Cramer Says to Buy Gold

"Are these guys smoking crack? or could these government think that Gold actually does have an intrinsic value that requires no counter-party or backing to prove its worth?"

1) You've still failed to acknowledge that there is a price fixing cartel designed to *sell* at the highest price. This cartel doesn't talk about helping its member nations buy - just making sure they can sell without crashing the market first. Hardly a gold support.

2) You've proven that you don't understand the theories you quote. The Austrian/Mises theory of monetary supply states that the world needs a universally accepted, convenient, stable, and secure proxy for value. They claim that gold is the only such system - fiat currencies fail the "stable and secure" test. However, the Austrian theory still requires "universally accepted", which means there *must* be a "counter-party" - most of the world, to be exact. You wrongly claim that there's intrinsic value, no counter party necessary.

Those who truly understand the theories you claim to understand know this. They know that gold, by dumb luck, had desirable properties (easy to test for purity because its so unusually weak, relatively rare so the supply is stable, pretty enough to create bootstrapping demand back before there was any real monetary system to speak of, etc). Gold got lucky, and for a while got to have extra value, just like green pieces of paper got lucky more recently. There's no intrinsic value in either.

You're only furthering my belief that you're just pushing political desire. Worse, extreme ultra-conservative political desire. When Ron Paul has a chance of being president, your beliefs may hold water. For now, you're just another conservative talking head who doesn't even understand what you're parroting.

techguy
the intrinsic value of gold is that u cannot cheat with gold. It is the referee of last resort.As such it is nobody's liabilities (can u believe that u store your wealth in the IOU's of the US govt? what a store of value: a mortgage on wealth that does not exist).
The french president has HALTED the sale of Bank of France gold.
Central Banks cartel is to prevent the price from rising (not falling) ("should the price of gold rise we stand ready to sell more" A. Greenspan in testimony before congress).
Lastly it appears that a large number of big bars has been released in the market as of late Oct. these are .889 purity, a dead giveaway that they come from West point depository where they had been stored since melting the confiscated gold of 1933. again to keep a lid on prices.

tech_guy,

Just answer the simple question:

Why would Central Banks, the lender of last resort, consider something with no intrinsic value as a "reserve asset"?

It's really not that difficult.

nicercatch: Reread about that central bank cartel. Even MMAfia, who's super-bullish on gold, acknowledges that the agreement is to limit sales and keep prices from falling. If you don't even understand this, how can the rest of your analysis be trusted?

MMAfia: If they valued it so highly, why would they need to form a cartel so the member nations don't tank the price by unloading it?

You are listening to what they say. I'm watching what they do. Which do you think is more telling of their true intentions? The fact that they created such a cartel shows that they *don't* want an honest, open, freely traded market. Clearly people who actively prevent an open market can't be trusted to speak the truth about said market either.

central banks never communicate at face value. the official message is what u understood it to mean. The real message (that a trader will get) is: we all stand ready to sell in a concerted effort .should u dare buy gold you will get creamed.and believe me that is really scary.I won't even mention the real fire power of derivatives,that the (friend) bullion banks (GS,JPMC)have at their disposal.
That's why I always recommend physical first (once u have it, u only care about value/fonction, not price). I got killed more than once in the futures (one day in 2006 I lost 200K:in one day).
Caveat emptor :this is not investment advice.

tech_guy, your answer to my question is yet another question, which didn't answer my question.

Again:

Why would Central Banks, the lender of last resort, consider something with no intrinsic value according to you (Gold) as a "reserve asset"?

Why not palladium? Why not land? Why not uranium?

The closest response I've gotten from you is that "Gold got lucky, and for a while got to have extra value, just like green pieces of paper got lucky more recently".

So, am I to believe that your answer is that Gold "got lucky"?

I thought I was pretty clear, but let me be more blunt: Central banks are lying to you. They claim gold is their reserve asset while they organize a monopolistic cartel to liquidate it at a higher profit.

some say the federal reserve is a monopolistic cartel that should be abolished

So, let me get this straight:

The reason why Central Banks are using Gold, which you view as having no intrinsic value, as a store for its own reserves is because... they are "lying"?

So- you believe that all the Central Banks in the world are lying about wanting to keep Gold as their reserve store of value, only so that they can liquidate it for money fiat currency paper money.

Fair enough- obviously I don't agree with the above.

Don't get me wrong- I am very familiar with the "cartel" you allude to and its nefarious actions of trying to keep the price of Gold down, which is what they do so that they can print even more money without the public realizing it. This is extremely well documented by GATA and I have been following that organization since its inception.

I have never heard of your theory as to why they are "lying" however. GATA has extremely precise data points that show you the real reason why the "gold cartel" artificially pushes price down to mask inflationary proof.

But I have never seen empirical evidence for your theory that Central Bankers are lying about Gold so that they can sell it for a higher price.

Why? Well, the reason why I doubt your reasoning is that... well, the Central Bankers can just print fiat money! What's the point of having to go through this complex ruse to fool the public so that they can sell Gold in exchange for more fiat money when.... they can just print the money themselves!

MMafia: In your opinion do we see an "armageddon" scenario where paper is worthless and we will use our gold to buy fuel and food..an economic holocaust if you will? I am way out of my league in understanding the formulas, but it seems one could only be so bullish on gold if one thought as you have said the fiat currency system was to collapse. Them is fighting words-we are not talking about depleted 401(ks),a few failed banks this sounds more like Mad Max stuff. nicercatch: What about owning some pre-1964 silver coins along with the gold...do you think we will ever need to use this as "money" or are we just talking about hedging/insuring against falling paper? Digs: this guy has a great reputation and quite an interesting story he actually is being prosecuted by the IRS for "selling" gold and not collecting sales tax. Of course he considered it exchanging currency for currency, the IRS did not. http://the-moneychanger.com/entry.phtml good information on buying physical gold and silver.

“Twenty-eight years brokering silver & gold have not prepared me for what I met this morning (circa mid-August 2008). One of my wholesalers said he was not selling anything, only buying, until further notice. Another refused to give any prices until he adjusted his spreads. Another was spreading one ounce gold coins, normally at $7 - $8, at $25. Another said he was making no sales for immediately delivery or deferred payment, only sales for 30 days delivery paid at once. Premiums were high: Austrian 100 coronas, 4.7%; Sovereigns 5.2%; Krugerrands 6.8%, American Eagles 8.2% (none for immediate delivery), & Mex 50 pesos 4.5%. 90% silver was at $9,783 a bag, a whopping 6.7% premium (1368 cents an ounce on a 1282 market!). Silver American Eagles for 6 - 8 week delivery, 1586 or 23.7% premium.

