Gold price rises above $2k for first time

https://www.bbc.com/news/business-53660052

by MindGods • 6 years ago

111 303 6 years ago

sawaruna• 6 years ago

I was thinking of buying some gold mining company or gold ETF shares a while ago. Still time for the ETF buy I suppose, but maybe wait for a dip before buying the former.

rapsey5• 6 years ago

but maybe wait for a dip before buying the former.

No real dips for the last 60 days. There might be one that goes below current level in the near future but there also might not be.

perfunctory• 6 years ago

There might be one that goes below current level in the near future but there also might not be.

Insightful.

Humphrey8• 6 years ago

Or just buy the real thing? The problem is since we can't know the future, it's hard to tell if it's a dip or not. I've bought a small amount in the past year by deciding on a price that I'll buy at if it drops below that. It worked out for me, buy it could have equally not dropped or plunged. #prettyMuchGambling

johnyzee4• 6 years ago

The real thing is the best thing, but typically you lose about 10% in transaction costs (dealers have around 5% spread on both the buy and the sell). You can decrease that somewhat with larger transactions, but you'll take a pretty big hit upfront.

lkrubner2• 6 years ago

I forget where he said it, but at some point Paul Krugman makes the point that the price of gold will tend to rise when real interest rates are low. He makes a similar point here (written in 2019):

"After all, the price of gold soared from 2007 to 2011... So why did gold soar? The main answer seems to be plunging returns on other assets, especially bonds, which were the product of a depressed world economy."

https://www.nytimes.com/2019/07/13/opinion/goldbugs-for-trum...

So we should expect the price of gold to rise while the pandemic is out of control. Once the coronavirus is defeated, we should expect the price of gold to fall.

coder1001• 6 years ago

Makes sense.

However, couldn't this be a sign that people are getting ready for if/when the current financial system fails?

arethuza5• 6 years ago

If the current financial system fails how does it help to have bits of paper saying that you "own" gold in a warehouse somewhere?

Retric4• 6 years ago

No, gold is a poor asset should the financial system actually fail. It’s simply a hedge because it doesn’t move the same direction as other assets.

malandrew• 6 years ago

Guns, ammo, food and fuel are good assets to have in a collapsed economy.

rbinv• 6 years ago

That implies that interest rates will actually rise significantly again. That's anything but guaranteed.

mytailorisrich2• 6 years ago

No, it's not directly related to interest rates remaining low or not. As economical situation improves after Covid-19, money will flow back to other assets and the price of gold will mechanically decrease because people will sell to invest back in those assets. This is what happens during and after every crisis, and what OP meant.

The upwards trend of 2020 is due to Covid-19. There will be a correction when that crisis ends.

gridlockd8• 6 years ago

That's anything but guaranteed.

It's guaranteed not to happen in the short to mid-term.

Rising interest rates during a recession when the economy is massively over-leveraged and even the low-interest debt can barely be serviced would result in an even greater wave of defaults.

Low interest rates and QE are here to stay. The dollar will depreciate significantly, easing the burden of debtors and making American labor more competitive. Good for exports, bad for people who earn a dollar salary.

Gold appreciating (in dollar terms) is just a side-effect of this development.

gridlockd8• 6 years ago

So we should expect the price of gold to rise while the pandemic is out of control. Once the coronavirus is defeated, we should expect the price of gold to fall.

Gold has been rising steadily for years, interest rates have been low for years. That's a lot of excess liquidity already in the market, it's just exacerbated.

Coronavirus disappearing from the news won't make all that excess liquidity disappear.

Gold and other assets will drop when that excess liquidity is removed through rate hikes and QT.

When will that happen? My money is on "never".

bildung• 6 years ago

Why never? Gold was down over 40% between 2011 and now.

awinder• 6 years ago

Krugman argues that there’s a special nature to the bond-gold relationship but I would argue that it’s because gold is an asset of last resort. The only thing special is that bonds have typically been an asset of last resort, but governments have sort-of taken them off the table in crisis situations.

daodedickinson5• 6 years ago

Assets of last resort include things like water, food, air...

plmu• 6 years ago

It depends. Once the coronavirus is defeated, it will have accelerated the economic cycle downturn, we might see a very deep and long recession, maybe even one like we have not seen in recent centuries.

And since the world is progressing in a direction of depletion of natural resources, the next deep recession might be the last.

We have seen many recoveries after many recessions, but there is no guarantee that there is a recovery. Sooner or later the earth will be in such a bad condition, that it will be impossible to recover.

whb07• 6 years ago

Krugman, the same fella who commented on the internet and on bitcoin?

He represents everything that’s wrong with government excesses and theft of its citizens via inflation.

