The Gold Slide Isn't Over

It may fall to pre-QE levels of $700-$900.:(:frowning:

Investors who bought gold at its January 1980 peak of $875 an ounce are today still below water in inflation-adjusted terms. They even were showing a loss two years ago when gold was trading for more than $1,900.:shock:

Nor is the dollar’s slide (see chart).

I wish I could find some physical gold to buy near these spot prices. The Colorado Springs coin show ended yesterday and there was little to be had and the premiums were insane. Physical on eBay is crazy high. All I can figure is that China must be hoarding it up, cause gold sure isn’t on the street.

It took 99 years for the dollar to lose 99% of it’s value. Will it go to zero like every other paper currency in human history?

purchasing-power-of-dollar.jpg

It must hurt being a gold bug.

How is physical Silver doing ?

Seems to me best investments are to constantly reinvest.
No matter what, property will always in the long term be the best investment.

Nick as leader of a Home inspection association I am actually surprised you do not discuss that end.

I’m not a gold bug, I’m a physical gold bug. I’ve never owned an ETF in my life.

You really can’t speak about the “price of gold” any longer as physical (bullion and coins) and paper (spot price) have decoupled. If you value paper gold in paper dollars, I would argue that you are masturbating. It’s not real as neither of them are real. Neither is the CPI.

The price of something is what it is being bought and sold for… today. eBay is great for this. If you want to know what widgets are worth, go to eBay and see what people are paying for widgets today. If you want to know the price of physical gold, do similarly: http://www.ebay.com/sch/i.html?_odkw=u.s.+gold+1+ounce&_osacat=0&_from=R40&_trksid=p2045573.m570.l1313.TR0.TRC0.Xu.s.+gold+one+ounce&_nkw=u.s.+gold+one+ounce&_sacat=0

Once you have that down, you then need to figure out what the real inflation rate is to figure out if gold is hold its purchasing power over time or not. Again, you can’t use CPI because CPI isn’t real. You have to figure out the real inflation rate.

Only after you have determined the real price of gold and the real rate of inflation, can you make a statement about the whether or not gold is losing, holding, or gaining in purchasing power over time. The answer of course is that physical gold holds its purchasing power and has for 6,000 years. My graph in post #3 shows that the U.S. dollar does not. It lost 99% of its purchasing power in my grandmother’s lifetime.

If you are valuing paper gold in paper dollars, you haven’t determined anything except for how many paper dollars it takes to buy an ounce of gold using spot price. Meaningless.

Numbers of pieces of paper with Ben Franklin’s face of them or little pieces of shiny yellow metal should mean nothing to you… it is only the purchasing power of those that should mean something to you.

This is the best video I know of that explains why CPI is wrong, and so therefore charts that measure the sensibility of holding physical gold over time using CPI are also wrong: http://www.youtube.com/watch?v=pwI3Nya5L9g

Mr. Schiff has been wrong for the 2 years since Gold peaked.

Thinking he is suddenly now right is dangerous.

There is a very good chance of deflation ahead of us.

Bubbles pop and we never seem to learn.

Peaked in what?

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The real test will be to see what happens if GOLD continues to hover around $1200

Below $1200 the marginal cost of getting it out of the ground exceeds it’s value for a lot of mines that are currently in production.

I don’t mess with gold.

Some physical is not a bad idea just don’t put too many eggs in the basket.

Paper gold can be traded but you MUST pay close attention especially in the futures market.

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Paper gold and physical gold are two entirely different products. You can’t trade physical gold because the premiums are 10 times what they were a few years ago. It’s too expensive to do a trade. That’s why physical gold didn’t go down much in numbers of dollars required to buy an ounce… the premiums filled the gap.

Furthermore, if your physical has even a modest numismatic value, the price of the coin didn’t go down at all. A pre-33, type 1 U.S. coin sells today for what it sold for a few years ago (around $1800/ounce).

Furthermore, even if it goes down in numbers of dollars required to buy it, Bernanke added 3.6 trillion to his balance sheets in 4 years, which means the thing you are valuing the coin in, is less rare and so less valuable. Your product commands more of them, but they are each worth less.

So, instead of making two mistakes in one equation and focusing on the price of spot (paper) gold in number of U.S. dollars, which should be meaningless to all, try to focus on the value of actual (physical) gold in terms of purchasing power.

In 100 years, the U.S. dollar lost 99% of its purchasing power. Actually, all paper currency in human history ends up being worth zero.

So whenever you price something in U.S. dollars, you have to remain conscious that if it keeps going up in price (nominal number of dollars required to buy it), it could be going down in value (purchasing power).

In stark contrast, gold has maintained its purchasing power for 3,000 years. An ounce of gold bought about 300 loafs a bread 3,000 years ago. Today an ounce of gold buys about loafs loaves of bread.

Yak yak yak.

Cut to the chase.

How much will I need to spend for 1 ounce of physical TODAY

Gold is a store of wealth (purchasing power). Money is not. See the difference in charts before you trade physical gold for paper dollars.

purchasing-power-of-gold.jpg

How much over spot?

I went to the Colorado Springs coin show this weekend and no one would sell for less than $150 over spot which makes it financially prohibitive to trade physical gold. Premiums used to be $25. Also, no one had any anyway. If you look on eBay, the premiums are running as much as $400 over spot. It’s nuts.

The coin show reminded me of a joke. A trucker is driving down the road and sees a sign that says “Coke 5 cents.” He pulls in and says “I’ll have a Coke please.” The store owner apologizes, explains he’s out of Coke, but that there is another store a mile down the road. The trucker gets back into his truck and sure enough, finds the next store which has plenty of Coke. He says “I’ll have a Coke please.” The store owner says “Sure thing, that will be $2.” The trucker replies “$2? They sell it for 5 cents a mile back!” The store owner asks “Well then, why didn’t you buy it there?” The trucker replies “Because they were out.” The store owner then responds: “Well, when I’m out, I offer it for free.”

You can order gold coins for online for less than that in stock

American Buffalo Gold Coin (1.000 oz.) $1,317.18

Uh, not without shipping charges, insurance charges, state taxes depending on where you live, and a paper trail.

Peter Schiff just after gold peaked.

http://finance.yahoo.com/blogs/breakout/avoid-disaster-u-assets-peter-schiff-150725617.html

7oz. of gold would buy the Dow 30 on Aug. 3. 2011

Today it takes 12 oz. July 1, 2013

Do the math.