Gold new price & Dollar's weaknesses!!

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Gold hit a new all time record on the New York Spot Market today in what some have described as gold's "longest rally since... 1948" (10/06/09, Bloomberg, "Gold Jumps to Record as Inflation Outlook Fuels Investor Demand"). The dollar continued to suffer from inflationary concerns as well as market "chatter" regarding possible challenges to the dollar as the world's reserve currency.
A British newspaper reports "Gulf Arabs are planning- along with China, Russia, Japan and France - to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency.... The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years."(10/06/09, The Independent "The Demise of the Dollar"). Several oil-producing nations have denied this report.
According to the chief investment officer of a California investment management firm, "Gold has just begun its ascent...As central banks print more and more money, the private demand for gold as an investment and inflation hedge is destined to grow. It's pretty clear that gold will be at $2,000 by 2012, and it could happen a lot faster." (10/06/09, Bloomberg, "Gold Jumps to Record as Inflation Outlook Fuels Investor Demand")*
As of 9:00 a.m. PDT, gold was trading at $1,041.70 on the New York Spot Market, up $23.50. Silver traded up $.70 at $17.36. Platinum traded at $1,323.00 up $19.00.

 

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The mindset of America is about to change as Americans wake up and realize how rapidly the U.S. dollar is losing its purchasing power. No longer will gold be looked at as a risky and speculative asset. Instead, there will be a rush into gold as the safest asset of all. The new mindset will be that you can't afford not to own gold and you can't own too much gold. You will be looked at as crazy if you don't own gold. You will likely see the mainstream media proclaim a "gold bubble" soon, but the only true bubble we have today is a "dollar bubble". In recent years, we have seen a rise of precious metals recycling companies like Cash4Gold that have encouraged Americans to take advantage of purported "high gold prices" and trade in their gold for U.S. dollars. Those who got suckered into trading in their gold for U.S. dollars will soon realize it was the biggest mistake of their lives.

 

Wow. I'm happy for my coin collection, but then I wonder, what's happening to our dollar and what does that say about the strength of our society? Are people losing confidence in America's economic strength? Those are bigger questions.

I'm glad I got my gold double eagles in the early 1990's.

 

What I worry about is that a dollar decline could become self-reinforcing and hence disorderly although this would make gold skyrocket in price could you just imagine what it would do to the markets around the world as well as here in the U.S.?

 

I am some what confused.

When Gold reached it's high water mark in March of 2008 @ over $1,000.00 an ounce

The exchange rate was $2.01990 dollars to the Pound and $1.56780 dollars to the Euro

Today the exchange rate is $1.56570 dollars to the Pound and $1.46290 Dollars to the Euro

 

Somewhere around here I posted that measurement against other currencies is not a reliable indicator of the value of the dollar or the direction of gold because all fiat currencies were being inflated by their respective central banks, only at different rates. So it isn't surprising that the dollar is down against some currencies and up against others. When two drunks jump off of the roof, the one falling slowest isn't rising.

 

Perhaps fear?

 

The traditional measure was to measure changes in the cost of living by using a fixed basket of goods. But now the CPI is calculated using a changing basket that only includes things that don't increase in price because it is assumed people substitute. So here is an example of how it works [this is meant in the economic and not political sense].

Suppose at the start of a period, steak and hotdogs both cost $1 per unit. If at the end of period 1 steak is $2 and hotdogs are $1, it is assumed that people will buy hotdogs and the inflation rate will be zero. If at the end of period 2 steak is $2 and hotdogs rise to $2, it is assumed people will buy steak, and again the inflation rate is zero for the period. So at the end of two periods, the government will report no inflation even though prices have doubled. They have other tricks too, but this is sufficient to demonstrate how to lie with statistics.

So the answer to your question is that there is no measure anymore.:bigeyes: People just have to use personal experience to determine whether the dollar is gaining or losing purchasing power. :desk:

 

Really glad I purchased a decent amount of silver last week and the weeks prior. Now I feel like I haven't purchased enough!

I still need to live my life, pay for gas, mortgage, your daily essentials so I'm trying to put in as much risk as possible for physical PM's.

Just checked APMEX and they are out of the 1/10 oz gold coins. I wonder if it's because more and more people are unable to afford the 1 oz coins so they are just grabbing any gold coins they can get??

One other question, I have a really old 24K ring, it's pretty big, I don't know what to do with it though. Do I just stuff it into my safe or exchange it for cash so I can get gold coins? (I know that sounds silly, exchanging gold for cash, to buy gold, but I just don't know what to do with the ring?)

 

I think the 1/10 oz coins are more affordable, so they go first. A 1 ounce is a big commitment. It's probably more popular among the survivalist crowd too.

Regarding the ring, I'd keep it. Around here the antique shops periodically bring in appraisers who will give you an estimated value for free or a small fee. A jeweler will do it too, and perhaps better.

