'We buy gold' racket

Toyman01 wrote: I still wouldn't run out a buy a bunch planning to get rich.

You do not buy gold with the intention of getting rich. You buy gold to protect what wealth you have from the mathematically certainty of the collapse of the dollar as we know it.

I do not own any physical gold, but totally understand the reason people do.

Gold etc are worth only what people think they are worth, exactly like paper money. In a true economic collapse (not just a 'market correction' like we have seen over the last few years), gold will be as worthless as any other medium of exchange. What will be valuable? Only those things which are essential to life: food, shelter, medication, self defense. You can't eat gold. You can't make a house out of it. It won't cure a disease. But you can throw a gold bar and hit someone in the head with it. Since everyone else is in the same boat, the gold looks all pretty but is worth exactly nothing.

So anyone sitting on gold to get them through a coming economic apocalypse is only fooling themselves. That gold will be devalued with the collapse of the currency, much like post WW1 Germany when the Deutschmark was valueless. You'd actually be better off maxing out 10 credit cards to buy a stockpile of food etc, that way someone else (the big bad bank) gets stuck with the bill when the system collapses.

Gold almost has to be heading for a major correction, I'm thinking it's overpriced now. Buying now could be the worst possible time to do so.

The wife and I have been stocking up on clothes for the kids. Prices keep skyrocketing on everything. We're buying shoes and clothes for the kids to get them through the next couple of years. I figure it'll be cheaper to buy them now rather than later and if the world goes to E36 M3 at least they won't be running around naked. We're stocking up on some of the basics in food too. 90 days of food in the house can't be a bad thing. At least I won't have to stock up for the next hurricane.

Yes, I know I'm paranoid. Prepare for the worst, then you can be pleasantly surprised if it doesn't happen.

The point of investing in gold is that it tends to rise above the quick fluctuations of the currency market.

If the US dollar takes a E36 M3, gold will remain relatively constant because it's essentially supported by every currency on the face of the planet.

Also, there are plenty of so-called experts that are predicting a rise in gold prices into the neighborhood of $5000. per ounce. So it's anybody's guess really whether gold at $1700. is overpriced or not. We may look back in a couple of years and wonder why we didn't stock up at 1700, much as people do today when they reflect on the $350 level of a few years ago.

But if the US dollar takes a E36 M3, the rest of the currencies will follow. The planet is so interconnected economically that a shock in one part is felt elsewhere. What was it, two/three years ago? that the drop in the US economy led to massive layoffs and plant closings in China? Of couse that gov't is not going to let that cat completely out of the bag so we will probably never know the full extent of the damage done there.

Gold prices can, do and will fluctuate. If gold hits $5000 an ounce at some point that's going to correct itself, same as the housing market did. I don't want to be sitting on gold when that happens. For a further cautionary tale, check out the Hunt brothers' attempt to corner the world silver market:

http://www.buyandhold.com/bh/en/education/history/2000/hunt_bros.html

Sure, had I bought, say, $100,000 in gold back when it was $350 an ounce it would be worth a lot more today but the prices of everything has gone up as well. When prices and salaries rise, that's inflation. It takes more dollars to buy the same things, thus inflation makes dollars (or any other currency) worth less.

For gold to jump from $1700 to $5000 is what I'd call super inflation, pure and simple. I don't think I want to stake my future on super inflation and that's why I say if I held gold right now I'd be bailing pretty quick so I'd get my money's worth. I'd take that money and pay off a house, that way I wouldn't be screwed and not have a place to live when that super inflation blowback came.

1988RedT2 wrote: Also, there are plenty of so-called experts that are predicting a rise in gold prices into the neighborhood of $5000. per ounce. So it's anybody's guess really whether gold at $1700. is overpriced or not. We may look back in a couple of years and wonder why we didn't stock up at 1700, much as people do today when they reflect on the $350 level of a few years ago.

