Gold will go down to $700 in the next 5 years?

Yea all those factors are going to side ways (Gas, slowing emerging markets), that is why if you recall since last year i have been saying gold/silver will be sideways as well and will never break the highs we saw last year or the lows for that matter. IMO they will likely move in that matter for another a year till the debt issue finally plays out.

 

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By definition, this is socialism, the opposite of capitalism. It didn't work out too well for the Soviets. They only managed it as long as they did by adoption of governance where individuals had no economic rights and the state takes everything. Well.... it seems this is the direction we are headed too.

We will find this train ends up at the same station.

 

It is exactly what happened when investment instruments securitized by property loans failed.

 

I can't disagree until it happens. Makes sense.

 

You are correct that it is not as cut and dry as that they mirror each other inversely. However with paper gold skewing the price discovery mechanism, and with fiat currency skewing the traditional monetary ties to gold, we are currently floating around somewhere in limbo with market forces yet to reach equilibrium. I will certainly admit this to be speculation, but I have little doubt that once this fiat experiment runs its course that my previous statement will be upheld. After all, it has throughout the span of human history with the exception of the current paradigm, and there have been many other attempts down this same road that met the same end.

 

If you read David Graeber's book, "Debt: The First 5000 Years," you might change your opinion a bit. It busts many of the myths about money including the use of gold and silver. It's okay to hold the beliefs you have, but not because the current system is an exception because it is not.

 

The system works because people believe in it. No system, not even PM, would work without belief.

 

Did you actually watch the video because I found nothing in it that new or enlightening. To me Gold is an asset class, nothing more. It serves a purpose in a portfolio it is not a portfolio.

 

No portfolio should be comprised of just one type of commodity or thing.

 

I think gold could take a tumble within 5 years. It could in 1 year, again in 3 years, and again in 5 years with gains in between. Monitary policy changes could be on the horizon which can take some wind out of the sails of gold. More wind could be taken if the stock market tumbling 25% and companies selling real property in order to stay afloat. Those are a couple of factors which could decrease the value of gold. Then we have QE3...

QE3 is printing for real property unlike QE1 and QE2 which backed treasuries. Does this mean QE3 is actually backed by an asset? Sure, and I'm certain this could be debated if people believe the easing is greater than the asset or money is just tossed into the general pool. So wouldn't this mean that the value of gold recently increased based on the speculation money is being printed without a real property asset? Could gold drop some from it's current position based on the function of QE3? I believe so.

Then we can also look at our debt spending. Our debt spending over the recent years is by far greater than it ever has been. Is this sustainable? No. So what will likely happen? Decrease spending of course. If we decrease spending and policies change under any administration to increase GDP--such as tax policies--then some surprises could happen within PMs.

As for India and China collecting PMs? I don't see how those two emerging markets whom are riddled with inherent continous economic fear, both within government and amongst its people, should be our indicator that we are missing the boat on PMs. It has been stated even in this thread that PMs are somewhat fear driven. If that's the case, I don't want to follow the lead of nations that could be on the verge of a bubble. Once their bubbles bursts so will those PMs since fewer will be buying them.

Don't get me wrong. I've been a stronger collector of PMs and certain coins over the recent months. I just wish I had been more aggressive at it when I first started buying coins in 1990. Nevertheless, for every $2 in PMs I buy I also buy $10 in stocks. I have to consider the short history vs long history vs the current climate. We all know stocks could go under, hyper-inflation could occur, and American could be rock back onto its heals. At that point I be pleased I had insured myself with PMs. But with that said, the last I checked, shredders work just as well as printers, and policy changes could shut down the presses and start up the shedders.

My current position with PMs is not to overbuy. If you're buying for 'want' rather than 'need', I do believe there will be a more reasonable time in the near future to buy PMs.

 

The problem lies with what happens between now and then. Gold might be $1000 in a few years and that would be a more "reasonable" price to pay. But it might go to $5000 first and a lot of profit would be foregone by waiting. It isn't easy to decide, but I'm going to attempt to ride the bull as far as it goes and then try to jump off before he runs off the cliff.

 

Your analysis is incorrect because Qualitative Easing is not the act of printing money to buy assets. That is Quantitative Easing. The Fed is simultaneously participating in both activities. The Qualitative Easing part is what they then do with those assets once they are acquired. This is the part that most people don't understand because it's complicated and requires a thorough understanding of the differences and roles of base money versus circulating money.

Remember, The Federal Reserve wants to increase the amount of cash in the real world (circulating money) but which it has little power to do directly beyond lowering interest rates. However once those rates hit 0 it's left with no options. You can make a loan 0% but if there are no customers, it doesn't matter. The Fed has to find other ways to get money into the economy and that is where Qualitative Easing enters the picture.

Qualitative Easing - literal meaning = lower the quality. Hence by lowering the "quality" of money people will demand more of it. (or so the insane Japanese theory goes) They do this by taking the base money asset created by Quantative Easing (growing the balance sheet) and then using a complicated set of schemes to essentially make debt interest negative. i.e. You take out a loan for $100 and you end up with $105 when its said and done. Of course at the individual level, this doesn't happen.

Where the scheme fails and why it hasn't worked in Japan in close to 2 decades, is that all of this money ends up in in creating other paper profits and doesn't do anything to stimulate the real economy. In fact it hampers it even more as companies who are making profits through the equities market see little need to invest in real work.

Gold won't be going down since they can never de-leverage this mess. It's a one way street where turning back is too painful to endure but where there is nothing but an cliff at the other end.

 

I have a friend who the first time he played Roulette cleaned up. So he fancied himself a fine Roulette player. He has played many times since then and always lost money. I think a lot of people who are into market timing are like that. They have a positive experience with it then become convinced it is because they are good at instead of the fact they were just lucky.

 

I don't think the market is like roulette at all. First of all, the market has a tendency to rise over time from the reinvestment of earnings, so the odds favor the investor and not the house. Second, unlike roulette, skill matters in the selection of investments and a person who cannot distinguish between an Enron and an Exxon by looking at the financial statements has no business playing the game. Regarding timing, massive amounts of money have been made by folks who know how. Massive amounts of money have been lost by folks with day jobs who think they can do it part-time because their broker provides a trading platform.

 

I think you missed the point of an inexperienced player trying something, succeeding and then drawing the conclusion he is good. As for pros they are often on the opposite side of trades from each other. Afterall, all trades have a buyer and a seller and individual investors aren't that much of the volume are they? I think John Corzine's career should illustrate the highs and lows a brilliant mind can achieve. But that debate aside my point is people need to be very careful when trying to time things, lots of very smart people have lost money doing that.

In another example, everyone is a pretty good poker player until they are playing for an amount of money that is meaningful to them.

 

Playing the "market" has become like roulette but I'm not talking the Vegas game of chance. It's like the Russian variant of the game now where Mr. Smith & Wesson is your dealer.

 

Aaahhhh, but you get lucky 5 out of 6 times.

 

No, I was making sure the readers understood that the actions of dumb money should not scare people away who are willing to do the work to move beyond the guessing game, and to let them know that market odds generally favor the prepared investor.

 

Agreed! If you study up and learn the factors influencing the market, you increase your long run probability of success.

 

Or even 7 out of 8 times with the S&W TRR8! What more could anyone want?