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Gone
Premium Member
join:2011-01-24
Fort Erie, ON

Gone to Wolfie00

Premium Member

to Wolfie00

Re: Buying some USA nickles for the intrinsic value.

said by Wolfie00:

I'd say that's probably the one thing that will NOT happen. Companies can peak, decline, and even fail eventually, but as long as gold remains a measure of monetary value, economic fundamentals will inexorably push it upward. It's just a question of timing, and how it compares to other investments. After it peaked at nearly 800 around 1980 or so, it declined and remained flat for many years and took nearly a quarter of a century to regain that price point. No one wants to be holding the bag in that situation. An investment that returns exactly 0% after 25 years isn't too cool! I'm sure many speculators in the commodities market lost their shirts. OTOH, many got rich just before 1980, and in recent years.

The value of gold is a direct indicator of economic stability. When the economy sucks, gold value goes up. When the economy is booming and there's plenty of credit and money to go around, the value of gold plummets. The value of gold now, and the lead-up to it, were direct results of both the economic mess the entire world is in now, and the fact that most people started to realize the jig was up in 2006-2007.

Wolfie00
My dog is an elitist
Premium Member
join:2005-03-12

Wolfie00

Premium Member

said by Gone:

The value of gold is a direct indicator of economic stability. When the economy sucks, gold value goes up. When the economy is booming and there's plenty of credit and money to go around, the value of gold plummets. The value of gold now, and the lead-up to it, were direct results of both the economic mess the entire world is in now, and the fact that most people started to realize the jig was up in 2006-2007.

I'm no expert, but I would suggest that there are two basic components to gold prices: the fundamentals that determine long-term value, and the speculative market forces that determine relatively short-term value (which can be many years) that are driven by things like gold as a "safe" haven from inflation and financial instability. I was talking about the long term fundamentals, which are driven by things like population growth and increased demand for scarcer resources.

Gone
Premium Member
join:2011-01-24
Fort Erie, ON

Gone

Premium Member

Fair point, but the increase in gold prices since about 2006 or so would be part of that short-term speculative purchasing that you mentioned. I would suspect that the long-term value, at least to relative to fiat money, would have more to do with inflation than the actual scarcity or supply and demand.