here is a question for those of you who think one should buy gold … how do you know the central banks (which hol like 99% of global gold reserves) will not sell part or all of thri gold at one point in the near future thus making gold prices drop like a stone?
the current rise in gold prices started only after the washington agreement in 1999 where the central banks agreed to not sell anymore gold. Who says they won’t change that policy and gold dropping back to 259$ an ounce?
If 400 tons is half their reserve, then their reserves aren’t much. 400 tons is approximately 13M ounces, or just a bit more than changes hands on a daily basis in the London Exchange (if memory serves).
The big money traders in the gold markets are far smarter than you give them credit for. They have already estimated the gold reserves in the central banks and take that into consideration, along with things like proven and unproven reserves, in making trading decisions.
You don’t buy gold to make money. You buy gold because it retains its value.
Its worth the same, relative to the amount of goods you can get for it as it has always has been.
It will always retain its value.
The only thing that will change is the value of federal notes.
So, as federal notes lose their value, gold becomes more expensive (in terms of federal notes).
As federal notes gain value, gold becomes cheaper (in terms of how many federal notes it takes to buy an ounce of gold)…
If gold suddenly, goes way down in price (federal notes), all that means is the federal note has become a little more valuable.
Seeing as how the government is counterfeiting the federal note like crazy, you’d be crazy to think the federal note is going to increase in value.
Gold’s value might be constant, but it’s price isn’t solely determined by the value of Fed notes. If it were, it would never go down in price. I think there is an equilibrium price for gold that goes up consistently with the increase in money stock, but there are plenty of psychological elements that can have a fairly dramatic impact on the price of gold, driving it much higher or much lower than the equilibrium point.
“driving it much higher or much lower than the equilibrium point.”
If it costs more federal notes, or whatever currency to buy more gold, all that means is that particular currency lost value.
An ounce of gold could buy a nice man’s suit back when, it can still buy a nice man’s suit now, and probably will always buy a nice man’s suit.
In the future, a man’s suit might cost about $2000. And you’ll probably still be able to get that nice suit for an ounce of gold. That doesn’t mean gold is more valuable. All that means is that the currency that it costs 2000 dollars in, is worth less.
wouldn’t you agree that the price of gold is as vulnerable to speculation as the price of any other commodity (be it oil or .com stocks) ? So if an artifical scarcity is created due to the central banks holding most of global gold reserves and not selling any the current price of gold might not be too high not too low.