50 years ago an ounce of gold was $35/oz. Today that very same 1 oz gold coin is at $2000.

lebed20452• 6 years ago

aside of Krugman, $35 worth of goods and services in 1970 worth about $233 according to https://www.officialdata.org/us/inflation/1970?amount=35, so it's not currency problem but the gold itself went up.

ac29• 6 years ago

You've very conveniently picked a time frame where gold was at a century-long low, to a century-long high. One could easily pick an opposite period, such as 1980-2000, where values dropped precipitously.

Qasaur4• 6 years ago

Krugman in his usual arrogance neglects to consider the price and indeed monetary history of gold. It is and always has been "real money" and most people either consciously or subconsciously trust gold more than the pieces of paper we call money, and its price is not a reflection of people chasing returns but rather people having less faith in the current monetary system (which is backed by nothing). The record physical delivery orders at Comex proves this [1].

If the dollar hyperinflates, where would people go? Crypto is obviously interesting, but gold is the supreme form of money that requires zero trust (while crypto is near trust-less, you still need to trust the cryptography to be secure).

[1] https://reuters.com/article/gold-cme/102-tonnes-of-gold-chan...

gridlockd8• 6 years ago

If the dollar hyperinflates, where would people go?

The dollar is inflating right now, where are people going, besides gold? Why would the dollar hyperinflate?

daodedickinson5• 6 years ago

There have been plenty of stories of hollow gold bars and, true or not, they've been trending again lately.

Gold hasn't always or everywhere been real money, I've personally worked on an archeology site where I sifted out a tiny shell bead with an even tinier hole punched in it so it could attached to a string like ancient Chinese coins and so on.

I once read a claim that J.P. Morgan said something like money is only worth the character of the person who wields it.

I feel more like interactions with other people are more precious than precious metals.

If the dollar hyperinflates, some people will go into bunkers. I'd maybe starve or hide... I don't have a plan, I'm way behind on stuff as it is.

lottin• 6 years ago

The fact that gold has historically been used as money in some places doesn't mean it's money now. Money is a commodity that is used as a medium of exchange. Today, gold is not used as a medium of exchange, i.e. most people are not paid in gold and don't buy things with it. Therefore gold is not money.

daodedickinson5• 6 years ago

There are other catastrophes pending than COVID-19. It can't really compete with the repression of schooling or church service or bars or thrift stores or, or, or...

Krugman's first piece post 9/11 was about how getting to rebuild a skyscraper was somehow going to be a tremendous economic stimulus, as if the loss of so many knowledgeable and wise people being murdered all at once didn't occur to him... AT ALL!

In college I read the NYT everyday, thought it was the best paper in the world. Then one morning I opened my copy to see a full color photo of my rapist attached to a hagiography of how she had been elected to public office.

Now the NYT CEO is still Mark Thompson, who got the job because as Director-General at the BBC he covered up Jimmy Saville's... I don't have a word for it yet.

Walter Duranty won a Pulitzer for using the NYT to cover up Stalin's genocide of Polish people so that American media didn't seriously cover it until the 1980s.

Don't get me started on how many people with Gilead financial ties are acting as if financial incentives might somehow statistically significantly effect their behavior because it seems to just give me sleep deprivation.

lma21• 6 years ago

What if... we don't really defeat it? no, maybe that's too pessimistic... What's the worst case scenario in case we have to live with Covid-19 for a few more years?

karlkatzke• 6 years ago

The worst case scenario is that 10-15% of our population that comes down with COVID-19 over the age of 40 has some sort of permanent organ damage.

https://jamanetwork.com/journals/cardiology/articlepdf/27689...

eloff• 6 years ago

Likely a serious recession or even an economic depression, judging from the economic knock on effect of lockdowns, whether involuntary or just people curtailing their spending and activities, that we have observed so far. 10-30% contractions in GDP in the second quarter, in dozens of countries.

I won't touch the market with a stick because it's going in the opposite direction to the economy. There has to be a correction coming. I know there aren't good alternatives, interest rates are so low, etc. But I still think there's a correction coming, that's my two cents.

hydroreadsstuff2• 6 years ago

Yes, this is indeed about the low bond yields paired with inflation expectation - low real yields.

But I would not hold my breath that this changes much after Corona. In 2019 the Fed tried quantitative tightening, which resulted in the December stock market correction, and a big overnight lending spike. From there they resumed QE (Which was one day supposed be a temporary measure in the great financial crisis). They did drop interest rates again in response to Corona, though. Not before.

J Powell already promissed rates would stay as low as they are for 2 years.

But right now the yields of the 10 year, e.g. are going below what a new issue should yield I believe.

Gold/Silver should lose some steam when the DXY goes up, or bond yields increase. (Both of which should also have a negative influence on stock and bond prices).