 

Thanks cloudsweeper,

I have a friend who's aunt owns a jewelry shop so maybe I'll go get it appraised. But if gold keeps going up the way it is now, perhaps I'll save it for a couple of years and then appraise it.

I bought a couple of those 1/10 oz coins and didn't realize they were so TINY!!!

Anyways, I'm ready to dip into the 1 oz gold coins now. I think I've done enough reading the last month and I think the longer I wait, the more I will PAY!!

 

I wonder what these speculators plan on doing with their piles of gold. You can't pay your mortgage with it. It's not very tasty. Gas stations won't take it. The far-fetched notion we're heading for a barter society won't help, as gold won't support the family of the people you're paying a one ounce gold coin for a steak to. And, as recent trends have proven, people can't sell the stuff to anyone but coin dealers at a loss when the prices are this high. It seems it's a false sense of security, at best.
Guy~

 

http://phoenix.craigslist.org/search/clt?query=gold+coin&catAbbreviation=clt&minAsk=min&maxAsk=max

http://coins.shop.ebay.com/Gold-/45134/i.html?_catref=1

 

Why can't people just sell it on E-bay, where all the other people I see are getting spot for their gold even with it this high? Just curious.

 

I don't think anything you wrote is much of a factor in higher gold prices. The price is higher mainly because of central bank buying and wealthy investors purchasing it as a store of value. At the same time, the large owners of gold are reluctant to sell because there isn't really an attractive alternative, so it takes higher prices to pry it out of their hands [i.e., you have declining supply and rising demand at the same time]. There is also no doubt some speculative buying by hedge funds using futures contracts, but that isn't physical buying in the strict sense because these guys don't usually take delivery. There is a segment of society that expects barter to return, but I doubt that they account for even 1% of gold sales. Their impact is way overstated. If you think that is the reason to own gold, you don't understand gold.

 

I could be wrong here but I think we are ready to take a ride up.
And silver will follow.

 

I posted this fact recently in another thread. The total amount of gold mined throughout history is estimated to be about 160,000 tonnes.

To set all the outstanding currencies of the world’s major economies at par to current gold reserves – gold would have to be valued at what?- something like $500,000.00 an ounce. To achieve a gold back world currency – all the governments of the world would probably outlaw private ownership of gold and confiscate all privately held reserves. From that point forward economic growth would be constricted by annual worldwide gold production. Or I guess the IMF or whatever newly formed authority could pass a resolution increasing the value of gold to the amount needed for the targeted rate of economic growth. Which in actual fact transforms gold into a modified fiat currency.

 

Hey coleguy,

Eventhough I am new to the world of PM's, here's my take on gold/silver and why I am buying physical.

1) Well you can't eat FRN's either so I don't think anyone would want to eat PM's or FRN's. :eat:


2) You're right, you can't use it directly to pay for gas, or bread at the local store. But my purpose of purchasing PM's is to preserve purchasing power "long" term. Is this speculative? You can say that, but compared to FRN's and stocks, I no longer trust paper and the people's confidence in that paper. Gold and silver is tangible and there's real value to them rather compared to simply hitting the print button at the Federal Reserve.

3) Anyone who completely wipes out their cash for PM's is a fool. You will find yourself stuck with items you can't pay for directly. I created my own calculation of having 1 years worth of cash in the bank for daily living if I end up not having a job and had to live off cash. The remainder of my cash goes directly to physical PM's. (i'm a believer in that if you don't hold it, you don't own it.)

4) I can't vouch for this, but I assume there will always be buyers for gold no matter what timeline we are looking at. For example, people who bought gold at $255 in the 2000-2001 period. I am sure that some people felt if gold ever hit $1,000 things will be so bad, no one will purchase your gold at $1,000. Well, you can still sell your gold at pretty close to spot price now. And I assume if gold ever reaches $2k, $5K etc, it will still be the same thing.

5) I don't look at PM's too much as a way to profit off of them, but if they skyrocket, that is what will happen. But say I bought gold at $255 and I sell at below spot for say $950 instead of $1000. Some may or may not agree with me, but I'm not going to cry over $50 when I paid $255 for them. Especially if I'm selling at volume. I know there are penny pinchers out there who would not sell for too far below spot, but I just don't think that way....


6) I think that's about it, sorry for the long rant....

I HOPE that the gov't does not take our gold. But if I recall, for WW2, was it mandatory or volunteer? I think we need to make sure what happened first history wise.

If PM's are through the roof at that point, say $5K 1oz gold and $100K 1oz silver, and the gov't made it illegal to own these metals and will pay face value for them, I think a lot of people will cash in. I'm not going to jail because of PM's, and what do I care if they are giving me full value anyways?

BUT, we would all be screwed if the value skyrockets even higher say $15,000 for 1oz gold and $500 1oz silver....

But again, I'm not going to risk prison time for metal unless the entire nation revolts, but considering most people still have their heads in the sands, I don't think we will get that many people revolting for the owners of PM's in general....