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

I'll take a crack at that. When the NASDAQ was making its big run, there were companies that not only never showed a profit, they didn't even have any revenue, and their stock was still going up. There companies weren't worth anything. When a stock loses 80 or 90% of its value, it usually goes to zero. People don't usually load up on a stock that gets real cheap. Gold can't go to zero, because gold is real.

When gold starts going up, it doesn't mean gold is in a bubble, it means the dollar is headed for zero. The dollar can go to zero, many currencies have. Gold can't go to zero, because it is real. That means the price of gold can go to infinity. When Germans were burning their money for heat, the price of gold in terms of the German paper currency was approaching infinity.

Its all in your point of view. Its only been 45 years since our dollar became totally faith based. I'm amazed its lasted this long. I think its because there hasn't been any alternative.

 

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because the gold did not go up a lot. gold go up a little bit mainly due to inflation. gold is so stable that a lot of people like it. and it will continue to be that way. yes it will bubble if only it went up more than 100%.

 

Rising prices do not make a bubble. There was tremendous speculative fever and buying on margin associated with the NASDAQ bubble. Gold is sort of drifting up with very little excitement and almost no participation from the general public. It is also only about 10% higher than the 1980 price. When CNBC launches an evening show devoted to gold, it will be time to move on to something else.

 

That chart seems to indicate that gold is too high. It wants to come down. I am just talking chart here, not fundamentals.

 

Inflation will no doubt be experienced but it won't get as bad as the doom & gloomers would have you believe. The prime reason inflation won't go hyper is very simple to grasp.

Inflation has the secondary of effect of decreasing the value of debt. In a country like the USA where the populous is largely indebted -- and real wealth has been built atop of that debt -- inflation poses a very real threat to debt interests (i.e. bankers) and since the bankers are running the show (and money) via our Federal Reserve system you can guarantee that they won't allow a flooded dollar market to essentially erase the value of their debt assets through inflation. As soon as there is even a hint that real infation is on the horizon, the Fed will contract the money supply so quick your head will spin.

Now, I promised you this would be easy to grasp so, to simplify: if inflation becomes so bad that you earn like $3,000/hr. (i.e. real hyper-inflation scenario) what does that mean for your $1200 mortgage or $600 car payments? To you it means you own them both, free and clear, with damn near zero effort. To the bankers who hold the notes on those items, it means their assets are wiped out. In a country the size of the USA with as much debt as is held by US citizens, we're talking enormous, mind-boggling amounts of money. You'd be a fool to believe the powers that be would ever allow inflation to threaten those assets.

So, inflation will come but it won't be too big of a big deal. Maybe just enough to create some good theatrics, but little else. Deflation is a much bigger threat to people who are in debt and is a windfall to bankers who hold the notes.

 

Charts don't predict the future, as much as people wished they did. One thing to keep an eye on is the average total cost of production. Very few metals spend much time at a price below the cost of production. I'm talking total cost of finding, permitting, financing, building and operating a gold mine; not the "cash cost" of production which is deceptive and meaningless.

 

with a LIL bit of effort this could be the primo thread in GD or PRWE

 

Your post is well taken and an interesting perspective. But you're also making an assumption that these 'powers that be' are completely 100% in control of the economy which as you say, consists of massive debt and millions of citizens.

It reminds me of when during presidential elections, there are people who really think they're voting for a president who can single handedly turn the economy around.

IMO, if the powers that be could control everything, we shouldn't have any large banks failing or people at the top committing suicide. Why don't they just change things so all these banks are fine and they continue to profit?
My guess is that you can't control what people will do, how they feel about things, what they will spend their money on or what they want. You can't control who will be responsible, and who won't be. You can't convince people at the top to take pay cuts in order to save employees without the companies being taken over by the government.

The economy and the value of a dollar I believe is a large and complicated thing. Even the powers that be, may only be a small rudder on a large ship, moving full speed ahead.

I'm beginning to become more concerened about a possible World currency. A quick fix would be just to devalue the currency by 'x' amount and implement a World currency that you will now be paid in.

What choice would anyone have in the matter? (I disagreed with bailing out AIG. Who am I supposed to call to stop or reverse what was done?? Nobody. You can't. They did what they wanted to do.)

It would be enormous wealth lost to the average guy but the debts that those banks hold are then instantly worth that much more, simply remaining the same. They win, we would lose as usual. They have plenty of incentive to implement this under the guise that it is "what is necessary for global financial stability."

Metals of course would skyrocket as your cash gets traded in on lesser value global currency that you now have to use. They own the federal reserve. They decide what's legal tender. Absolutely nothing stops them from pulling the plug on the whole fiasco and moving to something else.

Remember this is a global economy now. Global currency will be looked upon as the new, good thing. The powers that be on a global level will decide how best they can benefit from this. The smaller ones in this country will not matter. Maybe they'll be able to convince people with a small devaluation. Maybe only 10%? (lol)

This isn't just doom and gloom. To me this is a very feasible situation that they could accomplish if they choose to.

Even if they only do as you say and start pulling money back and raising interest rates back up to prevent inflation.... didn't those actions help drive us into a depression in the 30's?
Interest rates are low. Cash is being printed like mad, government bailouts are plentiful and yet still there is news of banks refusing to lend. So what happens when they pull back to defeat inflation? People need to get car loans to buy these cars that keep the big 3 in business.