Also don't marry the idea of inflation to the CPI. There is asset inflation (think housing market and stock market), and inflation in certain products like food. But other things like transportation (perhaps of lower importance to poorer than for rich). It's not a black and white matter.

alasdair_8• 6 years ago

Taleb makes this same point about inflation repeatedly - that the things he plans on spending money on in the future may inflate far more than the CPI.

alasdair_8• 6 years ago

The thing is, at the beginning of the pandemic panic, this didn’t happen at all. Instead everyone sold gold and the price dropped (same with bitcoin, which went to $3.5k) because they wanted liquidity rather than a speculative investment.

jkhdigital6• 6 years ago

Same thing happened in 2008--gold dropped along with everything else after Lehman, but quickly turned around and was already making new highs while stocks were still bottoming out. Liquidity crises are anomalous events which don't say much about the long-term forces that move asset prices.

jkhdigital6• 6 years ago

Yes, this is elementary economics--and I'm not trying to say that pedantically, it's just easily overlooked. Gold is an inert metal that pays no dividend and incurs storage costs, so any rational market participant who believes that they can achieve a risk-adjusted real return above 0% will not own gold. A poor economic outlook reduces expected real returns on equities, and currency devaluation (i.e. inflation) reduces real returns on fixed-income securities (bonds). Combine the two and you've got a perfect storm for skyrocketing gold prices--just look at the 1970s.

smabie2• 6 years ago

Gold is a good investment because it has such low correlation to the broader market. Even though the return of gold is poor, the vol of your portfolio can be significantly reduced.

I actually have a blog post https://cryptm.org/posts/2020/07/09/alt.html where we create a minimum variance portfolio using gold and the S&P 500. And even though gold has high volatility and poor returns, this approach generates a higher risk adjusted return than the S&P 500.

Especially in an age when bonds are no longer countercyclical, gold is an attractive component of a portfolio.

pcdoodle• 6 years ago

People lose confidence due to the shutdowns.

lasermike0262• 6 years ago

No, people have lost confidence because the US has not gotten Covid-19 under control.

s1t5• 6 years ago

Not really. If that was true, stocks would be tanking but they're also at a high. There's just a lot money around and low interest rates so all assets increase in price. I just wonder how long that can last for and how it will end.

ngcc_hk• 6 years ago

Someone said what is to be watched is gold to silver price ratio. Not sure.

DrAwdeOccarim2• 6 years ago

If Milton Friedman is right, and inflation is always and everywhere a monetary phenomenon, it will be interesting to see how this plays out. There is a huge fight right now between deflationary forces caused by an unprecedented collapse in both supply and demand, and inflationary forces from both fiscal and monetary stimuli. The risk I've read over and over is that the stimulus overshoots the deflation risk and we get higher inflation--I think that's what gold is starting to respond to. But the most interesting thing to me is that gold does best when deflation takes hold because it forces a massive inflationary push from the government to reflate the currency (e.g., Executive Order 6102 and the Gold Reserve Act of 1934 changing the price of gold from $20.67 to $35 overnight). Talk about an inflationary shock! How would they do it now a days? Direct helicopter money into everyone's bank account...oh, wait, we are doing that...But the scary part is that demand is crimped by fear of going out and spending, so we see Amazon beat EPS by 10x because everyone simply spends online instead. What a time to be alive! But joking aside, how do you inflate if people don't want to spend? I guess if/when a vaccine comes, and everyone rushes back out is when we could see inflation jump.

devalgo3• 6 years ago

Direct helicopter money into everyone's bank account...oh, wait, we are doing that

Except the amount is peanuts, peer countries are doing 2k/mo without issue but its somehow a struggle or hyperinflationary for the US to do 2400 over 6 months?

Humphrey8• 6 years ago

I bought some about 10 months ago as a practice investment, as I figured it was easier to understand than the share market and it had given an average 10%/year return over the past 10 years (well at least in Australian dollars). Kinda wish I bought more though, but who would have predicted a worldwide shutdown?

That said, the gold price has barely moved compared to how much silver has skyrocketed the past few weeks.

The question I'm pondering is, is the value of gold/silver skyrocketing, or is the real tangible value of the USD crashing? I guess only time will tell ️

topspin• 6 years ago

The question I'm pondering is, is the value of gold/silver skyrocketing, or is the real tangible value of the USD crashing?

A strong decline in the value of USD would be reflected in the prices of all commodities and their is no general commodity price inflation at the moment; the gold and silver price increases are an outlier. The price of gold and silver is increasing because the demand for gold and silver is increasing.

Humphrey8• 6 years ago

That's a good observation! While not a commodity, I'd just add that where I live (Australia) the price of housing has also been sky rocketing the past few years.

lasermike0262• 6 years ago

I've always thought of the gold prices as a fear index.

wdb3• 6 years ago

I have some gold and the storage is more expensive than I thought :)

Humphrey8• 6 years ago

Whoops! As long as it's less than the rate of return I guess?

