Seriously, can gold tank?

[Lord Xar]

Is it possible for gold to plummet to like 3-500/ounce?

I'd hate to buy into the hysteria, buy a bunch of gold = then bamn.. in the toilet. then having to wait 20 years before the value returns.

Any thoughts.

 

[matthylland]

anything is possible I guess.

But the great thing about gold is that its price is always relevant to the money supply. To me, a tank in gold right now, in this situation, would mean massive deflation....which could happen because of a run on banks, etc.

but in that situation $900 now (about an ounce of gold) would buy $500 (or whatever a ounce of gold would be) then...does that makes sense?

So although it would be "worth less" I would argue that you wouldn't really lose much, certainly compared to if you held cash.

 

[dannno]

If gold 'tanks' then the value of the dollars you get back from it will be just about as strong as the value of today's dollars, possibly more.

If you hedge with some bonds, then those dollars will be worth a lot of gold 'tanks'

 

[cska80]

Is it possible for gold to plummet to like 3-500/ounce?

I'd hate to buy into the hysteria, buy a bunch of gold = then bamn.. in the toilet. then having to wait 20 years before the value returns.

Any thoughts.

Here's how I rationalize reacting to everything that's happening and more importantly what everyone says is going to happen in the future.

Have they been wrong yet?

 

[dannno]

Let's say you are using gold investments to help offset debt obligations within a 401k that you plan to cash out in the next couple of years, then if gold goes up you're stoked, even though the value of the dollars you get back is the same you are able to pay off the debt more easily.

If you're using it to store value, and gold goes up, then you will get more dollars back but they will be less valuable, but you will be better off than the person who invested in the dollar (bonds, etc)

 

[Bruno]

Perhaps through pegging a new currency to gold at an artificially low price. And it wouldn't last long. But I am only speculating, of course.

 

[lucius]

Is it possible for gold to plummet to like 3-500/ounce?

I'd hate to buy into the hysteria, buy a bunch of gold = then bamn.. in the toilet. then having to wait 20 years before the value returns.

Any thoughts.

Sure, we are in uncharted waters. It's a crap-shoot, but a peso harmonized 401k gives me night-sweats: diversify, not all your eggs into pm.

What was the warning during the Argentina melt-down? Couldn't pull but $100 out of the atms with a currency devaluation soon after.

We live in interesting times...(Chinese curse).

 

[JaylieWoW]

Is it possible for gold to plummet to like 3-500/ounce?

I'd hate to buy into the hysteria, buy a bunch of gold = then bamn.. in the toilet. then having to wait 20 years before the value returns.

Any thoughts.

Posted this in another similar thread:

Gold coming up short of demand?

If that's the case, it could cause a mad scramble at the ComEx, the commodities exchange, because there's not enough gold to meet the open interest. It looks like physical gold, as opposed to paper gold, is rapidly becoming the flavor of the day -- meaning that a huge price move may lie just in front of us.

And, if that thesis is correct, when more folks start understanding it, there might not be enough gold around to satisfy demand at anywhere near current prices -- and their attention will turn to the place where they can find gold, namely the gold miners, whose job it is to "make" more. (With the price of energy dropping as world GDP slows, the profit potential for the gold miners is liable to be the best it has been in many years.) So, I think the stage may be set for a dramatic move in gold stocks.

 

[ewizacft]

So although it would be "worth less" I would argue that you wouldn't really lose much, certainly compared to if you held cash.

I do not like this argument for gold. If you have 900 dollars and you buy one ounce of gold while the price of gas is 4 dollars a gallon. Then deflation occurs, and gold falls to 450 dollars and gas falls to 2 dollars. By keeping the 900 dollars as cash, it buys you that same ounce of gold plus 225 gallons of gas. I do not see how there is no loss here.

 

[BCR_9er]

Gold has maintained its value for 6000 years. I doubt it will plummet especially in this world economic situation. If anything, it will go up in value because of the demand.

 

[constituent]

yes.

 

[dannno]

I do not like this argument for gold. If you have 900 dollars and you buy one ounce of gold while the price of gas is 4 dollars a gallon. Then deflation occurs, and gold falls to 450 dollars and gas falls to 2 dollars. By keeping the 900 dollars as cash, it buys you that same ounce of gold plus 225 gallons of gas. I do not see how there is no loss here.

Because in your scenario where you get the gold at the gas you are "investing" in dollars.

Gold stored the value. Dollars won't store value if there is inflation.

 

[socialize_me]

Gold has maintained its value for 6000 years. I doubt it will plummet especially in this world economic situation. If anything, it will go up in value because of the demand.

...but gold was at ~$200 not even a decade ago. No one said it would go to zero as that's about the dumbest thing to suggest, but the question was if it could reach $300. I doubt it. I mean I guess anything is possible...if you look at M3 when gold was at $200/oz, we had more money than when it was $500/oz. The price of gold is manipulated through derivative contracts to a point where I don't understand exactly how it works. But if you look at the demand out there with local coin shops sold out, the Mint limiting the production of American Buffalo and American Eagle gold coins, I'm not sure how much longer the price can stay down for. With Peter Schiff saying an ounce of gold will eventually equal the value of the DOW, and other gold experts coming on saying gold could go over $2,000 within six months, then there's a good chance. I've seen platinum go from over $2400 this year to $900, though. Platinum is much harder to predict as it's at its annual lows today, but we have more money than ever before.