But “premium” is only one way of looking at things, dividing the item’s price by the spot silver price. Another way to view it is that physical prices have de-coupled from paper prices. The paper prices — futures, ETFs, etc. — no longer rule the market.

Physical prices are declaring their independence from paper pricing as those holding physical gold & silver refuse to sell it at prevailing paper prices. I have been expecting this to happen toward the top of the bull market, catalyzed by some paper purveyor’s failure, but now? What can it mean? At the very least, the public is nourishing a gigantic hunger for silver & gold in their hands, and no place else.

By now all the leveraged silver & gold longs have been forced out, just as all the dollar shorts have been chastened, bruised, and beaten away. Either this is the greatest silver and gold buying opportunity of all time, or the end of a bull market.

But it is NOT the end of a bull market. Time alone argues that. A bull market runs 10 - 20 years, this one has run only 7, since 2001. Those who think silver & gold have fallen into the “bursting of the commodity bubble” completely misunderstand what drives them in the first place. Silver & gold are not commodities; they are money.
When investors pile into silver & gold, it’s not any commodity bubble forcing them there, but monetary demand. They aren’t buying metals because they think all the Indian ladies are going to be wearing two nose rings instead of one this season, or that the American bourgeoisie will suddenly begin stockpiling sterling silver forks again.

They are buying metals because — listen to this, get it straight once & forever — they distrust fiat central bank currencies (or if you prefer, national currencies). The dollar is trash, the yen is trash, the euro is trash; all are equally insolvent, equally unbacked by anything expect a politician’s or central banker’s promise, which is not nearly as good as that of any madame at any bordello anywhere.

The dollar is rising? So, why? Did it become better, acquire more gold backing, solve its chronic balance of payments deficit last night? Come on. Did the euro get worse overnight? The yen? How much worse could it get? You are seeing competitive devaluations, all very much worked out collegially in advance by central bankers. Fundamentally meaningless.

What is NOT meaningless is that the Great Alternative Currencies, silver & gold, have long been advancing against ALL national currencies. All markets swing like pendulums, too far one way, then too far the other. Silver & gold prices became overbought — a lot of people short dollars were long silver & gold. The dollar rallied, oil & commodities fell, sucking down silver & gold money. Look at the numbers. Even with gold down to $787.50 today, that’s only a 21.5% correction, while always more volatile silver is down 37.4%. Friends,these are normal, not outlandish, corrections. Sober up.”

Franklin Sanders

silver is as good as gold

As a neophyte to this conversation I have learned much and have had to think back to my college and grad school econ classes and say "Oh yeah that's what those guys were talking about." I am long a little slv and am not going to get into the physical just because it is too doomsday for me and I would feel ridiculous walking into a bullion dealer and making a trade like they did back in roman times. That said, I understand the arguments for the trade given the decoupling with paper gold/silver from physical gold/silver.

The argument that gold has no intrinsic value is what has been holding me back from pulling the trigger more on this trade. I struggle with this one because at a base level I agree that gold has no intrinsic value in the way that food, fuel, or land does. However, reading this thread has moved me one step closer to getting past this view. I don’t think that we will be getting to the point of moving to Costa Rica with a big bag of gold bars and waiting out armegeddon slicing off little nuggets for peaches to eat and cloth to weave into clothes. Even though gold has no "value" it still has high potential to be the place folks will run to for security in the markets over the next five years. Where else are you going to put your money? Equities? sure. but dipping in slowly. If we get downgrades on large amounts of debt, corporate bankruptcies, and double digit unemployment where are people going to stash their money? If nothing else I would predict less volatility in gold over the next five years in relation to equities, debt, and many other asset classes.

I still back Buffet (and will always back the oracle) but I do not have his time and resources to be able to miss the bottom by 20% (more?) and still be ok with dividend paying preferreds and warrants to buy more at lower prices. 10 year, 20 year time frame equities are the only way to go (I’m 32). But which ones? 2-5 years gold makes more sense.

Much thanks for a great thread.

"10 year, 20 year time frame equities are the only way to go (I’m 32). But which ones?"

All of them! Unless you consider yourself a skilled professional trader (or are willing to lose money learning to become one), your best bet BY FAR is low cost index funds.

ditto. And, btw, ignore the retarded index stuff, just another broker trick to get some active trading.

SPY, VTI. Thats most of the portfolio.
For international, EFA and EEM, or just VEU if you don't want to split up emerging and EAFE
XLE and VNQ can diversify with 5% each...

Tech. I hear that. I have been increasing my 401 K allocations recently and within it using index funds ala random walkers rather than paying fees for actively managed funds. My 401 k is where I do my investing. As for trading, where I do my psuedo-professional, debatably-skilled gambling, I have been focusing more on things like slv and eev recently (and unfortunately on buying dips too early in financials over the past couple of months although I did trade some nice pops in MBI and uyg)

When I say which ones in the short term trading sense I mean that in trading there will be bankruptcies, M&A, and gov intervention that finally sorts things out and I do not care to be picking specific companies during that sort out. If anything I would buy some MSFT, IBM, MCD, and Coca Cola bonds and lock in ~8%. I don't want to be in indexes as a trade during the sort out because they will be dragged down with the bad companies. That leaves the good companies or winners at the end. But these companies will be the ones gobbling up weaker competitors possibly with some level of government intervention which will hurt short term earnings and impose some sort of government authority over management. No one really knows where we are in the deleveraging cycle and to what extent we have lost investors for good after the debacle of the past year. There are alot of folks on main street that will not invest directly in the stock market ever again (especially folks over 60).

The thing that gets me is when folks have the balls to criticize Hank and Ben. One guy has spent his entire career, 40 years studying market failures and policy responses. The other guy has been in the street for about 30 years and rose to the top of GS before joining Uncle Sammy. They have no good options and everyone screaming at them. They are tasked with preventing armegeddon in a time where folks on the street have been making 7 figure bonuses peddling toxic waste and prop trading with 40 50 60 to 1 leverage. $60 trillion notional value of the CDS market? off balance sheet stuff? complex derivatives and securities written specifically so no one could understand them and then dumped onto pension funds or some other sucker?

The job Hank and Ben are doing is the hardest job ever imagined in the financial world. It's mind boggling to think of the negotiations going on with banking heads, rating agencies, politicians, corporate CEOS, foreign govs, foreign CBs and calmly dealing with all of that while the market news comes in worse and worse every day and everyone screaming at you for help.

