If (or when) gold bubble bursts....

When Roosevelt was president, gold was money. Now it isn't. There isn't much point in confiscating [which was really forced selling, not confiscating] gold anymore. The last confiscation basically involved gold coins in the banking system. There was also an exemption of something like 5 $20 gold pieces per individual, which was more gold than the typical person owned at the time. I never heard anybody talk about going door to door searching houses. There's a lot of misinformation out there masquerading as history.

 

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When gold was money

Yes, gold was money. All the gold wasn't rounded up, but a lot was. And gold wasn't used in commerce anymore. Just because a thief gives you a receipt for what he takes, is he not stealing? I believe all the problems we face now are the result of fiat money. Will we go on a world currency? Will gold come to the rescue and be used to settle trade deficits again? Without any real money, will gold just naturally regain its status?

 

People weren't given "receipts" for their gold. They were given cash which they were free to turn into silver money or leave in the bank. I know it is popular to bash "fiat" currency these days, and I've done it myself at times. But the problem isn't fiat money per se. It is central banking and the collectivist mindset behind it. I don't see any circumstance where gold will be money again, but it will remain an important, if small, asset class because if its inflation protection.

 

If gold isn't money, what is it?

 

I actually disagree with the OP's original statement. I think people have a follow the herd mentality, and if gold were to drop down to $600, we would see a massive rush to get out before it falls any farther. This certainly doesnt apply to everyone, some would refuse to sell at that level. But I am afraid that there would be mass fear that gold is about to fall all the way back to some insane low level like it did in the 80's.

A little over a year and a half ago, when gold was around $600, I posted on this very forum asking if anyone thought gold would reach $1000 within 5 years because I knew I was selling at $1000 and hoped I could do so within 5 years. The responses were pretty close to 100% NO WAY, Not a chance, impossible, never, wont happen. Well, as we all know it did happen. Gold went on a tear and now it seems that everyone expects gold to just keep going up up up and up.

Thats what I mean, it goes up $400 and now everyone is on board. If it were to go down another $300, I believe the herd mentality would flip and everyone would be in sell mode.

I am not saying I think it will go to $600. I am just saying that you shouldnt count on there being a certain floor at which it cant fall below because noone would sell at that level. Remember gold was in the 800's before and fell down to around $300, where it sat for many years. So I think its safe to say that there were sellers at that level.

Personally, I hope it falls because I dont have any, and yes I would like to get back in at a cheaper level. Those Gold Buffalos are so beautiful.

 

So did you sell your gold at $1,000?

Notice how we talk about if gold COULD go to $600? We don't consider it going any lower, perhaps because it doesn't seem possible.

 

What is gold?

 

Yes, Sold it all around the $985 spot level on the other forum BST for a little over $1000 an ounce. I dont have any at all right now. Looking to get back in, but not at $880. Just saying that if a few things happen and gold does fall toward $600, dont expect that to be a guaranteed floor. When gold falls a lot like that, it might create a floor, or it might snowball as many try to get out before it falls farther. And that only worsens the fall.


I mean, 2 years ago with the DOW over 14,000 everyone would have said HELL NO I WOULD NEVER SELL AT 9000. I would buy more at 9000. But when it fell to 10,000, then 9,000 they were still selling. When GM was high, noone would have thought they would sell that stock at $5, but when it was $5, the selling was massive.

The same could happen for gold. Not saying It will, but it definitly could. Things change. Let the stock market go into full rebound mode, let the fed funds rate go from .25 to say 5 or 6, let the real estate market rebound big, let bank int rates go to 5 or 6 percent again and we could easily see $300 gold again. As impossible as that seems today, and I agree it does seem hard to see today. But nonetheless, I think its very possible we see gold at $300 or $400 again.

How much of this is speculation anyway ? I admit thats what I was in it for. And if I get back in ( wont unless it falls to 550-600), it will be just trying to make some $$$. Yes gold coins are beautiful, but if someone drops $1000 for a coin, they are looking to make money not as a permanent hold. In most cases.

 

its cheaper to buy the little Grams then the oz. right now. i think its better bet cus its a EZ sell and return then the Big oz. or better

 

How low can gold go?

I suppose gold could go to zero if it were made illegal, but it might still have a black market value. If someone figured out how to turn lead into gold it could crash, but that's unlikely to happen.

The last long bear market for gold was because the economy was great, people could make money in the stock market and inflation was low. That's the downside of owning gold, if times are great, gold can go down. I bought most of my GAEs in 1999, I paid under $350 each.

The longer times were great, the lower gold went. But, when times are uncertain, when there is a threat of a nuclear attack, when anything bad happens, gold goes up.

Actually, gold doesn't go up. Gold is gold, its the same today as it was yesterday. What's totally confusing, and changing, is the dollar. The doller is a myth, it has no value, its make believe. As long as everyone believes, it works. But with the trillions being printed, it can't go on.

