Seen some offhand comments to this effect, and I can't quite fathom what kind of rational argument could possibly back up such a theory. Gold was on very steady multi-decade decline before it started gaining again. The turnaround was due to fear, post-9/11. And now in the past few years it's skyrocketed due to more obviously economic fears. If western civilization lives on and people realize terrorists aren't a significant threat and we have a nice steady bull market again, of course there will be nothing to prop up gold's ridiculous price. How could anyone argue the demand isn't fear driven? How can we explain this bizarre inverse relationship with every other commodity's price? There's only one explanation for gold to be skyrocketing every time other commodities like copper plummet, and it makes no goddamn sense. Do people really believe modern civilization could survive a transition away from fiat money? Even if it could, do you think ANY government would let it happen? Unless you are physically hiding gold coins under your mattress, your hedge is useless. Hedging against the downfall of western capitalistic civilization using figures on a page, lights on a computer monitor, is useless and pointless. And let's say you ARE stuffing gold coins under your mattress. Why? Do you really think gold will be the de facto standard of trade again? There isn't enough for it to be used as a common currency anymore. There are orders of magnitude more 'civilized' people than there were centuries ago, and the unwashed (but rather more educated) masses won't stand for a return of a formally segregated noble/patrician economy. Even ignoring the obvious shortage issues, it's a fucking useless metal. Even as jewelry, it's been out of fashion for a long time. Fashionable people don't wear gold: they wear rhodium, with some ugly yellow gold hidden underneath to give it some weight, and call it 'white gold' because it sounds nicer. Gold's high demand in the jewelry business, like it's demand in the markets, is entirely psychological. And eventually the post-apocalyptic peoples of the world would have to one day look up and say 'hey, what's this soft, heavy, ugly yellow crap that we lock in safes or paint silver actually good for again?' And I have the same question now: Since gold is obviously not behaving like an inflation hedge and doesn't appear to be very useful if the apocalypse actually happens, just what the hell is it good for?
This ignores basic economics. It is a hyperinflation and if you want to know why you can have a look at the dollar index or observe how worthless our bonds are on a real basis. If rates start to go up gold will go down but until we turn off the printing press gold bugs particularly in Asian countries like India or China will not stop buying.
do you think gold is a bubble now? or that paper assets were a bubble this past decade that is still in the process of deflating? i'll go with option 2 my 10 year call gold 20k+, silver 4k+
They wont have a choice! If they are "civilized" then they wont do a thing. If they are "unwashed" they will riot, loot and create a state of anarchy which would be so much worse than a "segregated noble/patrician" society. Either way, if you dont have gold stuffed under your matress now while its cheap and can be bought with worthless fiat money. You are royally screwed later. Why do you think countries are buying so much gold right now? Why do you think central banks are buying? Dont worry though...History always repeats. After the collapse and we go back to gold and live in a dark age for a few decades (maybe up to 100 years) it wont be long before we do it again. I believe the last 100 years will be known as the "1st golden age of prosperity" We will then live like our forefathers did. Perhaps our grandchildren will live in the 2nd golden age.
Cliff notes for those of you who've gone off your Ritalin: The issue at hand is not gold vs. fiat paper. Gold is not behaving like other real, non-fiat commodities. For example, look at copper. Gold seems to be in its own private bizarro universe where inflation risk => increase and deflation risk => bigger increase. In my obviously too-long original post, I explore various reasons why this might be so and conclude that they are all heavily psychological, thus indicating a bubble. To be absolutely clear here: The dollar is very weak and I'm not contesting (nor conceding) that it may collapse. But if recent events were just about fiat money vs. 'real' money, other durable commodities like copper should be breaking new highs as well.
gold is a religion, like Apple stock. that said, I have moderated my mockery of gold in light of the Dog Catcher and his pooch friends, currently taking up residence in my White House. That and the fact that none of the criminal bankers have been publicly hanged. Mozillo should have already been fried.
This is turning out to be an interesting experiment. How many replies can I get before I get one from someone who actually read my post and has even the faintest idea about what I'm talking about?