It cracks me up when folks call into Cramer and recommend him for Treas secretary. To his credit, Cramer is the first to let folks know that he has not been asked and would not be interested (read capable) of that job. Besides Cramer already has the best job on the street. He gets to be the opiate of the masses and rant into a camera for an hour a day while selling some books on the side.

"It cracks me up when folks call into Cramer and recommend him for Treas secretary. To his credit, Cramer is the first to let folks know that he has not been asked and would not be interested (read capable) of that job. Besides Cramer already has the best job on the street. He gets to be the opiate of the masses and rant into a camera for an hour a day while selling some books on the side."

His calls have trailed the market. He famously called Bear a buy the business day before their forced-merger, and yelled at a caller who suggested taking money out of Bear. If he can't even succeed at stock picking, the thing he's supposedly best at, I certainly don't want him "promoted".

"I don't want to be in indexes as a trade during the sort out because they will be dragged down with the bad companies. That leaves the good companies or winners at the end."

Problem is, your likelihood to know which will avoid bankruptcy might not be so great, and then you suffer from less diversity. If you pick wrong, you are screwed. I'd prefer to own the larger basket such that the bankruptcies aren't as material. Hell, I knew folks who said that with Goldman. And you get EXTRA screwed because you paid a premium for a "less likely to fail".

In the end, the stats show that stock pickers aren't any more successful in bad markets than they are in good.

Go diverse enough, and the benefits of diversification FAR outweigh the risk of some of them going bankrupt.

Hey Noah,

Check out:

http://www.financialsense.com/editorials/cliffkule/2008/1125.html

Excellent analysis of the GOFO backwardation I mentioned earlier in this thread a couple days ago- looks like another analyst decided to write a detailed explanation regarding its impact to the Gold Carry Trade, the Lease Rates, and the huge disconnect between paper/physical which may lead to arbitrage opportunities in 12/08 causing more investors taking delivery of the physical metal.

Couldn't have explained it better myself- great read for those who are still relatively 'new' to the Gold market.

buffet is OK. I own 1mil of brk.a as a faith bet. it is not the point. hard currencies (NOT slv, gld,gdx..) are INSURANCE against what 's coming for the USD.Physical (silver,gold, costa rica beach house..) they are not spooky/conspiracy theory, etc.... They are not a trade( u might loose ur position).Dollar(us) denominated assets are to be avoide or at least hedged against. Buy insurance and if u make ur "money" in USD, good night and good luck

All of the central banks and central bankers are stupid. People on streeteasy are smart.

nov 28th: comex contracts will be under assault for delivery. who wins? dunno.
sell the children but do NOT seel ur gold (physical).
Talk to u in 3 days

Today I have decided to add to DD if it hits 23 or below. I originally started buying it at 25.5, and I did not buy on last weeks dip, which was a mistake. However, I am comfortable buying this stock at the current price. I also am going to buy some SPY as well as some more AA.
I actually thought about buying gold last Wednesday to finally add as a hedge, which I have mentioned before. However, I did not pull the trigger, so I am reluctant to buy some after such a massive run-up in price over such a short amount of time. USO is interesting, although I was thinking of buying some Chevron and EXXOn, which I currently do not own, so I have to decide which way I want to proceed.

nicercatch:

http://www.kitco.com/ind/willie/nov262008.html

"Sell the children, but do not sell the precious metal."

=D we are coming close "delivery" time for the COMEX for DEC contracts.

Very curious to see what unfolds.

Here's a talking head clip that caters the masses:

http://www.cnbc.com/id/15840232?video=940515089&play=1

too bad there isn't much differing opinions on Gold as both guests share the same sentiment. nevertheless, worth a view for casual investors.

wow...that guy on the left has some firm thoughts on the topic!

lol love his "if pigs fly" comment. classic.

notice FXP lately? Closed below 50! Did China all of a sudden enter a new growth phase from 2 weeks ago?

SupderFund's Managing Director charting Gold... he mixes it up with some fundamental analysis as well.

http://www.cnbc.com/id/15840232?video=942535398&play=1

How much longer does this bear rally last?

nothing happened today. in the middle of bollinger. up bias. 600 low range worst case. agricultural bottoming. how long? a few weeks

elliot wave puts gold near a Wave W low of 735, but if it breaks that, it could go to 600-650. I think 60% or so of the deleveraging is done, but we still have 340Bln of alt-a securities under review for downgrades and alot more prime securities that could be downgraded as well, and that could lead to more forced selling to raise capital, and gold could get caught up a few more times before any run.

[Gold] has been traversing either side of the $800 level. Presently, it’s back beneath it. The decline of the past two days has broken the support shelf between $817 and $823, which suggests that a test, and eventual break, of the wave (W) low ($735.90) is forthcoming. EWI’s long-standing target remains $600-$650 and odds still favor that this area will be reached prior to prices attempting a significant rally phase. Our stance is to be as patient as possible in anticipation of a decline toward the above cited area. Near term, gold might bounce back to the area around $850 (±), but we would view it as another opportunity for the bears.

burkhardtgroup - why do you ask? Are you trading this market and trying to figure out where to get short? Who knows. bear market rallies when they come, are sparked by little or no real news or even on bad news. This round was sparked by Geithner being named next Treasury Secty, one week ago Friday intraday causing a 500 pt intraday rally. We really had a good idea that he would be, so the news wasnt so surprising, but it added clarity and that sometimes it all it takes.

Bear rallies are fierce and as they last, shorts get stuck and eventual if it is prolonged, they cover and that in and of itself powers the last leg of the bear rally. We could easily go to 9500 by end of next week. Nobody knows. You have to see how stocks trade on news, and if they are rising on bad news. We know the news will only get worse, as unemployment is likely to rise to 9% and 4th qtr gdp will be awful. So, question is, where are we in the indexes, where did we come from, when this news breaks? If we are at 9500 when bad jobs data comes out, I think the market will clearly selloff. But if we were at the lows when the bad data came out, stocks prob would have priced that in already and may rise.

