Gold, platinum, silver that's availible - are people fooling themselves?

Discussion in 'Bullion Investing' started by bhp3rd, Feb 27, 2010.

  1. bhp3rd

    bhp3rd Die varieties, Gems

    First let me say right off that (as many already know) do not invest, collect, buy or sell bullion when and if I have the choice. I really do not care for it or think it is even a fair investment much less a good one. Of the three I think silver is the least valued on todays market and even then I only care about it as it relates to classic U.S. coins.
    With that said what I want to post is a sort of general question regarding our perceptions of bullion as a total fixed amount in the world.

    I think that we (all of us) tend to get lured into thinking that there is one amount of gold, silver, platnium in the world and that's all there is. We somehow get to thinking there is this pile and all the rings, coins, everything made from it sits all around the world as "one pile" of stuff. I believe we think this way because it's easy and helps us keep it in perspective. It's hard to think of all the pounds ounzes or tons each day being mined, lost, recycled, melted and formed.

    In otherwords I believe we, (esp. when we have it as an investment) do not consider it as corn, wood, steel or aluminum. We somehow set it apart from those type things but really is it not the same thing with the only difference being "there's just a little less of it" and it's a little more valuble and rare, but not that rare"!

    So the topic is if you own, want to own or like owning bullion does the thought of it, wish for it, importance of it cause you to be a little jaded, (or in love) with this just because it's gold, silver, or platinum and then set it apart from more logical reasoning in regards to other commonly traded items?
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  3. BDA

    BDA Junior Member

    Good question.

    The issue as I see it is that these PM's have a history going back millenia, of having "worth" in every culture. Other commodities dont. The value of other commodities is fleeting, because they dont have a shelf life like PM's.

    Gold is gold, no matter if its mined in Mexico.. uganda... the north pole. No matter if its used in circuit boards.. or earrings.. or coins. Its gold.

    Corn.. steel... cotton... ect.. ect.. Aren't. They have a shelf life.. and are only worth what the buying world is willing to pay to meet the needs of that particular day. 25 years from now.. that steel value is gone, the cotton value is gone... the corn is gone. The gold is still sitting there, ready to be turned into anything you wish.

    Just my opinion of course...
  4. Jeweler

    Jeweler Junior Member

    Did you know that if you put all the gold that got mined and out in the hands of the people, It would fit in a large room, perhaps the size of 50' X 50' X 50', that's how little there is gold out there, platinum is even much less.
  5. coleguy

    coleguy Coin Collector

    The difference isn't that gold is always gold, and not corn. Corn sustains us. It keeps you and I and everyone alive. Gold and silver is a metal, a rock basically, and has no real factor in our survival. It has always been an object of excess. People 1000 years ago, like those today didn't have access to gold unless they were wealthy. Most used the same things for trade as we still use, base metals. Much like the myth of diamonds, one of the most common carbon-based elements on earth, value is inflated by those that have it, not by those who want it.
  6. Gipper1985

    Gipper1985 Junior Member

    You forgot to mention copper . . . sorry, just kidding.

    Speaking only for myself I have always felt a sort of attraction to gold, I think it has something to do with history. Many stories, fact and fiction, feature gold and treasure as the common spoils of conquest or adventure. However, I have always had a nagging voice in the back of my mind asking me what a modern day average person can actually do with gold or silver.

    I guess the main problem I have, for example, is in a place like Haiti, I doubt gold or silver has very much value right now. What would a dozen gold eagle's do for me if I was in that kind of situation. Food or medicine probably would hold much more value that a handful of gold. The only reason to own gold as I see it is if you believe that that the economy will remain stable over time and it can eventually be traded/sold for something of value. That is probably true of most things that are not essential for survival and worthless practically speaking, like baseball cards, for example.

    One thing that gold has going for it is an adverting campaign that began at the begining of recorded history. I am sure that there have been many commonly traded items throughout history that are long since forgotten, but the attraction to gold remains and that must be worth something.
  7. bhp3rd

    bhp3rd Die varieties, Gems

    The longing for, attraction to, romance of is what I'm asking about and there is nothing wrong with that at all - if you have and say so you are honest!
    It has been talked about before and I'm sure it will again but in the future I doubt gold and silver will be as valuble as it appears today or has historically been.
    I think clean water, medicine, tech tools, transportation, so many things will so much more useful and valuble than gold and silver but we will see.
  8. sunflower

    sunflower New Member

  9. BDA

    BDA Junior Member

    However, we dont live in an island unto ourselves. We have to exchange with others to survive.. otherwise, why would the guy responsible for "clean water" go to work?

    Corn sustains us... sure... as do many things. How are those things paid for? The farmer doesn't trade corn for what he needs, like tractors & fuels. He does it for cash. As does everyone. Its the medium of exchange.. its what the world has decided is valued for exchange.

    For millenia, man has grown, invented, created.. and no other item has been valued as much as gold, excepting weapons.

