in as much as its move is tied to the weak dollar more than a supply/demand issue. Interestingly enough, I talked to a few folks in one coin dealer at the close of their bid board...people are beginning to hoard pre 82 Cents and Nickels. There is no downside (except of course inflation/loss of buying power) since they are paying face. I haven't checked the math, but one guy said the a nickel's intrinsic value is 94% of face. You gotta have a lotta rolls of Cents and Nickels to make much difference, but it amazes me that some people are feeling that way.

One of my other interests are firearms. I talked to a couple of dealers over the past few days as I have been eyeing a purchase. Gun sales are still brisk -- not as immediately after the Presidential election. Ammo is in short supply, doesn't stay long, and is up 100% or more over the past few years.

While anecdotal, it all does seem to confirm that some part of the population is fearful and one has to wonder how long the fear will last and the bubble burst IF in fact there is not a fundamental supply/demand relationship backin all of this up.

Do we buy at $1100 only see it return to $900 in a few months???

 

I say only buy fractionals or other "numismatic" coins that have their value based on the mintage and coin not the metal it's made by
so if the price of gold drops like a rock you still have the collector's value and if it goes up you have the metal value that if it rises like it could would actually be worth more in metal.

just my 2 cents...

 

Very fine indeed if that's your thing, though this is a "bullion investing" thread.