It seems we are in a Wave 4 up move right now, that could surprise a few as this bear rally may have legs. Im still long, but sold about 50% of my positions. I bought 200s of EEV down here around 72, and 200s of FXP around 52. If SKF, SRS continue their plunge, you may want to nibble

I have been trading the market mostly in and out with a few etfs, dig, dug,qid, qld. Although within hours of taking a rather large position in DIG it tanked. And no I did not sit patiently and make money on the strong rally but came close to getting even. Thanks.

http://meltdown2011.wordpress.com/2008/11/29/vaporize-comex-countdown/

Faustas/MMafia,
Excuse the inaccuracy / ignorance of the actual numbers, but weigh in on this logic:

Assume with all the debt/dollar conjuring, the national debt has let's say doubled (with more on the way). Am I incorrect to say that the dollar's value basically lost half of its value?
And if that is the case, wouldn't it be "not so bad" to lock in a loan for these "worthless" dollars for a hard asset such as real estate? Even if it does go down say 20-30%, I don't really lose money unless I am forced to sell... and even if I had to sell, the price loss is probably still less then the secret fed destruction of my wealth?

"Am I incorrect to say that the dollar's value basically lost half of its value?"

That is incorrect. Let's simplify - think of the govt in terms of a regular company.

1. If a company issues more debt to buy assets of equivalent value, it's value (net worth) remains the same. Assets go up by X, liabilities go up by X. That's equivalent to the U.S. buying assets (TARP, loans to institutions, etc.) with this new national debt. If the value of the assets declines (which is indeed happening), then that reduces the govt's net worth (and arguably the value of the dollar). The govt's argument is that even if the value of these assets decline in the near term, the value should increase in the long-term. We shall see. The govt can afford to hold these assets long-term, so this shouldn't result in an imminent valuation crisis, although ratings agencies may ultimately disagree and downgrade treasuries. In any event, it's far from the dollar losing half its value.

2. If a company issues debt just to pay a dividend to shareholders, that is massively dilutive to the stock and the stock price goes down by the amount of the dividend, right? The govt equivalent is to borrow and then just shower people with money (i.e., rebate checks). That is inflationary. The counter-inflationary argument is that, by showering people with dollars, you create demand through the stimulus and therefore production. This increase in production in turn generates a stronger dollar. Personally, I hate rebate stimulus plans. If the stimulus plan actually improves infrastructure and creates productive employment, it should arguably be less inflationary.

"wouldn't it be "not so bad" to lock in a loan for these "worthless" dollars for a hard asset such as real estate?"

It's better to owe in an inflationary environment than a deflationary environment.

"Even if it does go down say 20-30%, I don't really lose money unless I am forced to sell"

This is a rationalization and applies to anything you ever buy.

mmafia,
I too like gold, but how do you envision the "main course" playing out? From your timeline post, are you suggesting that the US will go back to a gold standard? Or in your mind, is that not a prerequisite for the price of gold skyrocketing?

Faustus,

Remember all the bantering we had earlier with regards to the Fed and "printing money"? Well- they have started doing so now... officially.

The Fed "took a "quantum leap," according to George Goncalves, the chief Treasury and agency strategist at Morgan Stanley.

Instead of swapping assets in the banking system, the Fed started buying them. The Fed bought $5 billion of Freddie Mac, Fannie Mae, and Federal Home Loan Bank corporate debt. The New York Fed's website says the purchases are being "financed through the creation of additional bank reserves." The Fed has finally started to create money out of thin air.

In other words, to pay for its purchases, the Fed opened new bank accounts for its commercial bank customers, struck a couple of computer keys, and filled the accounts with money. The Fed hopes the banks lend this money out. If they do, it will add credit to the marketplace... That's inflation."

gold up, $usd down, sucker rally, buying silver and agriculturals, russia ,china

Stevejhx - about 7 weeks ago you stated..."Everything is oversold right now, but both copper and silver have industrial applications, so there is a demand for them, or there will be. But gold? Name an industrial application for gold."

Fast forward to today. Gold has made a great move as the fed started its actual printing via quantitative easing, and I dont see any end in sight. So, the dollar got crushed, gold did its thing, however, copper & silver didnt?

In fact, copper is near a 4 yr low on deflation concerns and cutbacks in production. I know I argued back then against your statement above, and that silver & gold were tied to the global slowdown as industrial production declines, but what are your thoughts now, 7 weeks later?

During this time period of 7 weeks since that statement:

GOLD - up about 20% or so
SILVER - up about 7% or so
COPPER: down 30% or so

Thoughts?

got GOLD?

=D

Urban, Steve has been correct on real estate in the past 12 or 18 months or whatever, and entirely wrong, devastatingly wrong, on other asset classes. Let's give him his due where he's due, and recognize he knows nothing about where he knows nothing.

well at least Steve 'gets it', and he did get it from a early point. I still ask myself if the reasons why I own gold will ultimately play out. I argue this point often and traders I know did take Steve's side that you should by a metal with industrial uses over gold.

But my point is I dont want exposure to industrial production in a global slowdown, where CBs are printing like mad and stimulating like there is no tomorrow and bailing everyone out. I want an alternative form of money, and I view gold as money. Steve disagreed here on this.

So Im curious to hear now that we are 7 weeks later, if he still believes the same way or changed his view? Nothing wrong with changing a view. I was WAY WAY WRONG on TBT/PST, dead wrong. I hit my stop losses and got out. But I didnt see such drastic moves at the long end. Anyway, prob should have seen it because I could have put 2 + 2 together and realized the fed will run out of ammo and resort to QE and talking rates down to stimulate. Stupid me.

Noah,

"I argue this point often and traders I know did take Steve's side that you should by a metal with industrial uses over gold. "

Likewise. However, traders who were in the same boat are now actually beginning to doubt the USD's status as the world's reserve currency.

If you haven't already been, go here:

http://meltdown2011.wordpress.com/2008/11/29/vaporize-comex-countdown/

yea I read into this but I dont really buy it. They are expecting a DEC gold default right? COMEX I dont believe has ever defaulted and I dont see that happening in the next 2 weeks or so.

Anyway, it doesnt change my bullish stance on gold.

urbandigs: You seem to be arguing that gold is going up on inflation concerns, and copper/silver down on deflation concerns, at the same time.

tech_guy - Ummm, not really arguing about the inflation part yet but yes I have been arguing against copper/silver because it is tied to industrial use and deflation is the theme right now.

The gold trade is more of a 'money' trade. I keep repeating this over and over, and either you agree or disagree that gold can be viewed as 'money'. This fiat system is in distress, and CB's everywhere are printing, printing, printing, and debasing their currencies. Now, the dollar should swell in times of deflation and it did. But when the fed announced the start of QE, the dollar got crushed. So does this mean deflation is gone? No, I dont think so. Debt deflation theory states the dollar swelling should occur all the way to the end. But that is not happening in past week or so.

