You should take a look at the Banque de France piece I attached earlier - it gave me insight as to how CBs view gold. Interestingly enough, the French central banker pointed out that historically the liquidity of gold is proportional to disaster, whereas the liquidity of fiat is highly inversely proportional to disaster. As a result, any responsible central banker (and investor) is going to hold gold. The trouble with many US investors is that they think the S&L crisis and LTCM are major disasters ... there is little institutional appreciation of true economic Hiroshimas like hyperinflation during Weimar Germany, peso devaluation in Argentina and the rupiah devaluation in Indonesia. As for US dollar, exports and gold, Alan Greenspan wrote a famous piece for Ayn Rand years ago on the importance of gold in a modern economy - one of the very very few things he has written that is worth reading. Anyway, not many commodities have survived several millenia, I wouldn't be that quick to bet against gold. It has survived the Hapsburgs, the British empire, the Czars, the Goths, Imperial Rome and the Greeks. I think it's got a fairly good put floor at some decent price, so the risk reward may be favorable for the long horizon.
Give the the strength, Dear Lord, to stand up against these clowns! Gold has value to but one group of people - the paranoids. Times have changed, and circumstances have changed. You live in a world where people are far more concerned with who will be voted off of "Survivor" than a nation's monetary policy. I'll say it again: Only the paranoid are hoarding gold, and there ain't enough of you to matter. PLEASE SHUT THIS FORUM DOWN!
"On the whole, I would say that gold is an asset of last resort par excellance....." Assets of last resorts do not generate wealth. Now I'm not saying I'm betting against gold, I'm just saying that investing or accumulating it as wealth is just foolish. Now if one lives in a country where economic policy is derived by enriching the ruling party, then gold may be the only means to ensure some form of net worth.
You are correct. But then again, in an inflationary environment, an asset does not need to generate wealth to appreciate, it just has to have a fixed supply Anyway, I think the main argument for why gold might appreciate is not that the world is suddenly going to turn paranoid in a spate of belated millenium fear. No one believes that (is that a contrarian sign?). Rather, it's because the forces aligned against the price of gold (remember, it's a highly manipulated market) have possibly decided to relax their stance. Also, there is the question of how large and sustainable the short interest in gold is, and finally the simple economic argument of more clamouring hands in India and China wanting shiny baubles that mines have been induced not to produce more of over the years. I mean, have you SEEN an Indian wedding? Gold galore. Now if one lives in a country where economic policy is derived by enriching the ruling party, then gold may be the only means to ensure some form of net worth. [/QUOTE] Wait .... isn't that the USA? Actually, that's almost every government in the world! Elections are expensive you know, people who foot the bills for all that campaigning are going to want some return on their investment.
Gold is choppy and not a very good trading vehicle in my opinion. You would do well to trade NQ or ES or YM instead. Not to mention those GAP up & down days in GC can wipe you out!!! ......but do as you please.
I can't get past the idea that there are "forces" keeping the price of gold down. If people believe that, fine, but I believe its too big a world and marketplace to believe in such things. I do believe the contrarian thing though. When a majority expect one thing, the opposite usually (not always) happens.... and I'll leave it at that.
Perhaps I gave the wrong impression when I suggested that there are forces keeping the price of gold down. Far from being a conspirarcy theorist, I am merely recognizing the fact that the market for gold is like the market for a closely held stock - a few key players hold a lot of inventory. When you get that kind of market, you want to know what the big players are doing. I just think that their interests (the big players that is) may have changed - as evident from the fact that we've gone from a world where the Bank of England wanted to dump tonnes of gold in 1997 to a world where the central banks have tacitly agreed to ration out dishoarding by supporting the Washington Agreement in 1999 (?) and 2003.
I was hoping to ferret out some informed opinions on the whys and wherefores of the central banks in the gold game, but it seems like mentioning gold is like ringing the bell in a Pavlovian experiment. Everyone starts going start raving mad and its a war between libertarian gold bugs and neo-"realist" rabid anti-conspiracy theorists!
The pirates, who were as informed as any gnome about gold had a verse on the matter: "Rum and Gold are good to follow 'til bones be bare and skulls be hollow"