I managed to find a company that offers "pool allocated storage" for free, with an option to "cast" it to a shippable product for a small fee. Perhaps it's worth you shopping around for cheaper storage?

I wonder if that's where the programming term cast comes from.

wdb3• 6 years ago

Yeah, I will have a look into that. I bought my gold in 2009 so not much to complain. Luckily, if it's securely stored it's hard to get stolen. 100% sure gold is better protected than your typical bonds/stock at the high street bank.

johnyzee4• 6 years ago

What kind of storage? A safe deposit box in a bank runs like $20 a month around here.

wdb3• 6 years ago

I pay around ~0.2% of the worth of gold per year for storage and insurance.

shanehoban• 6 years ago

This got me thinking.

If our currencies and financial system were completely based off the value of gold and/or other precious metals where the amount on the planet is finite, wouldn't this eventually cause the opposite of inflation where the prices of goods and services go down as less and less gold is available as the population grows?

Wouldn't that also mean that wealth inequality and hoarding of gold make things even cheaper as less and less can afford to buy/sell at higher prices?

DrAwdeOccarim2• 6 years ago

Yes, this is part of the reasoning Nixon ditched Bretton Woods and unpegged the dollar from gold.

alexmingoia• 6 years ago

I think it’s worth pointing out that abandoning the gold standard had little to do with gold and everything to do with the practice of fractional reserve banking. The government simply had more foreign dollar debt than they had backed by gold, and foreign governments began to demand redemption of their dollars for gold. It wouldn’t matter what the reserve is, fractional reserve banking inevitably results in bank runs.

Nixon had to either devalue the dollar or completely default, and he chose to default and abandon fractional reserve banking altogether (though at the time promised it was only a temporary suspension of gold redemptions).

tomalpha2• 6 years ago

IIRC: Broadly yes. We tried doing this before and called it the Gold Standard[0].

[0] See https://en.wikipedia.org/wiki/Gold_standard

baconandeggs6• 6 years ago

Prices do go down. Smartphones for example, or clothing, tvs, music and entertainment via netflix, etc. Even food is now more attainable than ever. Technology and efficiencies in production naturally generate deflation, but for some reason governments insist on enforcing an inflationary policy.

Qasaur4• 6 years ago

They insist on enforcing inflationary monetary policy because it is thinly-veiled regulatory capture. No matter what the academics say to try and justify it (it is not justified and does not hold up to critical analysis, see the Cantillon effect), inflation is phenomenon that redistributes purchasing power from the people to those who are relatively closer to the central bank and the printing press (they can purchase assets and spend money before inflation hits the rest of the economy).

TheOtherHobbes2• 6 years ago

Arguably this is what caused the Great Depression. A Gold Standard artificially constrains the money supply, which leads to a drop in economic activity - often after a bubble.

The real problem isn't the amount of money in the system, it's the amount of useful work being done, and the way the gains from that work are distributed throughout the economy. The ideal is a virtuous circle where distributed gains create more activity which creates more opportunity and invention which creates more gains.

The current system is based on control of the money supply, and is the opposite of that. Effectively it's just the Gold Standard without the gold. It leads to the same kind of hoarding and rent-seeking, both of which are economically destructive.

hydroreadsstuff2• 6 years ago

The rate of new gold being dug up roughly matches global population increase. ~2% p.a.

baconandeggs6• 6 years ago

Gold price soaring represents the failure of the political establishment to manage a fiat currency. Populist proclamations via money printing, corporate welfare, and the corrupt dismantling of the rule of law (basically stealing TikTok for example) will only aid in the descent of the current fiat system into new lows and hence take gold into all time highs.

nine_zeros• 6 years ago

Underrated comment. One of the reasons third world countries continue to remain third world is because of gangster corruption such as this. It is really sad that America has fallen to such levels and is no longer the shining beacon.

devalgo3• 6 years ago

basically stealing TikTok for example

'Stealing' it for 30 Billion? Give me a break... TikTok is not the hill to die on...

obayesshelton2• 6 years ago

Might be a good time to sell then.

"While sitting in the shoeshine chair, Kennedy Sr. was alarmed to have the shoeshine boy gift him with several tips on which stocks he should own — yes, a shoeshine boy playing the stock market.

This unsolicited advice resulted in a life-changing moment for Kennedy Sr. who promptly went back to his office and started unloading his stock portfolio.

In fact, he didn’t just get out of the market, he aggressively shorted it — and got filthy rich because of it during the epic crash that soon followed.

They don’t ring bells at the top, but apparently when shoeshine boys start giving stock advice it is time to head for the exits."

https://www.businessinsider.com/how-to-spot-stock-market-bub...

czechdeveloper• 6 years ago

If you would sell every time something reaches all-time high, you would really not make any money.

blaser-waffle4• 6 years ago

That would depend on when you bought it.