 

[pennycat]

Watch out for deflation. The fact that the stock market is tanking and gold is barely moving tells us that something different is happening.

My suggestion: start stockpiling non perishables that you use every day. Their price or availability in the future is suspect. Nice to have around. No tax on their appreciation as well.

 

[Bossobass]

The brainwash machine has people thinking that gold is valued against the dollar.

The dollar index is the dollar against a basket of currencies (Swiss Franc, British Pound, Japanese Yen, Swedish Krona and Canadian Dollar).

The fact that the dollar is stronger against the basket or weaker against the basket has no bearing on its value against itself.

When it comes to the value of gold, the dollar is irrelevant, unless you are wishing to trade your gold for dollars, in which case you compute the value against the dollar by the dollars inflation multiplier.

Gold can't fall below that point against the dollar. It can only stay at that point or rise above that point or fall back to that point by the supply/demand multiplier, as in the late 70s and currently.

In 1913, an ounce of gold cost $20.67. At best guess, the dollar is worth 2 1/2 cents against the 1913 dollar, or 1/40th, which would make gold worth around $830/ounce.

Current supply/demand has driven that price up. It could go higher or it could drop back to $830, but no way it drops to $500, unless the Fed contracts MS, in which case, no harm, no foul because gold will always be relative.

Many articles say the dollar is 1/20th its original value, but they don't take into account the recent expansion of the money supply, and that number is not available except by educated guess, which I've done in saying 1/40th.

40 times seems to fit nicely with the price of a barrel of oil, the median income, the median price of a home and an ounce of gold from 1913 to today, so I'm comfortable with it.

Silver, OTOH, doesn't fit that multiplier and seems to be very undervalued, which is why I've recently been buying silver instead of gold.

Just my opinion, and always has been my opinion, FWIW.

Bosso

 

[UnReconstructed]

The brainwash machine has people thinking that gold is valued against the dollar.

The dollar index is the dollar against a basket of currencies (Swiss Franc, British Pound, Japanese Yen, Swedish Krona and Canadian Dollar).

The fact that the dollar is stronger against the basket or weaker against the basket has no bearing on its value against itself.

When it comes to the value of gold, the dollar is irrelevant, unless you are wishing to trade your gold for dollars, in which case you compute the value against the dollar by the dollars inflation multiplier.

Gold can't fall below that point against the dollar. It can only stay at that point or rise above that point or fall back to that point by the supply/demand multiplier, as in the late 70s and currently.

In 1913, an ounce of gold cost $20.67. At best guess, the dollar is worth 2 1/2 cents against the 1913 dollar, or 1/40th, which would make gold worth around $830/ounce.

Current supply/demand has driven that price up. It could go higher or it could drop back to $830, but no way it drops to $500, unless the Fed contracts MS, in which case, no harm, no foul because gold will always be relative.

Many articles say the dollar is 1/20th its original value, but they don't take into account the recent expansion of the money supply, and that number is not available except by educated guess, which I've done in saying 1/40th.

40 times seems to fit nicely with the price of a barrel of oil, the median income, the median price of a home and an ounce of gold from 1913 to today, so I'm comfortable with it.

Silver, OTOH, doesn't fit that multiplier and seems to be very undervalued, which is why I've recently been buying silver instead of gold.

Just my opinion, and always has been my opinion, FWIW.

Bosso

I agree. Saying that gold will tank is equating it to the value of a fiat currency.

 

[Join The Paul Side]

Gold has maintained its value for 6000 years. I doubt it will plummet especially in this world economic situation. If anything, it will go up in value because of the demand.

Gold has maintain it's value over 6,00 years? Hmm.. ..

What was the value of gold in US dollars 6,000 years ago? Don't know do you?

Yes gold has maintain value for 6,000 years (not it's value, yes I am argueing semantics because what you said it slightly misleading).

If you can afford to buy gold now good for you. Glad you are big pimpin like that cuz some of us aren't. However, just like anything else, it value is supply and demand based.

When there is no demand for it it's cheaper to obtain. It's price is going up now because demand is beginning to skyrocket because of the global economical crisis, which is why soon it may be 2K per ounce. But you are partially correct in the fact that gold will never have a zero value.

If I could afford to buy gold I would only buy if it's tangible at the time of or shortly after my purchase. A lot of people are 'buying gold' as in bonds or investments but don't actually recieve any gold products. This is foolish, IMO. Why? Because if the world's economy collapsed tomorrow and everybody said, "Hey, I want my gold now, give it to me"..... guess what.....you may be fucked. Whoever holds the gold holds the power and many of these 'brokers' will go pirate on your ass and simply not give it to you in an 'every man for himself' society.

So, if you are lucky enough to afford to buy gold, make sure it's something you recieve in your hand such as gold coins or jewelry.

But if tomorrow the skies cleared in the market and everybody thought things were gonna be okay for a good while, you would see the price of gold come down over time just like anything else supply and demand based. It's called the free market, baby.