Gold - is it really safe investment?

[mcgravier]

So I'd like to share some taughts... or more like doubts about keeping wealth stored in gold.

There are 3 major sources of demand for gold:
- goldsmith industry
- investitions/speculation
- electronic industry
- few other, marginal

Now imagine case of severe global economic collapse, that will force many people to spend their savings for basic needs. It can be assumed, that large amount of gold will be sold for curriences that allow buying goods and services.

Now wich of these industries is capable of absorbing large amount of gold?

I belive the answer is: Neither one.
- As luxury goods industies are drasticallly shrinking during crysis, you cant count on high jewelerry production, do you?
- Cost of gold is really small part of cost of a final electronic product, therefore you cant count that due to large gold supply increase, production of computers rises considerably.
- Only one that left is speculative/investive demand, and I dont think, that it can guarantee stable prices. Rather bubbles instead.

Of course this would be completly different if gold standard would be still in use - as it quite well guaranteed demand for gold in the same way that economy guarantees (more or less) the value of every mean of exchange. Im afraid that further or later price of gold may correct itself to value of shiny, useless metal that it has become since gold standard abondance.

Sry for english - not my native language, and not my brightest day either.

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[molecular]

there doesn't have to be industrial demand for something to be valuable (*points at bitcoin*)

I think gold is safe, but maybe not a good investment.

Consider silver or bitcoin, for a collapse: water, food, cigarettes, gas,...

[mcgravier]

there doesn't have to be industrial demand for something to be valuable (*points at bitcoin*)

I think gold is safe, but maybe not a good investment.

Consider silver or bitcoin, for a collapse: water, food, cigarettes, gas,...

True, there is no industrial demand for bitcoin, but there is "economical" one - its simply demanded because its needed for people to exchane it for goods and services.
Gold on the other hand cant be directly exchanged into goods and services, so there is no such demand for it. Only source of demand is the industrial and speculative - wich are dubtful in my opinion

[deeplink]

Now imagine case of severe global economic collapse, that will force many people to spend their savings for basic needs. It can be assumed, that large amount of gold will be sold for curriences that allow buying goods and services.

Gold (and silver) exists in many physical forms. For example as small coins. There is no need to sell these for other currencies during an economic collapse, because they can be used directly by itself for trading against goods and services.

Gold on the other hand cant be directly exchanged into goods and services, so there is no such demand for it. Only source of demand is the industrial and speculative - wich are dubtful in my opinion

The same point, the question then is, why do you think people cannot or will not trade goods and services for gold coins directly?

[exxe]

If there is a global economic collapse currencies will inflate/deflate extremely I guess. People will get scared that they lose most of their savings in the long term and will try to invest into something 'real'. Some will invest in real estates others in commodities like gold. My guess is that the gold price would go up in this case.

[dancupid]

Gold is relatively safe until the cost of manipulating matter at will is cheaper than the value of gold - give it 40 years I'd say.

[CoinDiver]

Gold will be the first to spike, as that is what governments will move to, to back the new currency when the dollar/euro/pound collapse. After the initial spike as governments hoard, the new currency will be pegged to gold. At that point, gold will stop floating... this is the point where you should GTFO of gold, and move to silver. Ride the silver wave up as hoarding shifts.

[J-Norm]

Historically gold has increased in value during tough times, particularly economic collapse.

Personally it makes me nervous that it might get stolen. I am slowly trading my silver and gold for bitcoins. It is difficult to trade because once again I am worried about it getting stolen.

...Gold on the other hand cant be directly exchanged into goods and services, so there is no such demand for it. Only source of demand is the industrial and speculative - wich are dubtful in my opinion

It certainly can. I often use gold and silver as a direct medium of exchange, and there are 6000 years of history of it being used directly for trade.

When fiat based currencies fail it will be the paper that cannot be exchanged, the metal will be in high demand.

[dancupid]

Historically gold has increased in value during tough times, particularly economic collapse.

Personally it makes me nervous that it might get stolen. I am slowly trading my silver and gold for bitcoins. It is difficult to trade because once again I am worried about it getting stolen.

...Gold on the other hand cant be directly exchanged into goods and services, so there is no such demand for it. Only source of demand is the industrial and speculative - wich are dubtful in my opinion

It certainly can. I often use gold and silver as a direct medium of exchange, and there are 6000 years of history of it being used directly for trade.

When fiat based currencies fail it will be the paper that cannot be exchanged, the metal will be in high demand.