Picked up 200 shares right before the peak? a modest gain, if that. Maybe you miss the worst of the downturn, though.

Bought 200 shares 10 years ago and now it's peaking? Get them ducets, son.

IgorPartola6• 6 years ago

You by definition would make money. If you sell at max price that means you had to have bought it for lower than that. Assuming you didn’t buy for so close to max such that transaction fees are larger than your margin.

peteretep• 6 years ago

I have successfully used “has my mother heard of this” as a reason to sell a few times, notably Bitcoin and selling out a political bet position on Pete Buttigieg — essentially at the point my not-especially-well-informed mother has heard of something, I no longer have any kind of information advantage.

WrtCdEvrydy2• 6 years ago

I worked in a company that has a decent mixture of technical and non-technical folks.

I consider it like the DEFCON level.

DEFCON 5 - Technical people who were aware of Bitcoin speaking

DEFCON 4 - New technical people who were not aware of Bitcoin (we are currently here)

DEFCON 3 - Business people

DEFCON 2 - Non-technical people

DEFCON 1 - Bathroom chats (last time I saw this was around the $17,000 mark)

misiti3780• 6 years ago

I experience a very similar moment in line waiting to go through TSA a few years back listening to a group of agents (on break, trading w/ Coinbase on their phones) talk about bitcoin going to the moon (one of them said 100K/coin) when it was already hovering at 17K/coin. I knew how unrealistic bitcoin was back then, as it is now, and once I was through security, I promptly liquidated my entire coinbase account someplace near the peak

oleganza• 6 years ago

isn't talking about 100K/coin in 2017-2020 is as unrealistic as talking about 10K/coin in 2013-2015?

jameslevy• 6 years ago

The thing that really gets me is that even once you hear these conversations, the price might 2x or 3x from there. I felt this way about Bitcoin by the summer of 2017 but obviously it still had some room to run.

BMSmnqXAE4yfe14• 6 years ago

You can also look at this from another angle. I bought today $5 iTunes code using a Lightning wallet, which is the new payment layer over bitcoin, think of it as Bitcoin 2.0. 1 second confirmation time and 20 cents fee (compared to 10+minutes wait and $3 fee with Bitcoin 1.0). The seller didn't need my name and address. Nobody knew about my purchase, and I didn't need nobody's permission to trade. This is why Bitcoin is going to $1m, and not because of what TSA agents say.

ALittleLight• 6 years ago

Isn't it way more likely that the shoeshine boy was just repeating what previous clients had said rather than playing the market himself?

thanhhaimai• 6 years ago

And that's exactly the reason: when the information is so widely circulated, you no longer have the information advantage. The market should have priced those information in. At that time, it's best to exit. Otherwise, the investor is no longer "investing". It's plain gambling without information.

ta1234567890• 6 years ago

This anecdote illustrates how the market could be seen as a big society-level pump and dump scheme. The guys at the top invest early at a low price, then pump the investment downstream as much as possible, then dump when things start looking too much like a bubble (i.e. "the shoeshine boys start giving stock advice"). If enough people at the top dump at the same time, the bubble bursts and there's a crisis.

Even if some of the guys at the top couldn't get out in time, they are unlikely to get ruined by playing the game. The guys at the bottom on the other hand, usually end up literally paying the price for their risk-taking.

chrisco2553• 6 years ago

That would be true if the market didn't consistently outperform inflation over the long run. Dollar cost average...buy and hold. Markets are subject to irrational swings in either optimistic or pessimistic directions. Rich people go bankrupt too. For every short there's got to be someone with equal volume going long...and vice versa.

BTCOG2• 6 years ago

Well, this is essentially how the markets work, in general. The top wealthiest traders with many connections on Wall Street tend to take the earliest tips to get in early, by the time the rest of the country/world start to play they're ready to dump. With a readily connected internet, it's much simpler to gather market sentiment and always get out after a rise. Money makes money.

ASalazarMX• 6 years ago

We got to see that in action here at HackerNews a few months ago. Tesla was doing great, then suddenly there was one news article after another about how Elon was dooming Tesla and it was practically crashing, then a couple of months of peace, and Tesla is suddenly awesome again. It looked someone with influence wanted Tesla stock cheaper for a while.

bmmayer1• 6 years ago

By your logic, this is precisely the time to sell non-gold equities -- with comments like Portnoy's "put any 3 letters together and buy that"[1], not the time to sell gold, which is behaving exactly as you would expect it to behave when confidence in other asset classes (especially the US dollar) is sinking.

Disclosure: I own gold.