From close observation, I've noticed over the years that the experts (in just about every field) are almost always wrong. Nonetheless, I thought gold was overpriced, and due for a correction at $1000. Was I ever wrong. The thing about gold is, that it's not entirely speculation. From what I understand, we're actually using more than we're making, hence the increase in value.

the growing middle class in India is buying lots of gold

My wife's daughter is expected to go to Senegal by the end of this week to assist in bringing back 10 kilos of gold. Her share is to be 2 kilos. Been working on this deal for over a year. I have tried and tried to convince everyone involved that this will wind up being a disaster, but the kid (42yo) is blinded by greed. So many scams in this market, so many corrupt customs people, so many government restrictions, and no way to truly establish what the "gold" actually is. I just see colossal heartaches for Mom. Gold can make people crazy.

cwh, sorry to hear about that. Greed in general makes people do crazy things. Good luck with it.

cwh wrote: My wife's daughter is expected to go to Senegal by the end of this week to assist in bringing back 10 kilos of gold. Her share is to be 2 kilos. Been working on this deal for over a year. I have tried and tried to convince everyone involved that this will wind up being a disaster, but the kid (42yo) is blinded by greed. So many scams in this market, so many corrupt customs people, so many government restrictions, and no way to truly establish what the "gold" actually is. I just see colossal heartaches for Mom. Gold can make people crazy.

hey, at least she'll be off your couch for a while.

THAT is the bright spot. As of now, she is on the couch until 11:00 every morning. I will be delighted to see her go, but fear what my wife will be like when it goes bad. Who knows, maybe it will go as planned?

cwh wrote: My wife's daughter is expected to go to Senegal by the end of this week to assist in bringing back 10 kilos of gold. Her share is to be 2 kilos.

That's pretty scary. Even if it wasn't a scam (and there's a 99% chance it is) what's she going to do when the feds catch her trying to smuggle gold into the country?

edit: This is from http://dakar.usembassy.gov/service/emergency-services/victims-of-crime-in-senegal.html

Business Scams

These scams pose a danger of both financial loss and physical harm. . . . . Other variations include apparently legitimate business deals requiring advance payments on contracts and offers to sell gold at a very low price. In the last case, the seller may present real gold to be verified then substitute fake gold and disappear with the payment.

Curmudgeon wrote: I don't think I want to stake my future on super inflation and that's why I say if I held gold right now I'd be bailing pretty quick so I'd get my money's worth. I'd take that money and pay off a house, that way I wouldn't be screwed and not have a place to live when that super inflation blowback came.

The exponential math behind our dollar means it is a mathematical certainty that the dollar as we know it will not be around forever. Hyper-infaltion can only occur when the people lose faith in the dollar and I do not see that we are anywhere close to that at this point. Mostly because a very large majority of the country (and world) do not understand what a dollar is or where it comes from.

Despite our problems, right now the US dollar is still a very near universal currency. If you go to deepest Africa people will still accept a US greenback before just about anything else. That means anything that shakes the dollar shakes everything.

People have lost faith in other currencies, the Deutschmark and the ruble being but two. That was a lot of the reason the EU went to the euro, to try to stabilize all those small currencies into one big one that will fall a LOT harder. The powerful yen (among other Asian currencies) took an ass whoopin' during the 1990's mostly because the Thai baht was devalued (it was pegged to the dollar and the Thai government removed that link, thus starting the whole thing). There's no reason that can't happen to the dollar as well.

Yeah, I'm pessimistic. I'm also a realist. The gold market cannot continue like it is, at some point the bubble's going to pop. It reminds me so much of the housing market when Alan Greenspan was so crass as to suggest it was headed for trouble he was (basically) shouted down. That was a LONG time before it actually happened. Man, it would have been nice for him to be wrong.

Curmudgeon wrote: But if the US dollar takes a E36 M3, the rest of the currencies will follow. The planet is so interconnected economically that a shock in one part is felt elsewhere. What was it, two/three years ago? that the drop in the US economy led to massive layoffs and plant closings in China? Of couse that gov't is not going to let that cat completely out of the bag so we will probably never know the full extent of the damage done there. Gold prices can, do and will fluctuate. If gold hits $5000 an ounce at some point that's going to correct itself, same as the housing market did. I don't want to be sitting on gold when that happens. For a further cautionary tale, check out the Hunt brothers' attempt to corner the world silver market: http://www.buyandhold.com/bh/en/education/history/2000/hunt_bros.html Sure, had I bought, say, $100,000 in gold back when it was $350 an ounce it would be worth a lot more today but the prices of everything has gone up as well. When prices and salaries rise, that's inflation. It takes more dollars to buy the same things, thus inflation makes dollars (or any other currency) worth less. For gold to jump from $1700 to $5000 is what I'd call super inflation, pure and simple. I don't think I want to stake my future on super inflation and that's why I say if I held gold right now I'd be bailing pretty quick so I'd get my money's worth. I'd take that money and pay off a house, that way I wouldn't be screwed and not have a place to live when that super inflation blowback came.

how long ago was gold at $350 ? the jump to $1700 = ~ a 21% rise... to go from $1700 to $5000 would only be ~ a 34% rise ... depending on how long it takes to get there .... if comparable to the time it took to reach $350 shouldn't the inflation rate be comparable ?