I personally do no live my life on the expectation of apocalypse - I live it on the basis of exponential technological progress. That's why bitcoin is the future.
If apocalypse happens I will have to rely on my very large penis.

[mcgravier]

Historically gold has increased in value during tough times, particularly economic collapse.

Personally it makes me nervous that it might get stolen. I am slowly trading my silver and gold for bitcoins. It is difficult to trade because once again I am worried about it getting stolen.

...Gold on the other hand cant be directly exchanged into goods and services, so there is no such demand for it. Only source of demand is the industrial and speculative - wich are dubtful in my opinion

It certainly can. I often use gold and silver as a direct medium of exchange, and there are 6000 years of history of it being used directly for trade.

When fiat based currencies fail it will be the paper that cannot be exchanged, the metal will be in high demand.

I personally do no live my life on the expectation of apocalypse - I live it on the basis of exponential technological progress. That's why bitcoin is the future.
If apocalypse happens I will have to rely on my very large penis.

I haven't in mind total apocalypse scenario, just a severe crisis, that would force relatively large amount of people to enable their stored assets. The problem when exchangeing gold directly is lack of mobility, it is really uncomfortable to use gold as cash, and when comes to electronic transfers, you must rely on some kind of IOU anyway.

[J-Norm]

I personally do no live my life on the expectation of apocalypse - I live it on the basis of exponential technological progress. That's why bitcoin is the future.
If apocalypse happens I will have to rely on my very large penis.

Yes, we all have a very large penis to fall back on...

The only three technologies that I believe threaten gold are deep core mining, deep space mining and transmutation of elements. I don't think any of those three are near being practical.

The vast majority of gold's use is already economic. Governments horde it and use it to settle debts with each other. Industrial and jewellery use is a very small part of it.

Silver on the other hand does have a good chance of losing much of its value due to advancements in materials technology. But if material technology makes copper less important then silver prices will jump up because most silver is produced as a byproduct of copper mining.

[dancupid]

I personally do no live my life on the expectation of apocalypse - I live it on the basis of exponential technological progress. That's why bitcoin is the future.
If apocalypse happens I will have to rely on my very large penis.

Yes, we all have a very large penis to fall back on...

The only three technologies that I believe threaten gold are deep core mining, deep space mining and transmutation of elements. I don't think any of those three are near being practical.

The vast majority of gold's use is already economic. Governments horde it and use it to settle debts with each other. Industrial and jewellery use is a very small part of it.

Silver on the other hand does have a good chance of losing much of its value due to advancements in materials technology. But if material technology makes copper less important then silver prices will jump up because most silver is produced as a byproduct of copper mining.

Genetically modified bacteria that consume gold ions also threaten gold, since the immutability of gold is it's key selling point.
This is practical for mining (from sea water), but also undermines the immutability of gold.

[phungus]

I personally do no live my life on the expectation of apocalypse - I live it on the basis of exponential technological progress. That's why bitcoin is the future.

The real meaning of the word apocalypse is simply change.

I take this to mean "change to the status quo" and in my case, I see world economic slavery ending all around us.

It's a good thing. :-)

-p

[molecular]

I personally do no live my life on the expectation of apocalypse - I live it on the basis of exponential technological progress. That's why bitcoin is the future.

The real meaning of the word apocalypse is simply change.

I take this to mean "change to the status quo" and in my case, I see world economic slavery ending all around us.

It's a good thing. :-)

-p

your words my friend. let's do this!

[whenhowwho]

Well to put it very simply precious metals are always a good store of value. they are never good investments. now i will explain.

gold and silvers value doesnt really ever change. A few decades ago you could buy a gallon of gas for one silver dime. Today you can still buy a gallon of gas for one silver dime. The only thing that has value that changes is fiat currency. Another example gold used to have its value controlled in respect to the dollar. 1 ounce of gold was worth 20 dollars. at that time you could buy a brand new car for about 300 bucks or 15 ounces of gold. Today an ounce of gold is worth exactly the same. 15 ounces of gold at the current fiat exchange rate will still get you one brand new car.

So if you were to buy a bunch of physical gold you would have the value of it stored. regardless of what the exchange rate does your value would remain the same. if fiat currencies decline further then you would think to yourself well now my gold is 5k an ounce and what a wonderful investment it was. The truth would be that your 5k would have the same buying power as your 1700 does right now. The same would hold true if fiat currencies gained value so your 1 ounce of gold is only worth 500 an ounce. That 500 dollars would have the same buying power as your 1700 does now.