[1]https://twitter.com/stoolpresidente/status/12728866210300149...

imtringued7• 6 years ago

Unlike gold other equities are actually expected to net a return and therefore it is possible to invest into them in the long run. With gold the only way you can get a return is through speculation which means you must sell it regularly. With other equities you can just sell them as needed.

david9272• 6 years ago

That story is quite funny because the true story is actually about how Kennedy Sr. saw the signs of the top of the stock market and got rich by selling his stock and buying...

gold, which he later used during the depression to purchase distressed assets like real estate.

The parallels between the 1929 crash and now are chilling.

obayesshelton2• 6 years ago

Yeah, using this reference for Gold wasn't correct but what you said is funny/interesting!

onetimemanytime2• 6 years ago

IMO: if you have tens of millions, buy 10KG of gold and 100kg of silver and bury it just in case. As an investment it sucks when compared to the rest but then a tiny percentage of your networth is nothing when considering that it may be useful if SHTF

minerjoe3• 6 years ago

I heard once that their still finding caches of gold from the fall of the Roman empire. It didn't help those rich papos, why would it help you?

I truly don't see gold being of any use in a collapse where suddenly food is the most valuable asset.

johnyzee4• 6 years ago

FWIW, during the (first) IMF default in Argentina, when the local economy and monetary system was in total collapse, gold was the most sought after item for trade and barter. People consistently said afterwards that they wished they had kept more savings as gold.

onetimemanytime2• 6 years ago

>I heard once that their still finding caches of gold from the fall of the Roman empire. It didn't help those rich papos, why would it help you?

Maybe some where helped by it, we don't know. But better to have it than not to, unless you announce to the desperate masses that you have lotsa gold

>I truly don't see gold being of any use in a collapse where suddenly food is the most valuable asset.

You can do without food for weeks, and many will trade food for gold ("I have enough food" etc etc). plus, you can provision for food too. The idea is to make believe you don't have x% of your networth and buy gold/silver/guns/food/land with it for that one moment in time.

refurb5• 6 years ago

Well, if they did dig it up and it helped them, we wouldn’t know, right?

namelosw• 6 years ago

It's people vote "I agree that things are really bad now and probably stay the same in the near future" by their own actions.

fredfoobar18• 6 years ago

Gold is the oldest ponzi scheme that exists out there!

* The practical uses of it are totally diminished because of this "novelty premium".

* Can't use it online

* Can't use it offline either (Can I buy a starbucks with it?)

* Securing it and moving it around is risky

I don't get it, who's buying this crap?

piinbinary• 6 years ago

It has been consistently regarded as valuable for thousands of years, and there is very little chance of the value dropping to near zero.

Edit: In response to child comment, I mean in the sense of the Lindy effect, not in the sense that age implies realness

fredfoobar18• 6 years ago

Next, you're gonna tell me that "god" is real, because religions are old or something.

There are untouched tribes out there in the Amazon who've been around for 1000s of years, it doesn't make their way of life better.

baron816• 6 years ago

The only way for your gold assets to increase in value is to convince other people they need to own gold. Usually, this is done with fear mongering.

wqTJ3jmY8br4RWa• 6 years ago

Paper currency is the oldest Ponzi scheme that exists out there. I can wipe my nether regions with it. If there is a collective delusion that it has value, I can exchange goods for it.

My point being, Gold is a delusion, just like paper.

fredfoobar18• 6 years ago

That, is something I can agree on. The value we put on things like gold comes from our minds, not gold itself.

magicsmoke• 6 years ago

Paper currency is backed by the fact that you have to pay taxes in it. On tax day when the tax collector comes around with his security escort, you better have something ready if you don't want to end up in jail and your property confiscated. In the old days you paid taxes with a part of your harvest or with gold you got from selling your harvest at the market. Somewhere along the way governments figured they could play all sorts of economic games if they collected taxes using fiat paper instead. They print paper and pay their soldiers with it, you sell your harvest to the soldiers, and the soldiers come around once a year to collect the paper.

Notice how this entire system depends on the government's monopoly on violence. The real modern delusion is the many layers of indirection that insulate us from the real source of power in the natural world. Whether the thing that has value is gold, silver, paper, or bottlecaps doesn't matter. What matters is that the one holding the guns says it has value.

anoraca• 6 years ago

Gold has been abstracted into a digital form so anyone who wants to invest in options and futures can now own digital gold, which makes it easier to trade, since no physical delivery or storage is required. Greed is extremely powerful. As is fear.

https://www.marketwatch.com/investing/fund/gld

fredfoobar18• 6 years ago

Who's guaranteeing that this is backed by real gold? how can we verify? can I take delivery whenever I want?

pvfffghhr• 6 years ago

So the only conceivable reason people invest or create financial instruments is greed?

legulere• 6 years ago

Pro points of gold:

* It’s relatively rare and production is naturally very limited (in contrast to e.g. diamonds that can be produced from carbon)

* It has a special tax-free status in some legislations.

