IS Gold Money?

BTW, ppl say "You can't print gold" as a reason why gold will always go up. But you can dig gold up - and many companies do that every day. They get more efficient at digging gold up every year as well. 99% of all of the gold ever mined is still around - so the supply of gold must necessarily increase until all of the gold that exists in the ground has been dug up.

It has in the past had big bursts of supply increase, enough to affect interest rates and inflation. From Rome conquering egypt to the Spanish conquering the Incas and the Aztecs to the California, Alaska, etc gold rushes. So never say never.

All the azzholes... load up on gold and silver. But please take your day trading to "scotttrade.com" WE ARE THE MASTERS OF THE UNIVERSE FORUM...

We poor ppl on SE, just wanna talk about the last great bubble.... and sorta RE based... we'll get to gold when I can live in it and the corner grocer will take it as payment....

Now go along.. and CBOE trade gold/silver to your hearts' content. FLMAOZzzzzzzzzzzzzz

Newmont mining is one of the worlds largest gold producers. It costs them close to $700 an ounce to extract. Additionally when it comes to gold there are three distinct categories; proven/probable, measured/indicated & inferred. The market is very good at factoring this in and this is very different than the unlimited ability of a printing press to crank out bills. Increases in the gold supply inferred or otherwise are a great deal more stable than fiat money.

So if I can come up with a better mouse trap to mine gold at $350 an ounce.. .then the cost of gold is halved, right?

So I can "invest" in dollars where the might of the US military backs me up or I can roll the dice on some idiot hitting the biggest gold vein in the history of mankind to make my investment worthless.

If India actually stops hoarding gold and starts buying CARs, then you're fked Riversider. IF China actually gets a stable gov't, your fked Riversider. Pump and dump foolz.

MY US$ got 20% stronger against Euro in 6 months. I know I know... BUT I CAN GO EAT IN PARIS, I CAN GET A BOAT IN PARIS. I CAN BUY A PORSCHE IN GERMANY... and if I have any leftovers... I CAN BRING IT BACK TO THE USA. But keep rubbing the COOP force field. That's sound investment strategy.

Hey looky looky, dirty ape w67thstreet doesn't even respond anymore when his dishonesty and sleazyness are discussed. I like it. Only emboldens me, makes me stronger, like I'm doing more squatz or driving my Porsche above 65, or giving some Fail grades to the students in the class I TA for. Flmaozzzzzzzz

Riversider - I bet BAC outperforms gold by a massive margin over the next 10 years from present levels. All of the bad news about BAC is factored in, all of the good news for gold is as well. choose wisely sir.

To put the conversation in context consider
BAC is little more than one hundred years old
Looking at bank pay-out it's clear one is better off working for a bank than owning shares in one

Considering the short(roughly 100 years) history of BAC and the long history(thousands and thounsands of years) of Gold,
the mere discussion of a bet regarding BAC outperforming, having more longevity makes no-sense. Additionally the lack of shortage of dis-believers means that all the good news is not factored in for Gold. It's also the case that people will pay a few dollars for stocks that they know holds no value, consider G.M. after it declared bankruptcy, Kodak, Pan Am, even MF Global trades for a few pennies(no chance in hell common stock holders get anything).

That's your argument in favor of gold?

"BAC is little more than one hundred years old"

And? AAPL is under 40 years old - that didn't stop it from becoming a $400B market cap company.

"It's also the case that people will pay a few dollars for stocks that they know holds no value"

People also sell stocks at absurdly cheap levels even though they know that, rationally, it's stupid to do so - it's called fear. And people will buy commodities at absurdly high levels even though they know that, rationally, such commodities are unlikely to appreciate much more in price - it's called greed.

Greed and fear control most people's behavior in the market, even though it is irrational to do so. That is why Buffett says he gets greedy when people are fearful and he gets fearful when people are greedy.

silver broke out today.

