Gold dropping?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Can someone explain to me how the price of gold can actually be dropping when the demand for gold is supposed to be up?
Just heard that some companies are going bankrupt.
Why would the UK be dumping gold? To raise cash?
-- gold question (an anonomous email@example.com), July 07, 1999
That is a very reasonable question. Gold market behavior has been discussed in many previous threads. Perhaps someone will post links to those threads later in this thread.
In the meantime, visit Gold Eagle. There are many articles at that web site explaining what's happening in gold.
-- Lawrence (firstname.lastname@example.org), July 07, 1999.
A recent thread on gold:
"OT Gold drops to 20 year low after Bank of England sells 25 tons"
-- Linkmeister (email@example.com), July 07, 1999.
there is nothing magical about gold. gold is no different than exotic automobiles, stocks, bonds, diamonds, or a glass of water. all are things. all have perceived values that continually change. that glass of water that you and i usually take for granted would come to be seen as very valuable after one or two hot days in the desert. for now the perceived value of gold is less than it has been in the past 20 years. people (governments) would rather own other things right now. tomorrow that might not be th
-- corrine l (firstname.lastname@example.org), July 07, 1999.
Well, it is pretty bewildering in part because the gold market is not very 'transparent'. It is not transparent because it is still the basis of much commerce and even monetary exchange. As Alan Greenspan said resently 'gold is universally accepted as payment' in the international banking community.
Since England went off a gold standard in the 1920's followed by progressive departure by the USA until Nixon decoupled the US$ from gold in 1971, gold has been subject to a number of periods of manipulation vis a vis paper currencies. The London gold pool of the 1960's. The sell down in the mid and later 1970's. Most recently since 1996 in the worst recent bludgeoning.
The BIS (Bank of International Settlements) has defined its SDR in terms of grams of gold and that definition continues to be used today. They also forbid any member countries from making any formal link to gold in a public fashion. The link is still there for international banking through each countries relationship to the SDR (a covert gold standard).
There are a number of thoughts about why this most recent manipulation has occured. Some have to do with retaining stability in the world financial system. Some have to do with postions in the financial community called 'short' positions which can not be recovered in a realistic fashion. Many feel that the governments are being honest in their word that 'gold is no longer a store of value' and 'we need to put our reserves into something more rewarding' (like US Treasuries, etc.).
Beare Sterns, Swiss fiancial house, upped their recommendation from 5% of portfolio to 10-15% of portfolio at the start of the Asian finacial crisis and I do not believe that they have changed that weighing (% of assets in physical bullion). Why would one hold gold bullion? To hedge against currency problems. As one has said 'Finally I realized that all my investments were based on the US dollar..I was indirectly betting that the US$ would stay strong or become stronger.'.
Many people have a problem with buying physical gold or silver bullion as insurance against financial catastrophy because they have no experience in doing that. It seems foreign and dangerous. We in the USA have been used to a very stable currency and political situation. The US$ has been the basis of the world financial system since WWII. Our currency has been the central point of all other currencies and has enjoyed its position by creating an ocean of debt in terms of bonds which have flooded the world.
The question on many people's minds is 'Is this sustainable?' and 'If not, then what will happen when things go wrong?'. If the US$ ever becomes something less than the world leader in currencies then gold and silver will be the hedge which will show the revaluation of the US$ by an increase in their respective 'prices' in US dollars.
Because of this it seems that precious metal bullion is a significant hedge against such a day. Y2K will have an impact on the ability of everyone to carry the debt burden which we have accumulated to date (including the Federal Government itself). What happened in Asia is that the respective countries were unable to sustain profit magins which would pay off the debt burden that they accumulated. When (not if) this happens to America via Y2K then you will see a truly unique situation because there will be 'no palce to run' and 'no place to hide' (no other currency to run into) and it is my belief that we will see an explosive move upward in the price of gold and silver as some of that fear driven money tries to move into precious metals.
This is only one opinion and you must make your own decisions about this. No one advocates dumping all your money into gold. But it may be a way of hedging your risks to bond and currency chaos in the future.
Paul Volker's mother was able to provide for her family during the German era of hyperinflation (early 1920's) because she had saved a few gold coins which she then used to purchase necessities while the German Mark became worthless. When the USA entered the Depression gold was revalued upward by 70% in relationship to the dollar by the US government. Use it for insurance.
-- ..- (email@example.com), July 07, 1999.
The short answer is that the central banks (Switzerland and England in particular) are selling their gold reserves and driving down the price of gold.
The UK is not selling gold to raise cash. They have bought into the false theory that gold is not a true indicator of the value of currency... the economy of a nation is the true indicator.
It's amazing that gold hasn't dropped firther than it has aleady. I expect an even lower price for gold.
-- walt (firstname.lastname@example.org), July 07, 1999.
Gold price dropping -- yep, as noted above, central banks are selling. They sell a lot.
Demand up? -- be careful. The demand for gold coins is up because of y2k buying.
Be forewarned that in most markets, the individual 'investor' is the one who is buying in the bear market (and selling in the bull market). Right now the big boys are selling, the little ones are buying. Sounds like a bear market in gold to me.
I expect gold to bottom well below $200 and ounce. Can't say how the gold coin market will react. I would expect to see the coins drop some as bulk prices drop, then perhaps> rise again later this year.
-- de (email@example.com), July 07, 1999.
Yes, gold has been on a more than 20 year slide.
As one commentor put it: "Gold is a great hedge... against becoming rich."
-- Jeff Donohue (Jeff_Donohue@hotmail.com), July 07, 1999.
Y2K will be a catalyst for a new beginning. In the rocky mountains lightening causes massive fire that errupt in the back country. Y2K is the lightening strick that will bring all of the financial accounts back to zero. We will all be able to start over again. All of the slips of paper that people hold to as precious will get burned.
Gold and commodities are what will maintain relative value.
-- Guns, Grub & Gold (The End@the beginning.com), July 08, 1999.