* It can hardly be destroyed (you can easily loose your bitcoin when your hard disk dies)

* it’s beautiful and you can use it for jewelry and art

Seems like a good choice if you see the risk of inflation, or of a state taking your money.

fredfoobar18• 6 years ago

It’s relatively rare and production is naturally very limited (in contrast to e.g. diamonds that can be produced from carbon)

What about the gold-rich asteroids we can mine?

It has a special tax-free status in some legislations.

This is a non-starter for me, someone can lobby the government to undo this easily

It can hardly be destroyed (you can easily loose your bitcoin when your hard disk dies)

You can literally lose gold, just like how you can "loose" your bitcoin (who stores bitcoin on their hard-drive now anyway, it's 2020, there are paper wallets too, in fact, I can literally memorize 12 words)

it’s beautiful and you can use it for jewelry and art

Sorry, I don't wear jewelry.

adventured2• 6 years ago

Another important point is that it can be blended.

Also, to add to the jewelry point, humanity has a nearly unlimited desire for luxury and will always seek out status, which is why so many thousands of years later humanity still has such an immense desire for gold jewelry when we very obviously don't need it. Status seeking is not going away.

The continued expansion of human population, rising living standards and finite quantity of gold, ensures it will grow more scarce per capita (driving up its perceived value persistently).

At the median our soon to be eight billion people will have a higher standard of living than when we had only one billion people. There isn't nearly enough gold to match that extraordinary change.

maerF0x02• 6 years ago

other pros * It's very divisible allowing smaller denominations

* It's soft enough to divide

* You can carry a lot of value in a small volume/weight

* It doesn't corrode (you can bury it, burn it) so it can be passed along generations

gruez5• 6 years ago

* It has a special tax-free status in some legislations.

don't you mean jurisdictions?

* It can hardly be destroyed (you can easily loose your bitcoin when your hard disk dies)
Seems like a good choice if you see the risk of [..] a state taking your money.

This doesn't really make sense. Sure, you'd lose your bitcoin, but only if it was the only copy. Since bitcoin is stored as information, you can store as many copies as you want. You can't do that with gold. The non-physical nature probably makes it better than gold if you have a proper backup plan. Also, if your goal is to guard against someone (including the state) taking it, bitcoin is also hard to beat. Gold takes up space proportionately to how much you have, so it becomes harder to hide the more you have. With bitcoin you can hide an unlimited amount anywhere - between the pages of a book, under a rock in your garden, even inside your head.

SilasX3• 6 years ago

Good points, but you're being a little too hard on the offline uses. You can't directly spend it at Starbucks, but wherever (or whenever) you are, you can go any pawn shop (and they're ubiquitous) and sell the gold for the local currency, and then use that.

fredfoobar18• 6 years ago

Have you actually done this before? did you get a fair price?

If you're thinking about doing this with jewelery: Do you know that gold jewelery mixes other metals to make it a bit more durable? and you pay fees on making it too

if you're using gold bars: How do you make sure things like this don't happen: https://www.bloomberg.com/news/articles/2020-07-15/chinese-j...

mbesto4• 6 years ago

Gold has little to no utility. There are a few practical uses for it, and very limited when compared to other precious metals (silver for example).

The price is based purely on speculation that it will go up. Which is frankly not much different from Bitcoin in its current form.

In order for gold to have more utility it either needs to be used as a medium of exchange or other new uses that utilize its precious metal properties.

fredfoobar18• 6 years ago

With Bitcoin, I can at least use it for transactions online. Which is almost 100% of my method of procuring stuff now, I also work for a company that facilitates that!

GlennS• 6 years ago

I personally avoid gold because I think the price is distorted by the nutters.

But I don't really have any evidence to support my position. Do the nutters have enough money to move the price?

ndesaulniers• 6 years ago

Yeah, too illiquid for my tastes. That's what ETFs are for! GLD overbought?

scumcity• 6 years ago

The US federal government is making poor choices in monetary policy - it's "fixing" the covid problem by printing US money, which, until now, was the new gold standard. As result, people are going back to an old, albeit, archaic gold standard. If the US government could have fixed covid with a real solution, we would not be observing extremely retarded stuff like people investing in gold. Sigh.

ffggvv• 6 years ago

for most of history you could use it offline, and it was actually the primary currency. until governments starting banning domestic redemption in gold. it’s only the last 100 years or so that we got off the gold standard. and it wasn’t until the 70s that the US got off the gold exchange standard internationally.