There was a very interesting piece put out by GMO capital re emerging market retail demand as being a precious metals driver... As far as apple being 40 years old, tech is a great example of chutes and ladders. There are so many broken companies that people thought were sure things back during the tech bubble, and not necessarily small names.

"There was a very interesting piece put out by GMO capital re emerging market retail demand as being a precious metals driver"

For months you have been denying supply and demand had anything to do with commidity prices and saying it was all the Fed.

gold and shares broke out today.

http://images.huffingtonpost.com/2012-01-25-TSFonGoldScenarios.jpg
----
ok.let's sum up how many of the following positives currently exist for gold
Low Interest Rates-Check!
Political Tension-Check!
Weak U.S. dollar-Check!

That's 3 out of 5

Unless we have high positive real interest rates and little fear that the central banks will continue to crank up the printing press, there's a good case for Gold.

Getting financial advice from a fat fk that doesn't believe in the existence of the 2007 nyc re bubble - Check!

"Believe In A Return To The Gold Standard? You Are Now Officially An Extremist According To The FBI"

"Just when we thought the US could not sink any further in its usurpation of civil rights, here comes the FBI to advise all those who tend to think that the broken economic model of the past century is the cause for the global insolvency, that wanton fiat diluation and reckless debt issuance does not 'fix' the problem of uber-leverage, and that the gold standard is the proper way to return to monetary stability, will henceforth be considered extremists."

http://www.zerohedge.com/news/believe-return-gold-standard-you-are-now-officially-extremist-according-fbi

I'm reporting all of you. Except Jason. :)

Here's the real story..

http://www.reuters.com/article/2012/02/07/us-usa-fbi-extremists-idUSTRE81600V20120207

Reuters) - Anti-government extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned on Monday.

These extremists, sometimes known as "sovereign citizens," believe they can live outside any type of government authority, FBI agents said at a news conference.

The extremists may refuse to pay taxes, defy government environmental regulations and believe the United States went bankrupt by going off the gold standard.

n May 2010, two West Memphis, Arkansas, police officers were shot and killed in an argument that developed after they pulled over a "sovereign citizen" in traffic.

Last year, an extremist in Texas opened fire on a police officer during a traffic stop. The officer was not hit.

Legal convictions of such extremists, mostly for white-collar crimes such as fraud, have increased from 10 in 2009 to 18 each in 2010 and 2011, FBI agents said.

This stuff has ALREADY happened this year. Actual attempts on policemen and judges lives, and so forth, in several states, by "Sovereign Citizens" and others. In fact more in 2011 than Muslim terror plots, on US soil. Its not hyperbole when this stuff is actually already happening.

And just like the FBI has NOT said "ALL MUSLIMS ARE TERRORISTS!!!!" they also never said all gold bugs are either. But their have been, in fact, terror attempts just recently, by goldbugs.

"Riversider - I bet BAC outperforms gold by a massive margin over the next 10 years from present levels."

Since Jan 17th, BAC up 25%, GLD up 5%. BAC outperforming GLD by 20% so far. Just keeping score for y'all...

...since beginning of the year, BAC is up 49%, GLD up 10% - BAC outperforming GLD by a massive 39% on the year. Will it last?

http://stockcharts.com/c-sc/sc?s=BAC&p=M&b=5&g=0&i=t57105526886&r=2571

http://stockcharts.com/c-sc/sc?s=GLD&p=M&b=5&g=0&i=t08018536564&r=8871

be careful where you park your money unless you know how to trade. The time to buy BAC btw was november, not Jan (nothing wrong with Jan, just late). Did you buy then?

And their(sic,lol) have been, in fact,rape attempts just recently, by white men.

@BSex--You may be right, but I would not be inclined to join you in taking the long side of the BAC bet
------------------------------------------------
http://www.ocala.com/article/20120210/APF/1202100590

NEW YORK - On a normal day, 4 billion shares of stock change hands on the New York Stock Exchange. One in 10 belongs to a single company. It's not McDonald's or IBM, both of which have been on a tear.

