TheLonger Term Implications of Basel III (January 2013) - Gold's Triumphant Return?

When the dollar was initially conceived it was measured in grams of gold and silver. What we have today is backwards. Currency should not be the yard stick because it is not a reliable store of wealth. When currency was backed by gold that was fine and well, but now with a debt based currency it's an unreliable method. That is why metals had the role they had in the past, and why they are returning to that role.

It really just depends what you are measuring with, and the heat analogy doesn't work in this case because temperature is a reliable measuring stick unlike debt based currency. If we're to get into specifics as to how best to measure the value of gold, personally I would weigh it against other commodities, silver, copper, real estate, etc. but not something that can be debased with the push of a button.

 

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I think the old story is that an ounce of gold will always buy a men's suit of clothes. Except that in 1980 the suit was from Brooks Brothers, in 2000 it was from Mens Warehouse, and now we're back to Brooks.

 

So the "value " of an ounce of gold is a "Belief" rather than a concrete measurement.

Which is OK, many of my values are such ( beliefs), but these discussions always seem to me to be wishful thinking.

Jim

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Gold value changes huge amounts in the current environment due to manipulation and being a dollar denominated asset. (i.e. the value of the dollar is actually changing not gold, if the value of gold in dollars goes up thats because the value of the dollar is going down, if the value of gold in dollars goes down that is because the value of the dollar is going up)

If gold was the only currency its value would change very little, not like it currently does because of the two aforementioned factors.

 

it's almost impossible to measure anything in the current economic climate, we don't have a free market so there are too many variables affecting the price of nearly everything. One recent example is the price of milk, if the subsidy bill did not pass congress it was widely held that their would be a huge increase in the price of milk. So how can you judge the value of something with government intervention and subsidies?

You'd only have a much clear picture of true values if the United States and the world followed a free market system, not the central planning that is currently going on.

 

So any change in the price of gold that is not dollar related, and that happens quite often , is due to manipulation??

 

Let's get back on track folks.

Was Iraq's burgeoning CB Gold hoard mentioned?
http://www.reuters.com/article/2012/12/21/imf-gold-iraq-idUSL1E8NKDQJ20121221

 

I believe in certain cases yes. Other legitimate reasons for spikes not related to the dollar would be increases or decreases in either the supply or demand. The problem with supply and demand accounting for all the price changes (that aren't already accounted for by changing value of the dollar) is you would not see the incredible fluctuations that we see now.

I think gold is a much steadier market than silver because it is much more difficult to manipulate, the total value of all gold mined throughout history is probably close to 10 trillion dollars. While all the silver available is probably close to 500 billion (and that is probably a high end estimate). So you can see why it would be much easier to move the silver market than the gold.

Another thing to keep in mind is if someone wants to manipulate the price downwards, they don't have to manufacture the entire move themselves. There are many technical traders out there, so if they can move the price enough to trigger a sell signal for these technical traders, then they don't have to do all the work themselves.

 

Inflexion says you are wrong, so I'll leave it to the two of you to figure out which gold dogma is correct.

It takes much less gold to buy just about everything now than it did a dozen years ago, so you would have us believe that we've had a deflation of about 75% over that time period in terms of gold while at the same time gold prices have been manipulated downward. Quite a theory.

 

you aren't understanding my argument, nowhere did i say we've had deflation. Lets agree to disagree and leave it at that.

 

:lurker: This kind of discussion is why I'm glad I joined CoinTalk. A lot of disagreement coming from different perspectives but a lot of good information from which I can form my OWN opinion.

Thanks, folks!

 

Actually yes. A few months back on the Keiser Report (e328), Sandeep Jaitly was discussing Austrian economics and von Mises. One thing that separates their thoughts from Keynes' is the acknowledgement that value does not exist outside the human consciousness. Another is that only gold and silver can extinguish debt. I guess it depends which school you subscribe to.

 

Assuming the baseline was a dozen years ago, though if you go by the DOW/Gold ratio it's just part of a cyclical correction. Maybe we would have had about that much deflation if you take away money printing? If so then gold is just reacting how it is supposed to. Gold suffices as money, but not currency. FRN's are both. Bonds are both. They each have pros and cons, but gold is the money that transcends time, as with silver, like in the movie Looper

I agree with Tinpot that current markets aren't a reliable gauge, and that gold may either be overvalued or undervalued because the market supply is mostly artificial. So it may not be currently performing to its role as I previously stated, but at some point it should since it always has before. Only people will decide, but I do think the current price is not representative of recent inflation, because as David Morgan has pointed out, it is the velocity of money that causes price inflation, not the act of printing it since it won't impact prices if it's collecting dust in a vault somewhere.

 

You indicated that changes in the price of gold are due to changes in the value of the dollar. So the only way to interpret this is that if the price of gold in dollars rises more than the equivalent price in dollars, there is deflation. It's just math. I think it is you that doesn't understand your own argument. But we can agree to disagree about that.

 

I agree that gold may be over or undervalued, but it isn't because of any defect in the market. Markets fluctuate because that's what they are supposed to do in response to changes in supply and demand at the margin.

 

I don't understand my own argument lol? You don't even seem to understand basic economic principles, let me try to explain one more time.....

If the value of gold is rising that means the dollar is losing value, that is inflation, NOT deflation. When the dollar becomes WORTH LESS in relation to the price of goods that is INFLATION.

If the price of gold was DROPPING then there is DEFLATION. (or manipulation pushing the price down, or lack of demand, or a supply glut)

 

Do the math. If the price of gold is rising faster than the price of goods and services in the economy, then there is massive deflation in terms of gold according to your logic. No, you don't understand the argument you are making. This is just math, not some grand economic theory.

 

in terms of gold yes, in terms of the dollar, no. This is the first time you've mentioned you were referring to in terms of gold. Since the DOLLAR is the prevailing currency, one would use common sense, and assume you were referring to dollar terms unless otherwise stated.

 

Since we were discussing how gold has a constant value and that it is money, one would use common sense and assume that we were demonstrating that using gold as a measure is highly flawed when real world examples are used, unless otherwise stated.

 

I'll admit I've been beat.

Don't argue with idiots because they will drag you down to their level and then beat you with experience. —Greg King