[Spaceman_Spiff]

gold and silvers value doesnt really ever change. A few decades ago you could buy a gallon of gas for one silver dime. Today you can still buy a gallon of gas for one silver dime.

Sorry, but this is such an urban legend.  Don't get me wrong, I like gold and silver, but they do not automatically maintain purchasing power.  Somebody who bought gold in 2000 made a hell of an investment, an can now buy a boatload more other stuff then he could then.  It is true that if you look at gold historically, then it maintains its purchasing power a lot better than fiat currencies, but in the short term (short being decades here), this is simply not true.  This is why I also don't see gold as a "safe" investment, next to the volatility being quite large.  There might be times when it is the safest asset to buy, but definitely not allways.

[Spaceman_Spiff]

Now imagine case of severe global economic collapse, that will force many people to spend their savings for basic needs. It can be assumed, that large amount of gold will be sold for curriences that allow buying goods and services.

Now wich of these industries is capable of absorbing large amount of gold?

I belive the answer is: Neither one.
- As luxury goods industies are drasticallly shrinking during crysis, you cant count on high jewelerry production, do you?
- Cost of gold is really small part of cost of a final electronic product, therefore you cant count that due to large gold supply increase, production of computers rises considerably.
- Only one that left is speculative/investive demand, and I dont think, that it can guarantee stable prices. Rather bubbles instead.

I think you are right that several people that have gold might have to sell their gold for basic needs in economically hard times.  However, there is a larger force in the opposite direction.  During economical difficult times (like now in western world) central banks will often print a large amount of money to give government sufficient purchasing power (as these governments have often accumulated a large amount of debt, and have fiscal deficits going on).  This has the capacity to severely undermine the purchasing power of your fiat money (although this depends on the amount of printing versus balance sheet reduction and reduced money velocity).  As people grow aware of this, they try to protect their savings by trading their fiat currency for hard assets (gold, silver, land, real estate etc.).  This causes a larger amount of wealth to be transferred to gold compared to fiat currencies.  If this wealth transfer is larger than the reduced availability of goods and services in bad times, your gold will buy you more stuff.  The thing to remember is, while there are middle class families struggling to survive, selling their grandmothers jewels, there are also a lot of rich people with a lot of wealth who do not want to see their savings printed into oblivion.

[DoomDumas]

I read somewhere that for gold to be as a reserve, like a gold standard, each fiat $ backed by gold, an once of gold sould be priced arround 33 000 $  instead less than 2000 like those years.
Knowing that fiat printing press are running at turbo mode, diluting fiat, an appreciation in gold price is strong probability.
But I bet BTC will show to be a much better investment.. BTC today VS gold Today, for sure I invest in BTC first, and a lot more !

In case of a major crash ?? 
My call is : Fire arm, dry food and run to hide in the forest
As I like to say in french : Bouffe sèche, arme à feu et planque dans l'bois

[Spaceman_Spiff]

I read somewhere that for gold to be as a reserve, like a gold standard, each fiat $ backed by gold, an once of gold sould be priced arround 33 000 $  instead less than 2000 like those years.

Based on the numbers found on these websites, I am calculating 10176$ / troy ounce of gold reserves.  I am somewhat surprised though, I seem to remember it being higher, so either my memory is wrong, or I am using the wrong resources.  They would be fools not to buy up some gold prior to going to gold standard though, so this would give a number between the current price and 10176$.

http://research.stlouisfed.org/fred2/series/BASE/
http://en.wikipedia.org/wiki/Gold_reserve#Officially_reported_gold_holdings

[odolvlobo]

I read somewhere that for gold to be as a reserve, like a gold standard, each fiat $ backed by gold, an once of gold sould be priced arround 33 000 $  instead less than 2000 like those years.

Based on the numbers found on these websites, I am calculating 10176$ / troy ounce of gold reserves.  I am somewhat surprised though, I seem to remember it being higher, so either my memory is wrong, or I am using the wrong resources.  They would be fools not to buy up some gold prior to going to gold standard though, so this would give a number between the current price and 10176$.

http://research.stlouisfed.org/fred2/series/BASE/
http://en.wikipedia.org/wiki/Gold_reserve#Officially_reported_gold_holdings

I'm not an expert, but that seems wrong because the 8133 tons of gold are only a portion of the assets held by the Federal Reserve. If the Federal Reserve sold off all their assets except gold, then the currency and deposits left over would be 100% backed by gold. Any idea what this number would be? I'm guessing a lot less than $10176/oz.