It's Bank of America - bailed out by the government three years ago, reviled for being part of the mortgage frenzy that helped wreck the economy and selling for not much more than an ATM fee.

When the market goes up because of positive news about the economy, Bank of America stock shoots up past the stocks of other big banks. When traders get worried about Greek debt, Bank of America takes the biggest plunge.

The big swings are not driven by a fundamental bet that the bank will be more profitable because the economy is getting better or a real concern that it will lose more money than others if there is a default in Greece.

Instead, Bank of America is the stock of the moment for high-frequency trading, the supercomputer-driven buying and selling that barely existed a few years ago and now accounts for as much as two-thirds of U.S. trading.

And of course etf on gold was't part of HF trading......

ETF on gold. Hysterical.

Oh lookee - it's ol' BSexposer!

Hey there - how's all that BRK.A doing?!! Up only 3.9% YTD, and DOWN 6.4% over the past year - that's DOWN 6.4%...

But I guess you dumped all that BRK.A for BAC, huh?

So...Gold is not money.

I don't own either BRK or BAC. Or GLD. But thx for asking. But, just to be clear, Buffett is much smarter than any of us here w/r/t investing.

Matson - if u can compound money 20 percent per year on average over a 50 year span, you will have the right to mock Buffett. But not before then. Good luck with that.

Um, we're not mocking.......... Buffet.......

BSexposer.....

Rough day for GOLD, huh matson? Ouch, indeed. No QE3.

...looks like the GOLD bubble is in the process of slowly deflating IMO.

Yes. It's terrible.

After the (obvious) "QE3" announcement and retraction, I'm only up over 20% over the last 12 months, and up over 10% YTD.

You know what I did to celebrate yesterday's announcement and reaction?

I bought more Krugs at around 1695/1700.

So... Gold is not money.

It's money and a store of value just not legal tender. It's funny how you guys miss the only and best argument on why gold is not money, that you can't pay your taxes with it and it's subject to sales tax.

Riversider: You can buy/sell 99 American one ounce gold eagles each year tax free.

if you Don't Buy Silver or Gold you are Effectively Buying US Dollars or Euros or Yen

Gold doesn't deflate

Wonderful.
If you bought gold in 1980, you'd have only doubled your money in 32 years.

now is the time to dump Bank of America

BAC is dog-meat, but there's an expression, "Don't fight the Fed" and the Fed is supporting BAC.

"Gold doesn't deflate"

You could buy far less of everything in Gold in 2000 than you could in 1980. Even now, you can still buy a bit less than you could then.

>You could buy far less of everything in Gold in 2000 than you could in 1980. Even now, you can still buy a bit less than you could then.

What year is this?

So someone else with a Bloomberg terminal double check this for me - though I am sure you can probably do it on Factset or Reuters: There literally about 0% correlation over the last year or last 5 years between expected inflation based on the five year tip spread and spot gold prices. Its actually slighly negative over the five years. Also, the r^2 for both time frames is about zero. As of yesterday the correlation was obout 0.21, but its varied from very negative to very positive over the past five years, averaging to zero. Meaning investors in gold seem on average to be unconcerned about inflation.

I then tried it versus the BAML GFSI index - which is basically a super-VIX, looking at volatility across more than just equities. Slightly negative correlation. Zero r-squared.

Then I tried the The Bloomberg U.S. Financial Conditions Index, which a panic index. Negative correlation, low r-squared.

Its as though NONE of the reasons usually given for buying gold have held true over the last 5 years. Its not being viewed as a hedge against inflaion or as a result of financial panic.

Ergo, its driven by speculation.

Again, someone else do the same correlations and tell me if I am wrong.

"BAC is dog-meat"

Since beginning of the year, BAC is up 57%, GLD up 4.5% - BAC outperforming GLD by a massive 52.5% on the year. Poor Riversider...

"looks like the GOLD bubble is in the process of slowly deflating IMO."