    Medicines.. clean water.. are paid for & created by people who are paid to do so... they dont do it for trade in commodities, but cash.

    Of course, gold is just a rock. Its not needed to sustain us, in a perfect world were everyone lives in a communal state of no need beyond the absolute basics. That world doesn't exist. Cash, in whatever form, is king. Therefor, there will always be a need for gold & silver, in some form.

    Manufactured goods, grown goods cannot become the new gold. You can always make more.. what value can be placed into something like that? Its like printing more paper money.. sure, you can print billions.. doesn't make it worth billions.

    The reality is, we all have 'wants' beyond daily survival. Gold paved that way... the economic world we live in has allowed us all to be sitting here, discussing it, on a computer. Not corn. Can't buy a computer with corn.. unless you are a corn farmer who got paid cash for your crop.

    A person in haiti.. or any poor nation on the planet, with a handfull of gold, would no longer be there. Of course, in an apoctylptic scenario, gold has little value compared to food & water. In a scenario like that, guns & ammo would be the new currency. But are we debating a "Road Warrior" scenario? Or reality?
  10. mpcusa

    mpcusa "Official C.T. TROLL SWEEPER"

  11. BDA

    BDA Junior Member

    I do know in the ammo world, prices started hitting the roof, even before the election, due to copper prices.

    Just my opinion, but folks tend to value certain thing greater when they are unsure of the world, i.e. possibel trouble ahead. In the gun world, we saw vast price hikes on the basics due to folks in a panic buying mode.

    How far that correlates to our current economic situation & bullion.. I am no expert at. But common sense would suggest that many more americans are waking up to this as a form of "saving" for the future, so demand is high. My worry is it will go back down a ways when things settle back down, and folks start spending their money on the fun things again.
  12. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    Of course! :eek:hya: I won't recount it here, but there are many sources that explain the characteristics that make gold the most suitable of all materials to be the "best by test" form of money. This is the reason why central banks are accumulating gold reserves while professing the merits of paper as they conduct attacks on the gold price. It's why Lincoln and Roosevelt confiscated it. It's why J.P. Morgan once said under oath, "Gold is money, and nothing else is."

    I can't cite a specific example, but I bet it will be the Haitian with a little gold who will be able to purchase [or bribe] food or medicine from the relief organizations down there while other wait in line, or never get any. It's the way the world has worked from the beginning of civilization. Gold isn't always the best holding, but when added to a diversifed portfolio that is periodically rebalanced, it's been shown to increase both safety and total return. The amount of gold in existence above ground is said to increase by about 1-2% annually. As long as the rate of growth in paper fiat currencies increase at a faster rate, there will be reasons to own gold.
  13. SilverSurfer

    SilverSurfer Whack Job

    Well, I wouldn't lump wood and corn into the same category as gold and silver, but steel and aluminum definitely count. Steel is iron and nickel, both are elements. Aluminum is an element as well. Corn isn't an element, it can be grown. Wood isn't an element, it too can be grown. There are only so much elements on the earth, they can't be created although they can be mined and acquired, but for how long.....definitely not indefinitely.

    I don't have an affinity to gold nor silver. I do like coins, as a hobby, but recently I've been buying "junk" silver, and this stuff is junk. Much of it is globbed with gook and just nastily tarnished, but it is silver none the less. I'm one who thinks that inflation is in the near future (5-6 years). It doesn't matter what you have, as long as it is limited. Last time I checked, you can't eat treasury notes either....or at least they don't taste very good and don't provide much sustenance. Yet, people talk about the printing of money....too much of it. But the real problem is money today isn't even printed. It's just 100101010010101010 on a computer. You can't eat that either, even if you tried. And worse yet, it can be wiped out with the push of a button and created with a push of a button. At least printed money is tangible and you can eat it...although it doesn't taste very good. But I digress.

    With the new money that is electronically created, the limit is endless. and the rate of creation can be almost infinite. Printed, there would still be a limit, as you'd have to acquire materials and operate a printing press, which also has limits. Gold, silver, even steel and aluminum have limits. Silver is just more expensive because there is less of it. I don't think I would want try to store steel as a means of an inflation hedge......the storage would be outrageous for the value.....likewise aluminum.
  14. fatima

    fatima Junior Member

    Well the question implies that we are going to return to a situation where we are bartering. This just can't happen in a world with 6B+ people in it as any kind of organized human activity to support even a fraction of this population requires some kind of currency. Without it, food, housing, clothes, etc can't be produced in the quantites needed. i.e. Currency is needed for any kind of human society. I am ruling out some sort of end of world scenario where the world gets hit by an asteroid, nuclear WWIII, or aliens and/or advanced robots take over.

    So if you accept that currency is needed, then gold has always fit this purpose for 1000s of years of recorded history. It does so because:

    • It does not corrode and is infinitely recyclable.
    • It can be divided without destroying it. (try that with a paper dollar)
    • It is not an obligation of a government.
    • It can be used anywhere in the world
    • Supply can't be increased to infinity by the click of a mouse button.
    • All important world governments hold gold for insurance, as much as they discount it as a relic to the public
    • Everytime a government destroys its currency, it's the gold holders that are protected.
    Now as mentioned, there isn't enough gold for normal transactions, so silver is around for that purpose. It has the same properties for the most part and as long as it's value is expressed in terms of gold it works well too.