As the fed buys treasuries/mbs, they inject newly created money into the system and the dollars dropped from the heli, hits the ground. This is very dollar negative, and good for gold. One can argue of the potential inflationary effects down the road, but the gold trade is for before that anyway. I think. When ben hikes, Im outta gold and hopefully it made a silly, parabolic run before that. I dont see Ben hiking rates anytime soon, and he still needs to rein in the 18-19 credit lending facilities first. I would think. So as mistrust grows on fiat money, and dollar debasement continues, the gold trade SHOULD, be on. deleveraging can stop this for a while. but the gold trade argument is because I view gold as money, as capital preservation, as govt's devalue, and race to debase. Of course this is all inflationary and Ben is trying to inflate because we have deflation now! So, the logic in my opinion is sound.

I don't think the default is going to happen either, but some useful info in those threads for sure.

these lemmings are so clueless as to the currency crisis that is headed our way soon.... it's going to hit them just like the equity crash and leave them starry-eyed and dazed... and then of course, they will all justify/argue how in hindsight it was all 'obvious'.

these people simply cannot understand the concept that Gold is not a commodity and that it is money. don't bother trying to convince them otherwise.

urbandigs: You talk about lost faith in fiat money. Do you think there's a non-negligible chance fiat money will fail? In a world-economic sense (dollar, euro, pound, yen, etc) - I'm not counting Iceland or Argentina here.

"there is an enormous unbridgeable gap between people who can form their own analysis and others". Ludwig von mises (from memory).
Backwardation is easing for Dec. Lets' see what happens for Feb contract.
In any case PHYSICAL gold is not for sale, increasingly REGARDLESS of price.Keep your gold/silver and add up.
Fiat is failing. USD might lose its reserve status.DO NOT BUY NON CURRENCY METALS (dahhhh)
The europeans r negociating with the chinese and arabs to bypass USD. they may succeed, or not.
In any case, if u r rich,park some physical in europe.If ur middle class ur already fucked (see $USD)
good luck to all

did I mention Gold is money and nothing else (beside silver) is :)

tech_guy - honestly, probably not. But that is a fear that I cant get out of the back of my head. Whether the dollar will survive as the worlds reserve currency. Given what we have witnessed so far, and the responses to it, nothing can be totally discounted. This derivative products have proven that it can take down the system, and the dollar with it. I would put the odds on the low end though.

urbandigs: I very readily agree that if a major fiat currency fails and readopts the gold standard, gold will be a good bet. Short term trades to capture that fear are fine (but like any short term trade, I won't touch it).

But, as nicercatch so eloquently put it, "DO NOT BUY NON CURRENCY METALS (dahhhh)". When major currencies used the gold standard, it had value. Now they don't. Unless they start again, the ground is going to fall out from under that price.

Even if fiat does fail, will gold buyers really be all that happy? Whatever central bank caused their own fiat currency to fail will be the same central bank that chooses what price to peg their new gold-standard currency against. I realize they can't say "gold at $1, ha ha suckers!", there are many issues involved, but I still doubt anybody, not even the gold owners, will be happy if things come to that.

Yes, great time to buy gold.
If I based it on this chart:
http://www.kitco.com/charts/popup/au3650nyb.html

then I would say that gold only goes up in value. You should buy now or you will be priced out forever.

:)

Gold is a commodity. Unfortunately, it is a commodity that is traded. It is purchased by speculators trying to make a quick buck. If gold were only used in jewelry then I could argue that it might make sense to go out and buy a bunch of gold bars and keeping them in your cellar. Unfortunately, since that is not how it works, I would not recommend that you buy gold or any other commodity unless you are a commodity trader. The risks are huge. I'm sure that you would be really happy if you bought oil at $110 per barrel right now.

hi tomy.
would u be happy if u bought gold at 289,then 350 then.....There is nothing wrong with ur chart.just a nice entry point.
now even better on kitco take the same chart in euro, in sterling, in reals, in ruppies..... do u get it now?
Gold IS a commodity:the most important commodity. so important that u cannot see the elephant:it is MONEY.
take some of your funny money (USD)and switch/convert it(you do not buy anything whenu buy gold, just a swap) to real money

I'm not trying to argue that any currency is stable. I'm just saying that gold is an overpriced commodity. It is a metal, not money. We no longer buy things with gold coins - it no longer backs our currency. It is just a metal with a face value that traded at half the price just a few years ago ... in fact, it has pretty much followed the housing market up.

You may see some short term gains in 2009 if you buy gold but it's sill to act like it is a safe place to throw all of your money.

Or, on second thought, maybe we should all jump in our wagons and move out west...I hear there's millions to be made in gold out there.

lobo: Its worse than that. Gold is worth 10x what the jewelry value/demand justifies. Those who like gold are proud of that fact (see earlier pages in this post) and show that as proof that gold is different, not just a precious metal.

The truth is, gold was different, but no longer is. The price hasn't collapsed to reflect this new reality. Fiat money may be incredibly sick right now, but at least its still alive and kicking. Gold money is deader than dirt.

"not arguing that any currency is stable"
one gallon of gas was 3 silver dimes in 1929......and in 2008. stability?
don't move west: EAST, FAR EAST. once they dump usd for gold (which china is trying to do w/o detroying usd) we are done, as in Argentina done.
GS is buing gold(in secret)for its own account in tokyo.they know.....what u don't.
good luck to all
ps: was in europe last week.gold is definitely a currency there. I bought some.one year of average us income.....just in case I am right

"GS is buing gold(in secret)for its own account in tokyo"

If it's a SECRET, how do YOU know, whizkid?

What do you have in your cabin in North Dakota that provides details on GS' Tokyo trading positions?

Just curious.

(Where do these freaks come from? Who wants to take this one?)

how do u know ur in a bull market?
when the middle class is doubtful.
blue collar in ND or.... NYC. welcome to ....brooklyn. let's have a...beer. and then watch....tv.
it's a (freaking) honor to be.

http://online.wsj.com/article/SB123308288034720495.html

Nice WSJ piece on gold. MMAfia, seems to be favoring your take.

I disagree: "But investors are the marginal buyers of gold", "How investment demand holds up will determine how brightly gold shines over the next couple of years"

Exactly what I've been saying all along: Gold has no intrinsic value. Its price is pushed up by *investor* demand, not actual demand for the underlying product. That's a bubble.

tech_guy, as always, cannot compute that Gold is not a commodity and that it is money.

"Its price is pushed up by *investor* demand, not actual demand for the underlying product."

He can't grasp the fact that the "underlying product" is industrial use like copper or even silver (Gold has practically no industrial uses). The "underlying product" in reality is that it is MONEY and an extremely liquid store of value.