Check.

"I bought more Krugs at around 1695/1700"

Ouch, indeed. Lot more downside though IMO.

@jason10006

run the correlation against the M3 money stock

OMG!!!!!!!!!!! Stop printing "money"!!!!! From the ground.

"Saudi Billionaire’s Gold Find May Spur Output"

http://www.bloomberg.com/news/2012-03-15/saudi-billionaire-s-gold-find-may-double-ethiopian-production.html

Can't these fkers do anything besides dig holes to make money? Yeh, this region needs more income inequality, more religious brutality, more ppl above the law.

No different than a KKK member hitting the mega ball.

BAC up another 4% today. Yawn...

I'm up too besexposer. Now go get me a ham and Swiss on toast.

4% wow. What a big player. I'm up 18% or $70k on my sprint. I know u can back into my starting position. Care to give us what your 4% represents in real terms?

The only reason the dollar works as a currency is because the gov't mandates that you must pay taxes in dollars. Otherwise we'd go back to gold and beaver pelts tomorrow-Mish

http://globaleconomicanalysis.blogspot.com/

Beads.

Hi Truth!
How's the music?

rockin' Riversider.

http://www.bloomberg.com/news/2012-05-02/gold-standard-for-all-from-nuts-to-paul-krugman.html

Nut cases. That’s what they are. And if you take an interest in them, you are a nut case, too.

That’s the consensus among credentialed economists who describe advocates of a return to the monetary regime known as the gold standard. In fact, the economic pack will marginalize you as a weirdo faster than you can say “Jacques Rueff,” if you even raise the topic of monetary policy in relation to gold.

But “all economists” is not the same as “all economies.” The record of gold’s performance in all economies over the past century is not all “terrible.” Especially not in relation to areas that concern us today: growth, inflation or the frequency of bank crises. The problem here may lie not with the gold bugs but with those who work so hard to isolate them.

------------------------------------

Gold’s Real Record

Conveniently enough, the gold record happens to have been assembled recently by a highly credentialed team at the Bank of England. In a December 2011 bank report, the authors Oliver Bush, Katie Farrant and Michelle Wright review three eras: the period of a traditional gold standard (1870-1913); the period of a gold-standard variant, the Bretton Woods gold-exchange standard (1948 to 1972); and a period of flexible exchange rates (1972-2008).

The report then looks at annual real growth per capita worldwide, over many nations. Such growth, they find, was stronger in the recent non-gold-standard modern period, averaging an annual increase of 1.8 percent per capita, than in the classical gold-standard period before 1913, when real per- capita gross domestic product increased 1.3 percent annually. Give a point to the gold disdainers.

But the authors also find that in the gold exchange standard years of 1948 to 1972 the world averaged annual per- capita growth of 2.8 percent, higher than the recent gold-free era. The gold exchange standard is a variant of the gold standard. That outcome doesn’t tell you we must go back to the gold exchange standard yesterday. But it does suggest that figuring out how the standard worked might prove a worthy, or at least not a ridiculous, endeavor.

Gold shone in other ways. In a gold-standard regime, money is backed by gold, so it’s impossible, or at least more difficult, for governments to inflate. Naturally the gold standard and Bretton Woods years therefore enjoyed lower rates of inflation compared with the most recent era. The gold standard endures a reputation for causing more banking crises than other monetary regimes. The Bank of England paper suggests gold stabilizes banks: The incidence of banking crises in the non-gold-standard period is higher than the incidence in the two gold periods.

Markets and countries enjoyed relative stability in gold- standard years, and capital in those years flowed to worthy growth-generating projects. The main sacrifice in gold regimes that the authors identify is that governments lose authority to micromanage domestic economies. But given governments’ records, that may not be such a bad thing, either.

It all suggests that contempt for old gold hands such as Congressman Ron Paul of Texas might not be warranted. And that it might be interesting to peruse the numerous gold-related currency plans outside the door of the academic salon. Plenty of people, many former bankers, think it is time to pass laws returning the U.S. to some version, strong or weak, of the gold standard.

