Gold Standard

Because once a mine is placed in production, exploration cost, infrastructure investment, equipment and other such cost are already sunk or contractually obligated whether the mine is in production or not.

 

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I don't believe gold was selling below the cost of production. During that time period [particularly 80s and 90s], costs were much lower than now. About 40% of mining costs are energy costs, and oil was as low as $11 during that time frame, and never close to $100. There were also several very large low cost mines in operation. Environmental regulation was more lax. It was also a time period when there was very little exploration going on, and the Bre-X scandal was still fresh in people's memories. Speculative money was going into technology, not gold mining. But now gold prices are higher, energy costs are higher, the large/cheap deposits are somewhat played-out, environmental regulation is more costly, China and India have a fast growing middle class making world-wide demand higher, currencies are not as trusted as a store of value, and there are fewer elephant deposits being found.

 

Nobody can tell you for certain. To me, it seems that in the highly unlikely event that the gold standard returns, gold will be revalued upward and your coin will be worth more than today.

 

Here is another datapoint. The attached article gives an indication of how rapidly the cost of of production has been rising. I've seen many similar articles over the past decade. You can spend a lot of time googling them to get a sense of what gold production costs were in the past compared to the present. It is somewhat amazing how high costs are now compared to 15 years ago.

http://www.wealthdaily.com/articles/gold-mining-production-costs/2201

 

Before being too hasty, let's discuss the hypothetical exchange rate. :devil:

 

Interesting article, but it says in 09 average costs may be $500, down from $608 in 08. 2008 had higher oil prices than today, so would a fair cost to product be about $550? At $550 an ounce gold I think it has a very far way to fall before hitting any kind of hard floor. Even $750 an ounce, (half of today's price), would represent profitable mines, therefor no reduction in production to rebalance supply versus demand.

I was not arguing there has to be a point of a floor for any commodity, its just a mainly non-useful item like gold would naturally be more subject to price gyrations since its demand is psychological more than being needed. Yes gold is used a little in industrial applications, but its high price encourages such high reclamation that little net gold is used versus worldwide supply.

 

If gold is soooooooo undesirable, then tell me why it is so expensive?
It doesn't back any currency legally, but folks are buying it up as a store of value.
It is traded as bullion and many people here own it just because it is gold.

I don't know that gold/silver is 'the' answer, but something must be done to change what we have now.
Like Alan Greenspan pointed out in my last post, "gold (or whatever you want to put in it's place) is a store of value and protector of people's rights and property." FIAT money just bleeds everyone dry.

 

The article measures what they refer to as "production cost." Total cost is probably significantly higher. Everyone is free to do their own research on this. My personal assessment is a bit higher than $1000 -- starting from scratch and not from an already producing mine. Also, energy costs are only one factor. The cost of just about everything to do with mining, including equipment, drills, assay labs and scarce trained human resources [e.g., geologists and mine engineers] has been rising rapidly as demand has soared. I consider cost of production to be one of the best measures of long term intrinsic value. My intent is just to share information, not convince anybody to use it. Everyone has to decide for themselves what they believe the price of this "worthless" asset should be.

 

I think trying to "prove" that gold has no value, as distinct from price, is a useless exercise. History has already established that gold is valuable to almost all people in all places at all times regardless of any theoretical arguments you can make to the contrary. That being the case, the job of the potential gold investor is to determine under what conditions they want to own gold, or not own gold. Any other approach might be an interesting game, but doesn't help the investor.

 

In response to Coleguy's paragraph (I won't quote it a third time), IMO it's just a matter of the way things are. Gold as a store of wealth is a self reinforcing paradigm that has been the case for thousands of years. Sure there are reasons why it got to be that way, but nowadays they don't matter as much as that it's just common perception. There will always be enough people who will look to the old ways of thinking, whether or not they are justified, to keep the status quo. Although, if PM's were biodegradable I don't think they'd have stood the test of time or the test of today.

 

Maybe you have hit on something here, backing our currency not with gold or anything else except beauty contest winners, but we should be careful, many nations have a treasure of beauties that would vault them into the upper stratosphere of economies.

 

Beauty queens are biodegradable.

 

Woo Hoo!! I hit the Mother Lode!

 

First being beautiful or handsome, does not genetically eliminate one from genius genes. And secondly, the photo obviously refers to the green back rather than gold.

 

I do not necessarily endorse, or not endorse anything in the attached link. But the conversation about a gold standard seems to have spread beyond the fringe.

http://usawatchdog.com/is-america-going-back-to-a-gold-standard-someday/

 

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