If they can't, they will just keep going away until they disappear. You can't forget about the reactions that will come from the actions that you say will save us.

 

I believe "inflation" simply refers to the money supply, not the effect on prices, although eventually it usually results in price increases. Most people call it "inflation" when prices go up, even though that has nothing to do with the money supply. The money supply has increased, as the fed is printing money like there's no tomorrow. So far it hasn't resulted in higher prices.

Its true that as money becomes more worthless the money you have saved becomes more worthless, and debts that you owe can be repaid with money that is worth less.

However, with hyper-inflation, more happens. If we were to have modest hyper-inflation, say 10% a month, people who have money in the bank aren't going to let it sit there, they'll take it out and spend it, because prices are going up so fast. This creates a boom of sorts. However, after everyone's credit cards are maxed out, and all their savings are spent, the demand crashes. Then unemployment soars. Then we have food riots. Everyone gets wiped out.

I don't see that happening. I think we'll go to a world currency first, within 4 years. The world bank will stop letting us print money, and we'll crash. Then we have food riots. Everyone gets wiped out.

 

public confidence on the economic improved. see these few weeks movement. it look like to be an uptrend. stock market will recover and rally big. gold maintain $850.00 to $1,000.00 range. coin market remain strong. mint the few government agency making huge profit.

 

Serious question - Could a new metal come along and replace gold as the hot precious metal to buy - driving down the value of Gold? This is the only way I see gold really going super low. At the end of the day gold will have more value than paper money that has no real backing.

The science behind what is going on with some forms of metal makes me wonder? Take a look at the items listed and the science behind them. http://www.elementsdatabase.com/Labs Things scientists are attempting to do really boggle the mind? It is all really just a perception of value - right?

For now I think inflation is going to drive metal up&up until the economy/inflation settles down to something more normal and then a new bottom will be created. That bottom may be well above $600 but now I'm starting to sound like Elaine I am an infant in a world of ancients so don't consider much of what I think!

Fun read and should make the mind think

 

Ah. A new angle. Interesting. You never know what new technologies may need to make them work. Your idea is very possible.

 

TY - I am glad I am not the only one that thinks so - I will leave it at that

 

This isn't as clear-cut as it seems. The Fed isn't printing money. The money is borrowed into existence, and every dollar in circulation is offset by a dollar in debt. This is entirely different from the situation where more zeros are added to the pieces of paper. The outcome of the increase in debt could very well be a deflationary collapse where there isn't enough money in circulation to service the debt. So we may have inflation and we may have deflation, but anyone who tells you with confidence that it's going to move one way or the other is just guessing at this point.

 

Joe, it hasn't yet resulted in wild price-increases, because you and some of the others, here (...at least, as far as I've observed), are forgetting, it's a relative term. Inflation isn't just too much money. It's too much money chasing too few goods. In this country, at least, we're experiencing no shortage of goods. And, remember, these don't necessarily have to be domestic goods, they can be foreign goods (...which many of them, in fact, are). But, that's why we don't have inflation. At least, not as yet.

 

By November 2009 Gold will be between $700 and $800

By November 2009 Gold will be between $700 and $800.
Silver $7 to $9 and who knows about Platinum - who ever knows about Platinum?
(of course I could be wrong you know but I'll stick with that for now)

 

I don't think a new metal will come along, all metals are known and no new ones are being discovered. How about rhodium? It's about 15% what it was. Many metals have been used for money, gold, silver, copper, bronze. But gold has the longest track record, at least 6,000 years.

This recession isn't like others we've had. We've never printed trillions of dollars to end a recession. Will it work? There is no chance. I'd love to see the price of gold go to $600, it would give me a chance to buy more.

Here's a good article on hyperinflation:
http://en.wikipedia.org/wiki/Hyperinflation

The article discusses 33 examples of countries that experienced hyperinflation.

An excerpt about Zimbabwe:
Inflation was stable until Robert Mugabe began a program of land reforms that primarily focused on taking land from white farmers and redistributing those properties and assets to black farmers; this in turn sent food production and revenues from export of food plummeting.

Slave reparations anyone? Check out their 100 trillion dollar bill!

After recovering from hyperinflation, most countries re-value their currency, at a rate of 1,000 to 1 up to 1,000,000,000 to 1. After the US does it, gold could be $600 per ounce, in new dollars. Of course new dollars will be worth 1,000 old dollars, which would make $600 gold actually be $600,000 in old dollars.

I'm in my sixties, and I fully expect to see gold at $100,000 an ounce (in today's dollars). When it happens, I won't be selling unless my family is starving. I grow my own food.

 

what is right ?

Some say that is what is left after you have done everything wrong.

 

I agree with the later part but look at these two elements Unbinilium (http://en.wikipedia.org/wiki/Unbinilium) and Iridium (http://en.wikipedia.org/wiki/Iridium). They will not replace gold - I know - but the idea of metals formed like these open the mind to what might be done in the future??? Just a thought... Also - who is to say some meteor couldn't bring a new form a metal yet unidentified? The type of thing found in science fiction I know...