Good as Gold. (did you read it yet Riversider?)

No Truth, I don't read many books. I'm more of a magazine guy.

I am happy I did not get rid of my gold in the latest gold turn down. I might even be buying more tomorrow considering that Sarkozy is out, not one party in Greece elections got over 20% so can't form coalition and the Spanish Banks are in very, very serious trouble. Fasten your seat belts, it's going to be a bumpy ride for a few weeks. Hang on to your gold.

Whatever happened to apt23's husband?

Riversider: Take it chapter by chapter. It's really good.

$1,597.9600

Because, you know, all this "money the Fed is printing" is "dabasing" our currency. Not.

1597 now and just a couple years ago it was like 800 bucks.

Because, you know, all this "money the Fed is printing" is "dabasing" our currency. Not.

-------
We know that when the Fed busy a Treasury from an insolvent bank and replaces it with cash kept as reserves, the bank is still unwilling/unable to lend, since their balance sheet has not materially changed. All that changed was one asset was replaced with another, Since the bank has no capital , they can't write a new loan.

So far that's meant that qe doesn't add to inflation, and debase the currency and it's also meant that current fed activity has only resulted in risk assets getting prced higher(stocks, commodities,etc,). When and/if banks recover things will go from bad to worse.

"Gold Poised For Worst Monthly Run In 11 Years On Europe

Gold is poised for the worst run of monthly losses in more than 11 years in New York as concern that Europe%u2019s fiscal crisis is escalating drove investors to seek the dollar as a haven over the precious metal.
..."

http://www.bloomberg.com/news/2012-05-31/gold-poised-for-worst-monthly-run-in-13-years-on-european-crisis.html

Pretty much demolishes one of the basic gold bug arguments - the dollar is viewed as SAFER than gold.

Gold Down, it's just the gov't helping a bank
---------------------------
http://blogs.telegraph.co.uk/finance/thomaspascoe/100018367/revealed-why-gordon-brown-sold-britains-gold-at-a-knock-down-price/

A great deal of Gordon Brown’s economic strategy would strike a sane man as troubling. Not a great deal was mysterious. The orgy of consumption spending, frequent extensions of the cycle over which he would “borrow to invest”, proclamations of the “end of boom and bust”: these are part of the armoury of modern politicians, of all political hues.

One decision stands out as downright bizarre, however: the sale of the majority of Britain’s gold reserves for prices between $256 and $296 an ounce, only to watch it soar so far as $1,615 per ounce today.

When Brown decided to dispose of almost 400 tonnes of gold between 1999 and 2002, he did two distinctly odd things.

First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. This was apparently done in the interests of “open government”, but had the effect of sending the spot price of gold to a 20-year low, as implied by basic supply and demand theory.

Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model. The price of gold was usually determined at a morning and afternoon "fix" between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply.

The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4.

It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.

One of the most popular trading plays of the late 1990s was the carry trade, particularly the gold carry trade.

In this a bank would borrow gold from another financial institution for a set period, and pay a token sum relative to the overall value of that gold for the privilege.

Once control of the gold had been passed over, the bank would then immediately sell it for its full market value. The proceeds would be invested in an alternative product which was predicted to generate a better return over the period than gold which was enduring a spell of relative price stability, even decline.

At the end of the allotted period, the bank would sell its investment and use the proceeds to buy back the amount of gold it had originally borrowed. This gold would be returned to the lender. The borrowing bank would trouser the difference between the two prices.

This plan worked brilliantly when gold fell and the other asset – for the bank at the heart of this case, yen-backed securities – rose. When the prices moved the other way, the banks were in trouble.

This is what had happened on an enormous scale by early 1999. One globally significant US bank in particular is understood to have been heavily short on two tonnes of gold, enough to call into question its solvency if redemption occurred at the prevailing price.