Think carefully- Gold rose last week AT THE SAME TIME THAT THE DOLLAR WAS RISING. Currency exchange rates are all relative values of each other. However, the absolute value of ALL currencies are going down the drain as the countries play the "who can debase your currency the fastest" game.

Just be patient. The REAL crisis is still stirring up. The dark clouds are beginning to form. Prepare accordingly and don't get caught off-guard.

So MMAfia, where is the price of Gold in 3 months? 1 year?

Gold in 3 mths? too soon to tell. still too much volatility. central bank 5yr agreement up in march, so expect some action around then, chances are, to the upside. the cb's haven't been selling as much gold, especially the germans. they still remember the weimar republic.

in 1 year= high probability that gold will break $1k and challenge its all time high. cash in a little around then if it occurs, and leave the rest in the odd case it rockets higher.

stag-deflationists are temporarily correct for the moment, but the shift, when it occurs, will be so swift, and unexpected (even though we are all expecting it but keep saying that inflation will happen but not now) that most will be caught off-guard in a similar way when the equities market collapsed.

What's interesting is that even some of the Bears are beginning to shift stance.

Take Gary for instance. An OG Bull, turned Bear, but now turning back into a Bull again?

http://garyscommonsense.blogspot.com/ (pardon the linkage Gary)

Read his posts, and more interestingly, his replies to comments about Gold. He is analyzing it from a purely technical viewpoint, which of course gives you a near-term compass.

Well, whichever way it swings it's gonna swing big. Thanks for the input.

"tech_guy, as always, cannot compute that Gold is not a commodity and that it is money."

You, as usual, can't read. I was saying the article supports my belief, not your belief. Which is true. You're free to say both are wrong, but the article very clearly supports my belief, not yours.

"Think carefully- Gold rose last week AT THE SAME TIME THAT THE DOLLAR WAS RISING"

Most of your arguments are about holding gold because it will go up as the dollar goes down... now you're saying it also goes up as the dollar goes up. I know you have a religious zeal for it (evidenced by the fact that you regularly capitalize "Gold" mid sentence), but like most cult religions, your arguments make no sense to outsiders.

"Most of your arguments are about holding gold because it will go up as the dollar goes down"

You are confusing EXCHANGE rates with the actual PURCHASING POWER of the dollar.

If all fiat currencies are being debased (as they are today), the RELATIVE values of currencies aka FX/Exchange Rates, which is what what you referring to when the Dollar goes UP/DOWN has no meaningful implication.

Who cares if the Dollar appreciates compared to the Pound when the Dollar itself is still being devalued and losing purchasing power? An increase in the Dollar's exchange rate does not mean the Dollar's purchasing power has necessarily gone up. It just means that relative to other currencies, it has not gone down as fast, but believe me, it is still going down.

Follow your grandfather...

http://www.bloomberg.com/apps/news?pid=20601087&sid=aqvwUIqllyRc&refer=home

The best economists in the world can't figure out if we're going to have inflation or deflation. Many believe (and fear) that we're seeing price declines and an expected increase in purchasing power of the USD, which cripples an economy. So you assuming one, not the other, not explaining why, and simply saying "believe me" and "follow your grandfather"... yeah, not going to cut it.

In fact, here we go:

http://money.cnn.com/2009/01/28/news/economy/fed_decision/?postversion=2009012815

"The Fed also warned of a broad decline in prices that could further slow economic activity, a condition that is generally known as deflation.

Deflation often prompts businesses to further cut production and consumers to delay purchases because they anticipate lower prices to come. Economists warn that deflation can have a more destructive impact on the economy than inflation."

Yet you say purchasing power of the USD is declining as if its an assumed fact, not even worthy of debate. You're wrong there, so why should anyone believe your stance on "Gold"?

it's really not that difficult, but in the end,

some people are stag-deflationist believers (a step above the stag-disinflationists)

while others are stagflation believers.

I am firmly entrenched in the latter group. you aren't. the former is the 'popular' and more 'mainstream' ideology going around in mainstream media right now. time will tell, with a high probability within this year which is going to happen.

but you see, on top of this silly inflation/disinflation/deflation debate, is the problem of confidence in currencies altogether. once countries start defaulting, the inflation/disinflation/deflation debate will be a but a side-note.

again, most people don't have a clue about what's about to come our way. just like they had no clue before the crash late last year.

the GEAB describes the issue at hand quite succintly:

"A simple example can help to understand what is at stake. If you meet a temporary problem of cash, and if your bank or your family agrees to lend you the money you need to cross over that difficult path, their effort is mutually beneficial. Indeed, you can resume your activity, you can pay your employees and yourself, your bank or your family get their money back (with an interest in the case of the bank), and the economy in general benefited from a positive contribution. But if your problem is not due to a question of cash-flow but to the fact that your activity has ceased to be profitable and will never be again because of new economic conditions, then the effort made by your bank or family becomes all the more dangerous that it was substantial. Indeed, in all likelihood, your first call for funds will soon be followed by more calls, always matched with promises (honest ones we suppose) that difficult times are about to be over. The more your bank or your family has lent you (and therefore the more it would lose if your activity is stopped) the more willing they will be to continue helping you. However if the situation worsens, and it will if it comes from a problem of profitability, there is a moment when the limits are reached: on the one hand, your bank will decide that there is more to lose in keeping supporting you than in letting you down; on the other hand, your family ends up with no money left because you have siphoned its entire savings. Then it appears clearly to everyone not only that you are insolvent or bankrupt, but that you dragged down with you your family or your bank (4). You have thus dealt a severe blow on the economy around you, including on your close relatives (5). It is important to highlight the fact that all this could take place in all sincerity because you were not aware of the impact on your activity of a sudden change in the economic context disrupting the conditions of your profitability."

http://www.leap2020.eu/GEAB-N-31-is-available!-Phase-IV-of-the-systemic-crisis-The-sequence-of-global-insolvency-begins_a2688.html

BTW

"The Fed also warned of a broad decline in prices that could further slow economic activity, a condition that is generally known as deflation."

Give me a break.. You expect me to believe that Fed/mainstream media concocted barf? that's for the lemmings who will get taken.

This is exactly the Fed's attempt to execute its 'deflation scare' tactic in order to get the permit to launch the printing-press nuke and start buying Treasuries and executing other radical balance sheet expanding experiments. Not that it won't happen- it will, as they will get what they want.

You have to be one step ahead of them. Even High School economics students know that deflation is worse than inflation. And that's why deflation won't happen, because Bernanke has the nuke. And he's about to get authority to detonate it. The Fed will succeed, and we will get stagflation. When it comes, it will be swift and unsuspecting.

