The price of gold and what it's telling us?

This chart does not prove your claim that money supply is being reduced as that is not a chart of this. It is a comparison of base money vs M1 supply and has nothing to do with the discussion. Your other claim concerning M3, is irrelevant. I was using the Federal Reserve definition which is all that matters.

I won't even get into the notion the recession ended when that chart said it did.

The money supply is increasing to unprecedented levels, and if you watched the news, Bernanke pretty much said, just today, the Fed is going to create even more money to introduce inflation into the economy. It pretty much refutes everything you have said.

 

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Fatima - thanks for your insights. I enjoy reading your posts.

 

Silver peaked in 1990, ten years after the peak. Mines take a long time to get going, sorry they do not open overnight to prove my economic theory in a more timely manner. We will simply need to have this conversation 10 years from now, or maybe just 5, to see where production is. You are right short term, I was laying this out for long term investors.

 

Many people know what the numbers are, but few bother to figure out what they mean. M3 is irrelevant because nobody knows what it is, or means. Raw money supply data isn't very useful because most of the increase is going into financial institution reserves to replace losses from collapsing asset prices -- as the chart shows, it isn't circulating. So you haven't refuted anything, but I'm sure that you and some others will believe what you wish. And that's okay because you probably have a 50% chance of eventually being correct. I've said on numerous threads that whether or not we have inflation or deflation depends on policy decisions that haven't been made [or at least implemented] yet. A year ago I was in the inflation camp, but the data since then suggests that this might not happen, or that we may have a pretty severe deflation before inflation kicks in. Or the Fed might surprise everyone and figure a way out, at least until the next business cycle. People underestimate what they can do. Time will tell, but your chart won't.

 

For 10 years your theory has been wrong. Now some investors may be okay with missing out on one of the largest bull markets in the past century because theory says it can't happen. Those folks are more patient than I am. I tend to value the real world over theory. Demand is rising and supply is severely constrained, perhaps for a very long time. That's all you need to know.

 

One more point, although I don't think M3 is reliable, here is one estimate of what it is. Note the growth rate is below zero. It doesn't prove either inflation or deflation. What is shows is what I said. Combine this with a lower multiplier and think about it. Good luck to you.

 

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Yes, well said! Besides that China is the new biggest producer of gold which is not quality gold at all. With all the demand around the world, scrap is being pulled from the mines and that is certainly not good enough. I know there's a few gold mines in Peru but look what just happened to the miners in Chile which incidentally was not a gold mine at all. The existing world gold is the last gold we have left. China and India are very big users and buyers of gold. It seems like there's not enough to go around anymore. Read the link or read below!

http://paguntaka.org/2010/07/20/pro...nalysis-reports-in-global-gold-mining-by-gia/



The global gold mining industry is highly fragmented with the leading five producers accounting for less than 30% of gold produced worldwide. Key players profiled in the report include AngloGold Ashanti Limited, Barrick Gold Corporation, Compañía de Minas Buenaventura S.A.A., DRDGOLD Limited, Freeport McMoRan Copper & Gold Inc., Gabriel Resources Limited, Gold Fields Limited, Goldcorp Inc., Harmony Gold Mining Company Limited, Jinshan Gold Mines Inc., Kinross Gold Corporation, Newcrest Mining Limited, New Gold Inc., Newmont Mining Corporation, Polyus Gold, Randgold Resources Plc, Rio Tinto Group, Quadra FNX Mining Ltd.

 

2010 Copiapó mining accident from Wikipedia.org

 

Interesting, copper=gold mine in Chile. I stand corrected! I wonder if anyone in that area will be going down a mine shaft anytime soon? Take a look at this!

http://www.msnbc.msn.com/id/39696282/ns/world_news-asiapacific/

 

Silver ASE Purchases are indeed telling us something.

In the history of man, not just US history, there has never been a purchase profile like 2010 US purchases of the silver ASE. It is hard to perceive so many purchases being made without people being told they would face legal consequence if they failed to purchase. Having not happened, we must then turn to irrational hoard buying. However, people spending these sums, collectively, are probably not given over to hysteria. So, what does that leave?
Rational, considered purchases based on a hunch that the dollar stands to be devalued at present printing levels. The US senses the market panic, and the Fed is buying up old treasuries at these cellar prices. Wise, but also telling. They know these purchases of silver are an inditement of our oversold M1, so they want to belatedly address it. Unfortunately, the die may be cast. One thing I assume for sure. I am with the hoard, and I don't wanna be one of the Reichstagg fire sale folks with a wheelbarrel full of paper trying to buy a loaf of bread. How much was a loaf of bread during the German hyperinflation? A million Marks.



Leaves me breathless considering the US devaluing our dollar, but hey, the Chinese have so much of our paper, how else to game the approaching historical financial tipping point. And what a precipice it is gonna be. People buying silver ASE's all say so.

 

Well said everyone.

So many, many insightful comments that I find it feels meaningless to even attempt to add to such a well researched, diverse cross section of comments. I especially like the comments of one member whose post I can no longer find in this thread. I'm with him, and if you read those comments, you might find it useful to follow that advice too. What a post that was. I hope you all saw it.

 

If gold goes to 2,000 an ounce, you can expect that you will be able to buy very little of other "stores of value", like land, houses, and-stuff at Wal Mart. My wife noted six months ago that Wally World was stocking less canned goods and fresh meats and produce. I dismissed it as her being overzealous when watching this economy tank. Then I went to the store with her, one trip. Sure enough, if you go to Wal Marts now, you will see it as well. They say it's too costly to get stuff to market and so they are slowing down the restocking. But I read a story that US companies are also gunshy, and they are sitting on hundreds of billions of dollars in currency. I also read that large companies are also carving up the gold market. I am not a fearful person, but I gotta say this is worse than in the seventies when jobs tanked. I was going to leave it alone with others having said things do deftly, but these days call for a dramatic rethinking of this economy. We buy four weeks of food at a wack. What if supplies really got interrupted? Not beyond the realm of possibility. And worse yet, no matter the mid-terms, the same fed is in place and we lose. So we buy gold and silver. I think everyone is waiting for the hammer to fall, and I also think unemployment exceeds Depression Era, and they are not telling us. Back in the eighties there was hope for deliverance from our government. That sense of optimism was eviscerated once the change we recently voted for became visible as the same machinery as the Republicans, just with a different paint scheme. Isn't is the height of irony that for centuries Keynesian economists used Red graphs to indicate a failing profit profile? Back in the sixties didn't the Democrats use red as their color? Deliver us from supply side theory, please.