Goldman Sachs, which is not understood to have been significantly short on gold itself, is rumoured to have approached the Treasury to explain the situation through its then head of commodities Gavyn Davies, later chairman of the BBC and married to Sue Nye who ran Brown’s private office.

Faced with the prospect of a global collapse in the banking system, the Chancellor took the decision to bail out the banks by dumping Britain’s gold, forcing the price down and allowing the banks to buy back gold at a profit, thus meeting their borrowing obligations.

I spoke with Peter Hambro, chairman of Petroplavosk and a leading figure in the London gold market, late last year and asked him about the rumours above.

“I think that Mr Brown found himself in a terrible position,” he said.

“He was facing a problem that was a world scale problem where a number of financial institutions had become voluntarily short of gold to the extent that it was threatening the stability of the financial system and it was obvious that something had to be done.”

While the market manipulation which occurred when the gold reserves were sold was not illegal as the abuse at Barclays may have been, the moral atmosphere in which it took place was identical.

The crash which began in 2007 and endures still was the result of an abdication of responsibility across the financial sector. This abdication ranged from the consumer whose thirst for goods pushed him beyond into grave debt to a government whose lust for popularity encouraged it to do the same.

Responsibility is evaded by all bar those on whose shoulders it ought to rest. The gold panic of 1999 was expensively paid for by the British public. The one thing politicians ought to have bought with that money was a lesson in the structural restraints which needed to be placed on banks now that the principle that they were ultimately public liabilities had been established.

It was a lesson which could have acted to restrain all players in the credit market boom of the 2000s. It was a lesson which nobody learnt.

A deflationist likes Gold
http://www.youtube.com/watch?feature=player_embedded&v=d_TYaINi_NY

Gold Won't Save You From Hyperinflation According To A New Study

Read more: http://www.aei-ideas.org/2013/01/new-study-gold-wont-save-you-from-hyperinflation-or-zombie-apocolypse/#ixzz2IwHZLMYG

Like most people, I like saying Pethokoukis, but when did we last experience a zombie apocalypse that leads him to be so definitive?
One of the points he makes is that precious gems may be better than gold. Hardly a much different asset class.

What about Amazon Gold? http://www.theverge.com/2013/2/5/3955202/why-amazon-wants-its-own-currency

hfscomm1

Yes, gold will save you from hyperinflation in all possible scenarios of how that could play out unless a gold asteroid is snatched in a close orbit with earth. What is all this nonsense about gold not protecting you in hyperinflation?

Gold, or the gold standard?

Gold increases in value during deflation, not inflation, as a general rule.

The gold standard doesn't work to control hyperinflation any better than simply reducing the money supply would, with or without a peg to gold.

Either. People just don't understand the law of limited quantity and the desirability of gold coupled with historical precedence. I am not letting go of my gold.

No one said you have to get rid of gold, but if you're predicting economic collapse crickets are a better investment, because you can eat them.

There is no such thing as "the law of limited quantity" - there is a limited quantity of earthworms, too, as there was once of tulips, but it didn't really mean anything in the long-run.

Other than jewelry and fillings, there isn't much of a real demand for gold as it's not an industrial metal. It does tend to go up in price during deflationary times, but it doesn't hedge against hyperinflation, nor does the gold standard prevent it.

Gold is the same as a tulip?

Only when hoarded.

In economic collapse as has happened at various times throughout history, gold does just fine. It becomes a readily accepted medium of exchange. I know it is hard for many to accept gold as the omnipotent currency and I don't want to give it any kind of divine or special powers, but throughout human history it has been "special" and remains so today. That it is still discussed in 2013 despite it being a barbaric relic or whatever Mr. Buffet called it sort of supports my point. I don't need to argue for its defense; it is just the way it is. It is special and in any time of economic turmoil we again will gravitate to it as humans have done so many times in the past. Those that have gold will be fine those that don't, won't.