I suspect we'll go on a world currency, and the world bank won't give us trillions. I think we might have a situation similar to Russia in the 1990's. I married a woman from Russia, and she told me how it was. Everyone grew their own food, because they couldn't afford anything. She bought her milk from a woman who had one cow, and delivered it. She gave the woman table scraps the cow could eat. When she was in college, during the summer she harvested wheat with a hand sythe. She worked for her town to arrange with businesses to pay their taxes. No one had any money, so businesses would do work for the town in exchange for paying taxes. The best job she could get as a computer programmer paid the equivalent of $10 a week. A beer in a bar cost $2, same as here.

Things got weird in Russia after the collapse. It could happen here. You can't just print money and not expect consequenses.

I don't think gold can go below $500. For that to happen we'd need a lot of people selling their gold.

 

Everyone can make up their own mind, but I would caution people to not blindly accept gloom and doom reports of the demise of the dollar. They have been coming out continuously for decades, and will for decades more.

Just a few thoughts...

The US is not Russia. I doubt there was ever a time when the average Russian lived in prosperity. They just don't know how or don't care to structure their economy that way.

While special drawing rights have been around for decades, they haven't and aren't likely to morph into a world currency.

The dollar has value. It has exchange value. It can be used to make purchases and pay taxes. It isn't a great store of value, so you're going to have to find someplace else to store your savings.

Gold rises and falls like every other commodity. The purchasing power of gold and silver changed when they circulated as money. It would be more correct to say that both the dollare and gold fluctuate in value, but the long term trend for the dollar has been down while gold has fluctuated less.

There is a lot of bad information out there. Be careful what you choose to believe.

 

How low can gold go?

Under Communism my ex-wife and her husband had 2 cars, and they vacationed every year at the black sea. After the end of communism they had the situation I described. We had several russian friends, and they all said that if there were to be free elections, the communists would win big. They had a real decline. I know another russian who waited in line for 3 hours to buy 10 eggs. Food was cheap, but there wasn't any. They couldn't have a farmers market, because people (with guns) would come around and want money from the vendors. Russia had gun control.

I don't "choose" to believe anything, I just try to analyze the facts. The dollar has lost 95% of its value since 1960. It only has value if someone is willing to sell you something. With the shortages of everything in Russia, no one was willing to sell anything, unless an obscene profit was to be had.

Another thing about Russians, at least in 1999 - 2000. They saw no value in saving money. They got used to not being able to buy anything, so why save money?

So the way it could play out is we have shortages, everyone has money, but no one is willing to sell anything for money because money can't buy anything, and everyone has plenty of money. That's how I see gold and silver regaining their rightful place as money. Personally, I hope gold goes down to $500. That will mean our dollar is good. I just don't see it happening.

 

It's also useful to be able to distinguish between a fact and an opinion, not to confuse a forecast with an outcome, and to be able to assign a reasonably accurate probability to all of the above.

 

C/S I know that we differ on this but I can see gold going much lower also. You forget that it was under $300 as recently as the Clinton years (that was a good time to buy). That being said it is having a little pop back up over $900 again.

 

The dollar

Our dollar for all practical purposes is backed by you.
The Ameican workers ultra high productivity, and technology that can not be found anywhere else in the world. There is little we can not do.
Corruption is our main deterent.
While we work our congress takes liberties with our treasure. If they could keep their hands away from the
" Cookie Jar" many problems would go away.
Term limits would keep a better power balance , and maybe the peoples work would be done first.
We carry the defense load for most of Europe and they are in a steady decline with their form of government.

My opinion ,I speak for no others.

 

gold can bubble only if it go up to more than $2,000.00. since gold did not move so fast and high. it will not bubble too. gold is so stable and go up only if dollar fall.

 

This is the best post in the entire thread..lucid and logical.

Buying and selling can be based on the fundamentals of what something is believed to be worth..but there's also the emotional factors of greed which can drive prices far beyond what something is worth (bubble) and fear which causes indiscriminate selling (market crash).

The trader who keeps his head in the game by only considering fundamentals can take advantage of the "herd mentality" that Gold Collector mentions by buying low and selling high.

 

I've heard people say this. I don't agree. If you offer me dollars for something I own, I don't HAVE to sell it to you. Paper dollars are only useful if someone is willing to accept them as payment. They can be used to pay taxes, but thats the only thing they're gauranteed for. There are many examples I could cite. German paper money was used to burn for heat, because the heat they produced was more than the heat produced by firewood purchased with the paper money. On the other hand, German silver coins from the same time are STILL valuable, because they're silver. Silver doesn't have to be backed by anything, because silver IS something.

I'm afraid our fiat money will go the same route as German paper money, and many other paper currencies. I believe this will happen here in the USA, within the next 7 years.

I certainly hope I'm wrong, but I'm in the market for silver coins. (I already have some gold).

 

So when the NASDAQ doubled in a couple of years it was a bubble but when gold does the same it is not a bubble. Why is that?