Never forget that Bernanke is a scholar of the Great Depression. He's studied it his entire life, like a imam would the koran. He's called helicopter ben for a reason. Now, he gets to execute plans that he's come up with after all those many years of thinking and studying on how to defeat deflation. And he will succeed.

MMafia, I've been following this thread with interest, and I think I get most of the arguments in both directions.

Not sure if I'm quite as bearish as you, but I think all your "it's gonna get a lot uglier" arguments makes sense.

Here's my issue, though:

If we get to such an ugly point that everyone loses confidence in fiat currency, what guarantees that gold will be the chosen currency instead (other than the fact that is has served that role in the past)? Isn't gold as artificial a measure of currency as any paper money? If we really are concerned about devaluation of all currencies, shouldn't we be stockpiling canned goods and ammo, rather than gold?

You've got a good point there, newbuyer. Guns and ammo prices have gone up quite a bit over the last few years, too.

As for gold, it has a good intrinsic value in that it would, in all likelihood, be accepted anywhere and in any country.

Actually, silver isn't a bad move, either. It would be, more likely, used in smaller transactions. It'd be pretty hard to measure out enough gold to pay for gas or a loaf of bread, where silver can be denominated in smaller amounts.

It isn't a bad idea just to keep a bunch of change, either. The melt value, especially in older silver, nickel, and copper coins, is actually worth quite a bit. Plus, you don't "lose" value on a quarter (besides for inflation, of course) if this worst-case scenario doesn't happen and gold/silver drops in price.

InvestorMan - that's my question: what makes you think would gold be accepted anywhere and in any country?

I'm no expert, but I'm venturing to believe it will be for two main reasons:

1. It's universally accepted
- Every country utilizes it in their reserves. Most citizens covet the stuff. It holds an intrinsic value.

2. It has been used as currency for thousands of years.
- Fiat currencies have been tried, and failed, many times. Gold was always returned to after the collapse. No country, regardless of background, has really disregarded gold as not having any value. Most have utilized something that is rare as a currency and, well, gold has always fit that mold; unlike diamonds that are artificially held back to keep them rare. It's unlikely gold could be "flooded" into the market and grossly devalued.

One MAJOR caveat to owning gold, however. During the Great Depression, good 'ol FDR and Uncle Sam decided to make holding gold ILLEGAL and forced the populace to turn gold into the government for currency. They said it was so gold could not be hoarded by the haves. Actually, it was because the government was inflating currencies, much like today, and foreign countries were demanding their gold reserves. They were no longer in control of it.

Contrary to popular belief that Nixon took us off the gold standard, it was actually begun back with FDR and the recalling of all gold certificate notes. Nixon just put the nail in the coffin.

"It's universally accepted "

Not true. I can't buy a loaf of bread with gold. Or silver. Not just because the person behind the register will laugh at me, but because its illegal in the United States to use gold coins as currency.

"Every country utilizes it in their reserves"

A relic of when it backed their currencies. Read earlier in the thread - as MMAfia said himself, they all started dumping it, crashed the price of gold, then came together to form a cartel to limit the sale of gold, thereby artificially (and monopolistically) keeping prices artificially high. That's not a playing field I want to participate in.

"Most citizens covet the stuff. It holds an intrinsic value."

As noted by the most recent article, while individuals do attribute it some intrinsic value (jewelry demand), this is a tiny fraction of its current value. The current value is investor driven, not demand driven. The pro-gold people readily admit this and spin it positively, as proof of gold's value beyond ordinary, "useful" demand.

"Fiat currencies have been tried, and failed, many times"

Its called "progress" when we finally have the means to get it right. MMAfia tells me the last time a major currency was off the gold standard for this long was roughly 12th century China. Other bouts of going off the gold standard are <10 years. This leads to an obvious conclusion that something is pretty damn different this time around. It alone doesn't mean fiat will last, but anyone who won't acknowledge that now is at least a little bit different is obviously pushing an agenda, not reading the facts.

blah blah blah... talk and type all you want while we all watch the price go up together.

call it whatever you want... relic, a bubble, the devil

bottom line is: the price will go up, and at the end of the day, that's all that matters as we make money (in reality, preserve our wealth) through it while you sit there and banter around.

I never said you won't make money. I've said many times here that its the biggest bubble of all time, it may not pop any time soon, and plenty of people have made plenty of money in every bubble.

But it will certainly pop sooner or later. Making 10% this year won't mean much when you're holding the popped bag.

Good- now sit back and watch it go up this year.

oh my lord, is tech_guy REALLY still here?

If I'm still here, you still troll me. If I leave, you'll go on and on about how I'm running away from the truth (you've done it before in other threads when I take more than a few hours to respond). You seem to be incredibly unhappy no matter what I do. As amusing as that is for me, you really should try to find a way to be happier. You really shouldn't let an anonymous Internet stranger ruin your mood.

Could it be that mainstream media and the lemmings are starting to understand why Gold is a good investment?

http://www.bloomberg.com/apps/news?pid=20601170&refer=special_report&sid=a0pWErBctHdM

Tech_guy
You can buy a loaf of bread with a $5 bill...for now. You used to be able to buy it for a nickel. Before that, you could buy it for gold/silver. Which one has held it's value better?

What do you mean they "dumped" it? It's something that can't be destroyed, so someone had to buy it. Who do you think did?

Here's a good article about the "current value" of gold? Seems like perhaps the government has had a hand in keeping it's value down all of these years: http://mises.org/story/3302

You call inflation "progress?" I call it a farce. The above article describes a number of reasons and, considering advanced civilizations have survived many years on a precious metals, where fiat seems to be getting itself into quite a bit of trouble in every country that uses it, I'd say it might not be such an "advanced" idea.

From Wiki:
"Governments through history have often switched to forms of fiat money in times of need such as war, sometimes by suspending the service they provided of exchanging their money for gold, and other times by simply printing the money that they needed. When governments produce money more rapidly than economic growth, the money supply overtakes economic value. Therefore, the excess money eventually dilutes the market value of all money issued. This is called inflation. See open market operations."

As for 12th century China being the last time, let's try that again:
-We've used it off and on for 200 years: http://www.kwaves.com/fiat.htm
-France and Germany both used it in the last 200 years: http://dailyreckoning.com/fiat-currency/
*We can see how well that worked for the Weimar government:
Inflation got so bad in this period that German citizens were literally using stacks of marks to heat their furnaces. Here is a brief timeline of the marks per one U.S. dollar exchange rate:

April 1919: 12 marks

November 1921: 263 marks

January 1923: 17,000 marks

August 1923: 4.621 million marks

October 1923: 25.26 billion marks

December 1923: 4.2 trillion marks

I'm thinking this is where we'll end up, if the government keeps printing money like they do. If that does happen, I'd imagine precious metals will come, pretty heavily, back into play.