Uh, no, gold prices have plummeted along with other asset classes during a few panics and depressions over the last 300 years. This was linked to above.

Actually, gold has not been a good investment over time:

http://inflationdata.com/Inflation/images/charts/Gold/Gold_inflation_chart.htm

It has not recovered from its 1980 inflation adjusted peak of $2337.

One reason why gold doesn't do to well is there's nothing you can really do but look at it. The very property that makes it good for jewelry - that it doesn't rust very easily - makes it bad for industry, because elemental gold is inert. It's a good conductor of electricity, but silver is better, and cheaper, and copper is better still, and cheaper still.

Basically nobody could buy gold until about 1973, and the world survived just fine without it. As I said, you can't eat it so it's really of little value come the revolution, when my money is on crickets.

Here is a chart of what has happened to gold prices over time:

http://www.aboutinflation.com/gold-vs-inflation

Gold is breakeven from an inflation standpoint from 1979.

You get the same chart here:

http://www.macrotrends.org/1333/gold-and-silver-prices-100-year-historical-chart

I agree I don't believe that Gold is a hedge against inflation. It is my impression that Gold is really a hedge against instability. Not a bad asset to own in times of uncertainty.It's all about perception and how the majority of the population feels about the state of economy. If they feel nervous and uncertain about their country's economic policies then I would expect the price of gold to remain strong.

Sprinkle gold with economic uncertainty and add some instability and you'll see it go up. As long as you have investors around the world worried or concerned that there is a possibility that they are living in a country that may turn into a Greece like environment you will continue to have strong demand for gold.

"Other than jewelry and fillings, there isn't much of a real demand for gold as it's not an industrial metal." stevejhx

Not true at all in fact as demand for gold jewelry declines the demand for gold as an investment has increased.

Guess all those central banks around the developing world are wasting their money building their gold reserves. I guess Mr. Brown was a clever clogs selling some of UK's gold reserves at 300(ish). Anyway, each to his own we all have a choice where to put our money. I think a 25% allocation to physical gold is the right amount to have in a portfolio. Time will tell.

"Basically nobody could buy gold until about 1973, and the world survived just fine without it."

You mean "from 1933, when FDR forcibly confiscated everyone's gold, until 1973". From the dawn of civilization until 1933, people most certainly could buy gold, but they didn't have to *buy* it; it was what their money was made of.

I will concede, however, that the world did a lot better money-wise from 1933 to 1973; since then chronic high inflation has destroyed our purchasing power much faster than it did before 1973. The only thing backing our money now is a government promise -- and we all know what those are worth in the long run.

>since then chronic high inflation has destroyed our purchasing power much faster than it did before 1973.

As a result, the world pretty much has gone to Hell in the past 40 years, right?

Tzero - you really need to reexamine your concept of "fact." We had the gold standard in 1929; it didn't seem to stop the bust or the Great Depression.

Also, Google "19th Century Financial Panics" and you will see that we had a 2008 experience just about every 20 years in the 1800's, with the gold standard and everything. We had periods of massive inflation followed by brutal deflation.

Through 1973 the price of gold was fixed, as it is what fixed currency exchange rates. Bretton Woods and prior agreements to fix exchange rates - based on the price of gold or not - have always fallen apart because they are inflexible.

Since Paul Volcker there has not been "chronic high inflation" in the US. In fact the problem right now has been the threat of deflation. Were we on the gold standard we surely would have plunged into a very great depression because it would not have been possible to increase the money supply. That is why Roosevelt dropped it, as it was dropped during WWI, and during the Civil War. It simply doesn't work.

"The only thing backing our money now is a government promise -- and we all know what those are worth in the long run."

Well - the only thing that backed money during the gold standard was the promise that the government would pay you back in gold if you wanted it. Unfortunately, there wasn't enough gold, and that is what caused the gold standard to collapse - when Charles de Gaulle demanded that the US pay France in gold for all French reserves in dollars, which of course we didn't have that much gold.

