Has anyone else noticed?

Seems the past few major gold price drops have all had similar circumstances. Gold approaching $1700 or $1800 an ounce, and showing very bullish action, followed by Ben Bernanke running off his mouth almost deliberately intending to knock the price back down.

As best I can tell, the economy isn't much better off today than it was in the fall of 2008. To be sure there has been some very modest improvement in business conditions, but hardly any improvement in median income for anyone else. Yet the stock market has had a huge rally, and while gold has not performed as well, it has still held-up remarkably well. Enter Ben Bernanke to entertain the market makers by saying things like there isn't going to be a QE3. This is said to deliberately knock gold prices down. (Bernanke's greatest fear being a world where gold rules instead of central bankers). Stocks then go lower, gold goes much lower, and almost perversely, bonds go higher. A few days later, stocks bounce back strongly, bonds soften up a little bit, and gold makes some modest gains in price. And that seems to be the current holding pattern, though it won't last forever.

Here is what I expect to see happen. There are millions, maybe tens of millions, of workers who thought they would be retired by now. There are only two things keeping them in the work-force. A.) Their retirement investments in the form of 401-k plans (most of which lack any method of investing in precious metals) have been mercilessly hammered since 2008 and they feel they can no longer afford to retire. B.) With no viable solution to healthcare expense exposures both for themselves and often times their younger spouse, potentially, retirement is a roulete wheel of catastophe in the event they retire prior to Medicare eligibility and get sick. However, both of these situations could change dramatically over the next few years.

If the healthcare reform package already passed is struck down by the supreme court, and then replaced with a single payer system, -with the eligibility age of Medicare being reduced to the day you are born in a law that isn't 2700 pages long, but instead is about 3 sentences long, coupled with a continued recovery in stock prices...,,, Well, there will be so many people retiring that the unemployment rate will plunge. Has anyone considered what will happen to precious metals prices in such a scenario? (a very likely scenario I might add!)

I don't think its out of the question to see unemployment drop by 3.5 % in a single quarter while the workforce shrinks nearly as much. In such an environment, inflation could easily hit the double digits in very short order. And that, my friends, is when the metals will make their real move into the stratosphere!! Any guess how high it will go?

 

Log in or Sign up to hide this ad.

Wierder still is that gold seems to be moving in concert with the S&P 500. Aren't their actions supposed to run counter to each other? In other words, when stocks go up, gold goes down and when stocks go down, gold goes up?

To answer your question, I've heard estimates of gold rising to between $2,500 an ounce and $6,000 an ounce.

 

I can't guess where unemployment may go from here, but I can say that the official cooked unemployment rate is much rosier than the straight up employment to population ratio which has been on the steady decline. It used to be that when Ben would speak, gold would always rise. The only constant I can see is that when he speaks, gold and silver move one way or the other, because markets know that he holds the keys to inflation or deflation. I saw a report the other day showing that the number of market transactions is growing exponentially, with between 1/3 and 1/2 of the transactions over the last 10 years occurring in the last 2. We have a market dominated by computer algorithms that can actually spider web site data and make decisions within split seconds of information being disseminated. So there is no reason that the prices have to go lower even if the economy gets worse, but for those of us who measure wealth in ounces of metal, and measure commodities against other commodities instead of currency, the picture will play out much differently than for people who only think they've increased wealth even though their return is less than inflation. You are correct that this pattern cannot last forever, because bonds are a debt instrument from a sovereign nation, and these nations have more compounding debt than their GDP can ever pay off. There's no way out for them other than hyperinflation or default, as the debt is growing exponentially, and in either case a bond will not preserve wealth. Stocks may, and in the short term will definitely benefit from QE3, but it's hard to imagine companies remaining prosperous if the nations they live in are amidst instability. However, as long as big financial institutions are in business, and as long as the Fed can print money to give away to them they will continue to exert their influence over markets in the face of even the most rational contrarian arguments. One day this must end, unless people are willing to put limitless generations into debt slavery. People (like Warren Buffet whose own father knew the value of gold better than he does) often downplay gold because it doesn't produce anything, but that is exactly why it is such an important asset, because it doesn't have to produce anything to have value. It is free from circumstances other than the single one that defines it, which is as an inverse correlation to currency value.

