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Author Topic: Gold is actually overvalued in real terms  (Read 2498 times)
theonewhowaskazu
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November 08, 2014, 08:10:26 PM
 #1

One may argue that the USD is -more- overvalued, but with wages what they are right now, CPI-inflation (and the price of gold) are both very unlikely to take off in the near future. The only way would be because of the influence of foreign central banks. One may have to prepare to wait 30+ years to ever get the same purchasing power gold currently has, again in the future.

Why?

Here:



Gold's recent collapse in value has done nothing when compared to the absolute slamming American workers have got since 2000. Right now, the average person simply cannot afford to accumulate any gold whatsoever. Meanwhile, gold is secretly near an all time high in value, once you take into account the deflation the dollar has experienced. This graph actually makes it look -BETTER- than it really is, as this measures wages vs. gold, as opposed to cost of employment vs. gold, which is a better measure of the total benefits a worker receives. I would have used cost of employment vs. gold, but there isn't enough historical data to have a good reference point. Anyway, the real cost of employment vs. gold is even worse, as people have been shifted to part-time and thus no longer get any benefits outside of wages.

Now one can speculate that gold is in fact cheap as it makes up a small portion of american's savings. However, this is not true either.



Its not quite as dire looking, but still, not very pretty. We're near a long-lasting resistance point that has only been broken once in history. And notice that corresponded to what was almost surely a bubble in the gold price, even when looking at the first chart.

In short, there is no way gold can rally right now unless foreign entities can suck out all the gold from the American economy, since Americans simply don't have the financial capacity to absorb any supply placed on the market.

Also, let me remind you of the absolute lack of correlation between the value of gold (in both charts) and recessions. Gold seems to hold a relatively constant -average- value whether or not the US moves into a recession or not, unlike the US Dollar. However, in return for its constant value, gold is much much more volatile. One may have to prepare to wait 30+ years to ever get the same purchasing power gold currently has, again in the future.

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worle1bm
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November 08, 2014, 08:14:52 PM
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the average person simply cannot afford to accumulate any gold whatsoever. Meanwhile, gold is secretly near an all time high in value, once you take into account the deflation the dollar has experienced.

What in the hell are you talking about?

I was reading along until these little assertions and then you went right off a cliff.

theonewhowaskazu
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November 08, 2014, 08:21:31 PM
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the average person simply cannot afford to accumulate any gold whatsoever. Meanwhile, gold is secretly near an all time high in value, once you take into account the deflation the dollar has experienced.

What in the hell are you talking about?

I was reading along until these little assertions and then you went right off a cliff.

let me simplify.

"Meanwhile, gold is secretly near an all time high in value, once you take into account the deflation the dollar has experienced. "

There is a dollar bubble. Gold is denominated in dollars. Therefore, even if the price of gold in dollars has fallen recently, if the dollar has bubbled more than the amount that gold has fallen, then gold too is overpriced.

"the average person simply cannot afford to accumulate any gold whatsoever."

Wages are too low for the average person to be able to accumulate any non-trivial amount of gold while still paying his or her living expenses.

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November 08, 2014, 08:28:03 PM
 #4

the average (western) person does not matter in the gold market. You have just to look at Asian imports to see who is buying.
theonewhowaskazu
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November 08, 2014, 08:30:20 PM
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the average (western) person does not matter in the gold market. You have just to look at Asian imports to see who is buying.

The average western person surely mattered after 2000. Why else would an ETF GLD (used mostly by westerners) coincide so directly with an increase in the gold price? They used to matter because they were accumulating gold. Now they can't, because they don't have enough income, and that is downward pressure on the gold price.

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November 08, 2014, 08:36:57 PM
 #6

ppl in the paper gold market is in for a bad surprise.

Gold Manipulation - For Adults Only http://ino.to/1skeOnM

http://blog.milesfranklin.com/surging-precious-metals-demand-expanding-economic-stagnation/

Paul Craig Roberts: Exploding Silver and Gold Demand and Fed Criminality http://ino.to/1GBUt84
Jihaqy
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November 15, 2014, 07:23:01 AM
 #7

Nowaday, i think there are many thing as : btc...., it can actually overvalued in real terms.
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November 15, 2014, 10:08:04 AM
 #8

I guess the only relevant question is what you would want to hold in the financial crisis to come (assuming the Big One): paper or gold?

For true stackers, the current price of gold doesn't matter one iota.

"... Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. ..."

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FinanceUS
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November 15, 2014, 11:17:20 AM
 #9

Nowaday, i think there are many thing as : btc...., it can actually overvalued in real terms.


I'll be interested if OP could run a similar analysis for Bitcoin.

I guess the result will also be "Bitcoin is overvalued".  Cheesy
cutesakura
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November 15, 2014, 11:40:21 PM
 #10

the current gold price is influenced world oil prices and the value of the US dollar, if the dollar and oil prices fell, the gold price will go down, the price of gold can now be used as a lifetime investment that its price is relatively stable and tend to go up, if indeed the price of gold is currently very high then it will make higher investments in gold, it is that makes the price of gold in the stock market will be higher ...  Roll Eyes
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November 16, 2014, 12:57:08 PM
 #11

I think demand dropping and supply growing will suppress oil, and that at the same time a more-uncertain interest rate environment helps gold.
Higher interest rates raise the opportunity cost of holding gold since the metal has no yield.

The original falling coin game
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