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alex kent  -  Dec 13 07:35 PM 1 Posts 0 Followers 0 Following
Gold not the 'real' game in town?
As western goverments look to reduce the value of their national debts and re-stimulate their economies in good old Weimar Republic printing style; holding some blue-chip currencies has started to feel more like a race to the bottom recently.

And so when the value of your money, becomes less than the paper its written on is it better to just hold and trade/barter the paper itself?

Up until less than 100 years ago the gold standard underpinned the world economy and yet despite our moves to a more suitable exchnage rate mechanism, times of monetary woe have fuelled many a 'flight to gold'.

And so, in our current climate, ensues all the coverage of the escalating gold price....

I, like many others, firmly beleive in a mid-term appreciation in the price of gold but beyond that I cannot speculate. (Although it's worth noting that everyone's beleif is a rising gold price creates a self-perpetuating gurarantee of it).

My question to the forum however is whether gold is actually the 'real' game in town right now?

Charting the inflation-adjusted price of gold we are still seem a way off the alltime highs which occurred at the start of the 1980's. Similarly from a short-term growth perspective gold is not even the stand out performer in its precious metals peer group.

ETFs in palladium and silver, for example, have shown over 70% nominal gains in the last 12months compared with a 23% return in gold and with their prices being more traditionally dictated by demand/supply economics, maybe all that glitters is not gold?

What is the forum's view?


Topics:   Gold, palladium, Silver, Inflation
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Ian R. Campbell  - Jan 16 04:06 PM60 Posts1 Follower0 Following
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I had hoped some other Forum Contributor would have answered your question by this date (January 16), but since they haven't, here is mine.

First, while many commentators and pundits related the U.S.$ price of gold (about $850) in the early 1980's as a benchmark (inflation adjusted) against which to measure the current price of gold, I don't see that as being particularly relevant.  My reason for this is that I believe fundamental world economics have changed markedly from the early 1980's to today, and the two times 'macro-economically speaking' are so changed that comparing 'much of anything' in the early 1980's to the increasingly globalizing world economy today - and resultant ongoing world economic power shifts - is not sensible.

Second, I believe we will witness a continuing weakening of the U.S. against its trading partners going forward - and see the U.S. Federal Government caught between a rock and hard place as (I think) U.S. protectionist policies or policies that lead to serious U.S. inflation rates each would do nothing but further exacerbate the problems faced currently by 'Main Street Americans' - to whit, and continuously lowering standard of living.  That leads me to conclude the U.S.$ is more likely to fall further which ought to cause the price of physical gold to go higher from here - although while I am prepared to comment on what I think of trends, I am not smart enough (nor do I think anyone else is either) to predict specific gold price targets.  Moreover, any number of recognized possible 'world conflict events' and unanticipated events could propel the price of physical gold as a safe haven higher.

All in all, I not concerned with the price of physical gold in the context of physical gold itself, because philosophically I see physical gold as a protector of 'purchasing power'.  I am, of course, concerned about the price of physical gold in the context of gold exploration and mining companies.

Perhaps other contributors will either add to this answer, or provide their own separate answer to your question.

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