The government's promise to pay you back in gold is as illusory as what people call "fiat money" - anytime anybody demanded their money in gold, the government said no.

For Steve:
http://www.popsci.com/diy/article/2013-01/gray-matter-how-make-cheap-fake-gold

Gray Matter: How To Make Cheap Fake Gold
Cast your own bogus bullion.
By Theodore GrayPosted 01.28.2013 at 10:00 am
Last September, a New York City gold dealer spent $72,000 on his worst nightmare: fake gold bars. The four 10-ounce counterfeits came with all the features of authentic ingots, including serial numbers. That%u2019s pretty scary when you consider how many people own gold%u2014or think they do.

I%u2019ve been a fake-gold fan ever since author Damien Lewis wrote me into his 2007 spy thriller, Cobra Gold. My supposed experience making fake gold was pure fiction, yet I%u2019m still treated as a source on the matter. I decided it%u2019s time to call my own bluff and make some real bogus bullion.

Instead of a 10-ounce ingot, I cast a two-kilogram (4.4-pound) fake the size of a Twinkie cake. A Twinkie heavier than four pounds? Yes, gold is dense, much denser even than lead. Good forgeries must have the right weight, and there is only one element as dense as gold that%u2019s neither radioactive nor expensive. That%u2019s tungsten, which can cost less than $50 a pound.

To fabricate a convincing fake, crooks could pour molten gold around a tungsten core. The bar would have a near-perfect weight, and drilling shallow holes would reveal nothing but real gold. A two-kilogram bar made this way would cost about $15,000 and be %u201Cworth%u201D about $110,000.

http://www.investmentu.com/2012/January/fake-bullion-coins.html

Gold versus SPX TTM:

http://finance.yahoo.com/echarts?s=GLD Interactive#symbol=gld;range=1y;compare=%5Egspc;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

"Gold Bets Cut by Most Since 2007 as Sugar Bears Grow...

...Money managers and other large speculators reduced their net-long position in gold futures and options by 40 percent in the week ended Feb. 19 to 42,318, the biggest drop since July 31, 2007, U.S. Commodity Futures Trading Commission data show...."

http://www.bloomberg.com/news/2013-02-24/gold-bets-cut-by-most-since-07-as-sugar-bears-grow-commodities.html

Yes, retail investors that's a great time to buy gold. Or anything. When the professionals are rushing to the exits. Not.

"Gold Bugs Getting Impatient"

http://blogs.wsj.com/marketbeat/2013/02/25/gold-bugs-getting-impatient/

Yah think?

So above I asked about palladium, platinum, and silver. From the height of the crises to now (Oct 1 2008 to today) Palladium is up 256%, gold is up a not bad (but not as good) 83%. Silver, however, is up 131%. Platinum is up ONLY 55%. But that still leaves gold as the 3rd best performer out of the 4 precious metals.

Palladium spot goes back on my Bloomberg only to 1993 - but it beats gold over 30 years too.

If you think Paladium has better relative value go for it. When people thin Gold their speaking precious metals, including silver, platinum etc. Gold is the standard but of course other metals may offer better relative value.

>Platinum is up ONLY 55%. But that still leaves gold as the 3rd best performer out of the 4 precious metals.

What a way to distort:
Reminds me of USSR 2nd place, USA 2nd to last.

"Gold, Long a Secure Investment, Is Losing Its Luster
By NATHANIEL POPPER
Gold has lost 17 percent of its value since 2011, a remarkable turnabout for an investment regarded as one of the safest of all."

http://www.nytimes.com/2013/04/11/business/gold-long-a-secure-investment-loses-its-luster.html?hp

I want to listen to someone named Nathaniel Popper.

I'm sure there are a good number of Cypriots who wish they had their money in Gold.

"I'm sure there are a good number of Cypriots who wish they had their money in Gold." The 5% tax on deposits below 100k euro is far less than the YOY decline in gold prices. So no.