    I've heard the you "can't eat gold argument" before as a reason for not holding it, but that scenario suggests some sort of armageddon that we are not going to recover from, and in that case, nothing matters. For anything else, which is more likely, currency will be needed and in that case gold and silver will preserve your wealth. As far as I know, I am not aware of many, if any, instances of gold holders going hungry in 6000 years of recorded human history.
  15. TheNoost

    TheNoost huldufolk

    As a guy who picks metal out of peoples junk, I have no special feelings for one metal over another. I just pile up the scrap and take it back when storage starts to become an issue (GF lets me know when it is an issue). I have not yet acquired enough gold or silver to have a storage problem yet.

    A side note/question: I bet there are other PM's somewhere in outer space. What happens to the gold price if we get hit by a gold meteor ?
    -Also, I thought there was a way to make gold, just too cost prohibitive ATM. If so, the cap on gold prices would be somewhere near the cost to "make" gold.
  16. Cloudsweeper99

    Cloudsweeper99 Treasure Hunter

    There are theoretical limits, but not practical limits since adding zeros eliminates much of the need for additional paper and ink, as Zimbabwe continues to prove.
  17. sunflower

    sunflower New Member

    Your writtings about ammo helped me to recall how I felt last year when I could not purchase replacement ammo after leaving the range. When I was able to restock what I had just used, it cost a pretty penny. Which brings me back to bullion, specifically Gold Bullion. When there was less ammo on the shelf, I became more interested in gold bullion. (I was not particularly consciouse of the coorelation, if any, at the time.) In looking back, that is about what happened.
  18. SilverSurfer

    SilverSurfer Whack Job

    That's so true, but with the added zeros it would be obvious to everyone that the money is being debased. Currently, hardly anybody has a clue.
  19. BDA

    BDA Junior Member

    I hear you sunflower... I work in the gun industry, and we were all pretty amazed at the mad rush to grab what was available. Prices are still not normal. We were also pretty angry at the excuse of "copper prices" causing a box of .223 to go up about $4 BEFORE the mad dash after the election.

    I'm just glad we were so stocked up that the mad rush wasn't a problem for us. I'm actually selling of pieces out of the safe queen collection now, to buy more coins! hehe.. ounce of gold? or Colt SAA? Its a tough choice..
  20. jmaichel

    jmaichel Junior Member

    Interesting topic.

    Gold has been coveted for over 5000 years. Before discovered any practical use for gold, it was used for ornamental decoration on tombs, statues, cathedrals, temples just to name a few. Eventually is was used a currency and a form of the " the gold standard" was adopted by many including the US and then private gold ownership was outlawed by FDR in 1933 and the gold standard went away. Then in 1946 we a system of fixed exchange rates were we bought gold from other countries for a fixed price (around $35 ounce). In 1971 Nixon ended trading gold at a fixed price and economic systems based on converting gold into currency and are now based on whats called a system of fiat money, "money that is intrinsically useless; is used only as a medium of exchange." The value of money is set by the supply and demand for that money and the supply and demand for goods and services. If the US was hit with a major economic crisis (I mean a real one not just recession) and the dollar hit almost 0, the money that you had in your account would be useless. However, the gold you had would still have significant value because it can be bought and sold in other countries, so in essence you could start over somewhere else if you had enough gold. I am not a bullion investor, I believe there are other investments that are better than precious metals but I like collecting coins because there unique and part of our history. If the US did a major economic meltdown and the value of the dollar went to 0, I think I would have much bigger problems then not owning any gold IMHO. Good topic though...sorry if I rambled on.
  21. tekhen

    tekhen Member

    quite simple IMO...

    1) PMs are insurance/hedge not investment
    2) Do the math...
    a) 1933 Au = $20.00
    Au confiscated via Executive Order 6102 by #32
    b) by 1934 = Price of Au set to $35.00
    3) 1971 - Nixon Shock and Executive Order 11615 by #37
    1971 Avg price of Au = $40.80
    4) #38 signs Public Law 93-373 allowing US citizens to once again own Au
    1974 Avg price of Au = $159.26
    5) #40 signs Public Law 99-185 the Au Bullion Coin Act
    1985 Avg price of Au = $317.26
    6) 25-years later, that GAE @ spot is worth $1122.60 at the time of this post.

    The definition and cause of the above… inflation.

    As long as PMs are tagged to a fractional reserve banking system where the fiat system is backed by debt and not by tangible goods PMs will always be a hedge/insurance.

    So if one is looking for fast, large returns... physical PMs are not the best choice. If one is hedging both against inflation & deflation while the FRN losses its purchasing power the PMs are the best bet.
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