InvestorMan, save your breath with tech_guy, he just doesn't get it and nothing will change his mind. Even if Gold goes to $2000, he'll just call it a manic bubble.

But who cares? As long as it goes up, even the misguided will have to accept that fact, for whatever misguided reasons they will come up to explain it.

Bottom line: whether you believe in the fundamentals, the technical analysis, or think its a bubble, the price is going to continue to rise and thus presents a good investment in these very difficult times.

So stop the bantering with tech_guy and just let him be.

InvestorMan: First, most of your arguments are for the gold standard. I've said it a thousand times - if we go back to a gold standard, it will be a good idea to buy gold. But we don't have a gold standard. No major currency does. That's the reality, no matter how much you hate it. The reality is that the fundamentals behind gold changed (used to back every major currency, now backs none), and the price hasn't changed to reflect that reality. That's a bubble, plain and simple.

"As for 12th century China being the last time, let's try that again"

All examples of fiat currency for far shorter periods of time than we've been on it now. How about you try reading what I wrote again?

Plus, all these arguments have a fundamental problem. They are each essentially "country X was on the gold standard, switches to fiat, and awful stuff happens". One such example is Germany around WW1 and WW2. If an article attributes the mess Germany had around the time they lost 2 world wars to... fiat currency, that article (and its author) are pretty damn stupid. It doesn't take a genius to realize they were pretty screwed with or without gold currency.

Plus, showing ancient examples of past failures is hardly indicative of our future. A whole bunch of democracies failed - apparently we're doomed too. No, we aren't, its called progress. Our nation's entire history is full of us doing things that nobody else has ever succeeded at doing before.

hasnt gold already proven to be a great play considering the delevraging? I know I argued like mad many months ago, WITH MMAFIA, on WHY I own gold. Every fiat currency is being debased. Forget gold standard, backwardation, or inflation hedge. Gold is clearly breaking out amidst major deleveraging and that is worthy of notation.

Stevejhx even arguied against gold because it has no industrial use and he does not view gold as money. I do. But these debates are useless because its so hard to change your mind from one way to another. Anyway, clearly gold has out performed by a landslide, even if it didnt do what everyone thinks it should have done during this mess. Once the deleveraging is over, you sill see gold rise. Your seeing it now even as dollar holds strenght temporarily. It goes beyond a dollar play at this point. All fiats are a race to worthless

You're talking extreme short term. I'm talking long term. The gold standard didn't disappear yesterday, so I don't expect the price to reflect that reality tomorrow. You can make a ton of money in a bubble - that doesn't make it any less of a bubble.

The money vs. not money argument is not useless at all. Gold only became special because governments used it for their money. Its not magically money, god didn't declare it money, people made it money. Those same people said its no longer money. The fundamentals changed, but the price didn't.

like i said...it.... just.... doesn't... compute for tech_guy.

he'll argue till he turns blue. i don't mind. as long as i'm making money. while he's turning blue.

LMAO.... UD, MMAfia, InvestorMan... pls don't argue with a guy who doesn't calculate imputed rents and believes his 1bdrm purchase at the height of the RE bubble is a wash at the worst b/c he thinks he took out his 401K money as a 1st time purchaser and leveraged himself/herself by 20x.... but HEY!... I would've lost 50% in my 401K.... LMAO...

OBTW..... all the MDs and wives of MD's that are on this Board... take purchase (of your home in NYC and environs) price cut in half, slice by a third and multiply by .35%..... congratulations... now try to sell it with the other 10K maniacs.... people keep the thread on point :)

Its amusing that you need to make up facts to argue with me. It says quite a lot about your confidence in your own side of the argument.

"Bottom line: whether you believe in the fundamentals, the technical analysis, or think its a bubble, the price is going to continue to rise and thus presents a good investment in these very difficult times."

Hmm, what does that remind me of? Oh, right, the attitude of tech stock bulls in 1999... or Manhattan RE bulls in 2007... or ...

InvestorMan actually has some good arguments. Nonetheless, I prefer to invest in something that cash flows, or has intrinsic value, or both.

"Hmm, what does that remind me of? Oh, right, the attitude of tech stock bulls in 1999... or Manhattan RE bulls in 2007... or ..."

Please don't try to compare today's situation to the Dot Com and Real-Estate booms... while we can say that the prices in Gold could undergo a similar boom, as it has been showing, the situation in which we are in today is extremely different, and thus the backdrop is absolutely incomparable.

Let's at least get that straight.

Remember, we are still far away from the Dot Com bubble when P/E ratios were off the charts, or when Housing Prices were the highest ever when adjusted for inflation.

Gold prices today adjusted for inflation would have to be over $2000 to even match the previous all time high set in 1980.

If we were truly to reach a bubble stage, then we'd have to at least start to approach previous highs, of $2,000 and take them out convincingly to open the gates to the mass speculators for the final, manic spike.

TG, my argument for the gold standard is the same premise as me arguing for gold itself: The fiat currency has caused rampant inflation, debased our currency, and allowed the government to just print money as they pleased; all which ruin the value of the dollars you hold in your pocket. Sounds like a pretty crappy deal to me.

MMafia, you're right about gold being "cheap" in relation to it's highs in the 80's, when compared to inflation.

One other note: Schiff brings up a good point. Twice in history, thus far, gold and the Dow have reached parity. In 1932 when the market was at it's lowest, the Dow scraped 35; which, coincidentally, was the price of gold it had been pegged to. This happened again in 1980, when the Dow was at 850 and gold rose to $850 an oz.

Think it's possible we head there again? I do. Whether gold skyrockets or the Dow plummets, it still has a long way to go to meet up. Even with gold's rise and the Dow's plummet, the Dow still trading at roughly 9x gold. Still quite a bit of appreciation, or of declines, if it happens again.

I have a strange feeling the next few weeks will be very interesting for gold. It already seemed to break out by Fridays close. China has their own major problems and they will need plenty of dough to survive. That means selling their treasuries. Watch out. I think treasury reversal and gold trade are interconnected. We'll see if this turns out to be the case.

I think the HF world will also jump on the only trade that is working, gold, and give it ummph. Kind of like what happened to oil in 07/mid08. It will get silly.