 

Well, if you go back 4-5 years on this forum and read, you'll see people have been predicting those, and higher prices for years. So, why has it been stalled where it is for almost five years?
Guy

 

I know one thing. You're right about the economy. If anything, times have gotten harder for people around here in the past 2 years.

 

Huh? --5 years ago gold was at $700 an ounce, less than half of what it is now.

 

2008 was the first year gold reached $1000 oz. It's $1600 now. Thats fairly stagnant. The percentage in the price of a daily newspaper has risen more in the same time. Hardly the 8-10K some were predicting we'd see by now.
Guy

 

I am one of these ducks, that still can't understand how gold was ever so low (back in early 2000). I do not fully, in my bones, understand why it goes higher, except for the idea of psychology.

I had a strong gut feeling in early 2002 to buy gold, so did my husband. We went to the financal pros are were talked out of it - "it keeps going down, it won't go up." We went back to financial pros in 2009, we talked, they talked - its too high, it is going to go down."

I am paraphrasing some, but the bottom line is the truth!

I keep wondering where average folks, like me, are going to get the money to buy more gold. Some people think a gold standards is coming down the line. I don't see that.

I feel like this year will be sort of average for gold. Not too high, not too low.

 

Are you kidding? That is a 60% return on your money in less than 4 years.

 

By setting priorities in your finances.

 

1600 up from 1000 does seem like a high return on a 4 year investment, but it is deceiving because the 1600 dollars now are worth much less than 4 years ago. Thats why I am a silver guy. Silver price can go up based on industrial demand for the metal. Gold on the other hand purely reflects our fear and emotion, and therefore will coincide with inflation. Interest rates have been low for a while. The second rates are raised, you will see gold plunge.

 

I took the plunge in 2008 and bought 5 BU Buffalos and one from the mint. That was the extent of my hobby in a number of years. Put them away and got interested in coins again late last summer. At this time I sold one to pay for the 5 A25s I was fortunate to get. Did the gold appreciation beat inflation? I don't know, but I'm feeling good with my present position.

 

Gold is also held by central banks and governments as partial backing for their base money supplies.

 

This is considered "common knowledge," so I suppose it will be true since all of the traders and hedge funds will be trying to figure out what everyone else is thinking and move first. But the "plunge" may not last long. Gold rose sharply in the late 1070s coincidental with high and rising interest rates. So gold prices might fall on technicals but then resume the rise on fundamentals. It all depends on what is going on at the time.

 

I'm not so sure about that. They don't refer to it as "raging inflation" for no reason. It's a lot like a fire, once the structure is completely involved, the arrival of the fire trucks makes little difference in the outcome. The building is destroyed and no matter how much water is poured on the raging fire, the end result is total destruction. That's pretty much where the dollar is headed, and while I have little doubt there will come a time when interest rates are jacked-up in response to inflation, the effect on gold will be minimal. In fact, most holders of the metal won't sell it for dollars, insisting on some other currency or representation of wealth that is more secure long-term. Even Russian Roubles may look attractive once the dollar really gets torched.

 

really? By who? certainly not in Greece.

 

Really? So you would rather invest in a currency in a nation that jails and kills there successful business leaders?

That is not how the Russians feel.

 

http://www.wnyc.org/shows/lopate/2009/dec/10/underreported-the-death-of-sergei-magnitsky/

 

http://www.thetakeaway.org/2011/dec/13/pressure-putin-prokhorov-enters-russian-presidential-race/

http://articles.businessinsider.com/2011-04-18/wall_street/29997118_1_moscow-embezzlement-tax

This one is great

http://www.rnw.nl/english/radioshow/taking-reins

 

No one invests in currencies. They may speculate in currencies, but no one invests. That is true of gold as well, it isn't an investment, it's a speculation. In the current dollar environment, the gold speculators have been winning for over 10 years now. The chances of some huge reverse in the inertia of the dollar's decline seems highly unlikely to me. None of it has anything to do with politics or approval of the ruling elite. It is what it is, there isn't much ideology to gold, it's one more reason so many people consider it the ultimate currency.