Gold price chart:

That's the whole point, wb: at this time gold is vastly outpacing inflation in its price growth. That's unsustainable. If you look at the chart stuart posted, the real big jump happened about the time the housing market tanked (2008). Had you grabbed some then and sold it now you'd be in good shape, but the bubble is expanding too much too fast to hang onto it for the long term.

But it's being touted as a long term investment, same as the housing market was and we all see what happened there. I see ugliness ahead.

Does anyone recall the collector car boom several years ago? For instance E types went off the charts, selling for stupid money. It got white hot for a while, there was even a company that would cut up a 2+2 and turn it into a roadster, you could do that and double your money. A few people made money, most didn't. That all went bust.

Or how about the Beanie Babies furor? http://qctimes.com/lifestyles/leisure/article_ed5b254a-8668-11de-8309-001cc4c002e0.html I had a woman tell me once that the two bags of B-B's in her car were going to fund her grandkid's college education. It was all i could do to keep a straight face.

I'm always curious about gold. While its a pretty and useful mineral, what percentage of its value is psychological?

I'm worried less about returning to the gold standard than I am about surviving the "canned pork'n'beans" standard.

It's hard to say how much is psychological. You don't want to think too hard about the worth of paper or metal money, that's all a matter of faith and is subject to change.

Some people compare the recent gold prices to the tulip mania of 1637: http://en.wikipedia.org/wiki/Tulip_mania

cwh wrote: My wife's daughter is expected to go to Senegal by the end of this week to assist in bringing back 10 kilos of gold. Her share is to be 2 kilos. Been working on this deal for over a year. I have tried and tried to convince everyone involved that this will wind up being a disaster, but the kid (42yo) is blinded by greed. So many scams in this market, so many corrupt customs people, so many government restrictions, and no way to truly establish what the "gold" actually is. I just see colossal heartaches for Mom. Gold can make people crazy.

For real?

Show her that embassy info on gold scams in Senegal and ask her how she found out about this screaming deal. Does she think people in Senegal are too stupid to know what gold is worth?

Street price for gold is the same as it is here. There are artesinal miners that work outside the system, and are thought to sell at a lower than standard price. Biggest problem is verifying what you are paying for. Supposedly, all paperwork is in place, but trusting corrupt politicians in an African nation? No. I don't know how she learned about this. But, she has staked everything on the deal, refusing to even look for a job, because she will be rich very soon. There is no Plan B. I cannot understand what value she brings to the deal. 2 kilos of gold is worth 120,000.00. That is a lot for babysitting a briefcase.

wbjones wrote: how long ago was gold at $350 ? the jump to $1700 = ~ a 21% rise... to go from $1700 to $5000 would only be ~ a 34% rise ... depending on how long it takes to get there .... if comparable to the time it took to reach $350 shouldn't the inflation rate be comparable ?

That's weird math. You did it backwards. The jump from $350 to $1700 is NOT a 21% rise, it is a 485% rise.

Does that number sound high to you? Do you think we could see another 485% rise in the next 10 years?

So, let's see... My grandfather bought his house in 1978 for $65,000. A 485% rise would make it worth $315,250. (It is actually worth about $120K). If we calculate a SECOND similar increase it would be worth $1.528 MILLION. There will never be a time it will reach that. Never.

Inflation is not a steady rate.

Gold prices can't be measured by an "inflation rate". If anything, there COULD be an INVERSE relationship (though there isn't). It doesn't follow the inflation rates. It is used (by some) as a hedge AGAINST inflation.

Curmudgeon is right. Gold is in a questionable position right now as an investment.

Could I be wrong? You bet. I'm one of the ones who didn't buy when it hit $300 per ounce. Will it always increase at an astronomical rate? Absolutely not.

In reply to cwh:

Seems safer for her to head to Alaska and pan for gold. Maybe she's been watching too much Discovery....