bump
Inflation be damned! They said I was crazy putting all my money into precious metals. Now they can all kiss my now they can all kiss my fat, extremist, reactionary, gold-hoarding, (soon to be) Rolls Royce driving ass, while they take the bus to go pick up their food stamps! =P
A visual depiction of what appears to be happening to the entire global economy.
@Fleet: As an aside, I hold a contrarian-contrarian view on gold. I am a conspiracy theorist. I do not believe the housing bubble was an accident, I believe that it was done on purpose to spark an economic crisis that would serve as a catalyst for a global currency that was scheduled to have been already in circulation. The 2009 Copenhagen summit was shot down by an insider with a carefully timed release of the “hacked” CRU emails.
Given this view, I don’t believe we are witnessing a true crack-up boom. Instead, what we are now witnessing is a global “bank run” on the US dollar. This is the end of Bretton Woods II. Every currency is inflating just enough to keep up with or outpace the devaluation of the dollar which is the equivalent of a bank run on the dollar as a reserve currency. As the Fed inflates faster, all currencies are devaluing faster which is what is pushing everyone around the globe out of paper and into commodities. This isn’t supposed to be the way it works. The Fed is supposed to be able to inflate while everyone else holds their peg and swallows the exported US inflation. In the wake of the breakdown of Copenhagen and the confusion which has ensued, governments and their central banks are turning to a standard, protectionist stance.
If the Fed continues to pursue a course of QE3, QE4, etc. it risks destroying whatever is left of the global status quo. If this happens, it will no longer be the center of the banking universe. That said, I’m extremely doubtful that a commodity money is going to emerge out of all this. For one, even though foreign central banks are sick of eating the Fed’s inflation, they’re not about to give up their money-printing racket, either. So, I think the Fed and foreign central banks are playing a game of chicken right now. In essence, the foreign central banks are saying “stop printing money, and let things go back to normal and then we’ll work out what to do from there” and the Fed is saying “You stop printing money or we’ll keep doing it until we blow up the whole system and we’re all back in the stone age with Thalers, Drachmas and Florins.”
This is all pure speculation. I have an active imagination. Anyway, the point is you should keep your eyes peeled and be looking for contrarian clues. Gold has never had a price adjustment this steep, ever. Doesn’t mean this can’t be the first one, but it’s pretty insane. Be prepared to diversify out of gold on a moment’s notice.
Clayton -
I would love to believe that the price of gold would suddenly drop. I would just buy more of it. If I had started investing in gold and silver from the day I made my first dollar, I could retire on salary alone-- just as nearly everyone did before inflation ran out of control.
Given the massive inflationary spending of late, I would expect gold to go up further, not down. The Fed has conspired to fix the price of gold, yes, but to keep the price down, not up. It sells off its gold to increase supply, making the dollar appear more valuable. Today, mines are all working at capacity and the Fed cannot sell off any more without endangering its own security. There is nowhere for it to go but up due to the massive release of government fiat money. If the Fed would just scale back, raising interest rates-- or better yet, letting the market set them-- the price of gold would go down sharply. Do you see that happening?
Whether or not we are on a gold standard, a gold standard exists nonetheless. An ounce of gold has exactly as much value today as it did a century ago, or a millennium ago, or since a man first emerged from his cave to trade with a neighboring tribe! It is the eternal currency of God and man because its quantity is fixed by physical laws. Fiat money is a tool of conspirators; gold is in-your-face truth that is impossible to deny (one reason they banned it for so long). Poetic flourishes aside, going backward and dealing in Ducats and Florins would be a vast improvement for individual savings.
Looks like it’s happening 
$1560!!!1ONE
Buy! Buy! Buy!
The fair-weather gold investors - the ones who bought mining shares or GLD because the Charles Schwab guy said “you should put 2-3% of your portfolio in gold for diversification” while keeping the other 97% in SPDR - are running scared because they’re figuring that if the economy hasn’t crashed yet, then it’s not going to. The price of gold is $300 off its highs earlier in the year and they’re afraid of “further losses” so they’re selling on the way down (derp).
While I’m not going to call a bottom (I can imagine another 10-20% drop as the fair-weather investors continue the stampede), I think it’s clear that it’s time to buy gold. The smart investor will have been exchanging his gold for other less volatile commodities (oil, copper, wheat, etc.) earlier in the year as gold was skyrocketing in what was clearly a mania buying pattern. Now is the time to shift out of those commodities and back into gold. If you shifted into cash, that’s OK but not as good and it’s now time to shift out of cash and back into gold. If you’re a risk-taker, you can try to time the bottom and go all-in at that point, or you can gradually ease into gold as the price continues falling.
Clayton -
What about silver? It’s at $27.
Well, I tend to treat gold and silver as “roughly synonymous” commodities, despite some technical differences (most importantly the relative size of the gold and silver markets). If you don’t have a few grand laying around to buy gold, silver is a good substitute.
Clayton -