_7fvc5• 6 years ago

Gold probably started out as a toy. Humans learned to manipulate metal with gold around 40k years ago. It sparked metallurgy industries (e.g. Bronze Age, Iron Age). They advanced human civilizations. Gold use as money probably predated any written history. It's likely making a comeback after a 30-year recession.

https://bitflate.org/post/2019/11/29/how-gold-became-money.h...

Humphrey8• 6 years ago

In the modern world people don't buy gold to make transactions but to store wealth. No wealthy person would store their fortune in fiat (paper) currencies such as dollars, but in things with real value such as shares in a companies, property, or other things of value such as gold or silver. At any time these floating currencies can change their value (think hyperinflation, or just exchange rates).

Compared to other "real" things, gold can be liquidated into dollars VERY quickly if you need to make a transaction, and since it's a real thing, it cant disappear.

Also, often gold is stored by the company you bought it from on your behalf, so you can sell it back instantly online. So no need to have to have a home safe.

Also, at an average return of 10%/year over the past 10 years (at least in australian dollars) it's has been out performing many other investment options.

fredfoobar18• 6 years ago

why store it in a piece of metal though?

Compared to other "real" things, gold can be liquidated into dollars VERY quickly if you need to make a transaction, and since it's a real thing, it cant disappear.

What happens when someone sticks you up and takes your gold away?

Also, often gold is stored by the company you bought it from on your behalf, so you can sell it back instantly online. So no need to have to have a home safe.

Isn't that how the dollar got started and here we are.

gniv• 6 years ago

I read this recently and found it insightful, especially if you believe bitcoin is valuable: https://ofdollarsanddata.com/why-is-gold-valuable/

grizzles3• 6 years ago

Gold: If you don't have the physical gold in your IMMEDIATE possession, you don't own gold.

stingraycharles• 6 years ago

I feel like I’m missing some underlying point here, since you’re assuming there is a financial difference between buying, say, 100 gram of gold on the stock market vs having it stored at home.

mattmanser• 6 years ago

He's implying if there were some serious financial disaster, digital records saying you own gold are going to mean little.

grizzles3• 6 years ago

The history of paper and leather money is that it was originally considered receipts for the storage of precious metals like gold. In fact this was the case in the US until the 1970s. I'm not a gold bug suggesting a return to the gold standard, just pointing out that the concept of money, value, storage and ownership can shift and be redefined over time.

fortran77• 6 years ago

I'm not a gold bug, and I certainly won't buy it now at the all-time high prices.

That being said:

I have enough Krugerands and similar gold coins in a very secure safe (in ground, in concrete) so I could GTFO if I had to and go somewhere else. All 4 of my grandparents had to pack up and leave suddenly and having something small you can pawn/hock/sell is handy. (Two fled Lithuania, one fled Belarus, and one fled Gaza City in 1929 when all the Jews were suddenly expelled. The families had all been living comfortably in the respective location for hundreds of years--or thousands in the case of Gaza.)

miohtama• 6 years ago

The inflation adjusted price of gold is still below 2008 and 1980 peaks.

kyboren2• 6 years ago

Not surprising. The money supply has increased sharply: https://fred.stlouisfed.org/series/M2

baryphonic• 6 years ago

And yet velocity of M2 has decreased sharply.[1] Therefore, hyperinflation seems unlikely unless the real economy unexpectedly recovers rapidly. However, since money is not neutral in the short run[2], we could actually get additional output from the increased money supply. That said, I'm personally skeptical of that claim in this crisis. Additional M2 can have zero effect on output when the law itself has forbidden workers from showing up and producing goods, and in some cases has discouraged them from trying to do so.

[1] https://fred.stlouisfed.org/series/M2V

[2] https://en.wikipedia.org/wiki/Monetary-disequilibrium_theory

kyboren2• 6 years ago

Indeed, velocity has decreased sharply. I also do not think hyperinflation is likely, even if the economy recovers quickly. But I do expect to see asset price inflation.

canada_dry• 6 years ago

> money supply has increased sharply velocity of M2 has decreased sharply

I don't think M2 takes into account money going into derivatives, does it??

I'd propose that most of the stimulus is going directly into propping up the US financial market.

My take is that bubble might burst when markets realize that the situation is still getting worse i.e. earnings and GDP continue to decline winter 2020/spring 2021.

ogogmad• 6 years ago

Cryptocurrencies are rallying as well. Some of them tap into the same economic logic as gold.

NicoJuicy• 6 years ago

I thought so as well, but I'm starting to believe it's more looks civilians running away from faultering currency ( Venezuela, turkey, Russia, HK ).

Which has very similar market conditions.

_7fvc5• 6 years ago

Gold is not simply a shiny metal or a collective fiction. I think many historians (e.g. Harari) got this wrong. Humans first learned how to manipulate metal through gold around 40k years ago. It sparked the metal industries that advanced human civilizations. Humans progressed through Bronze Age, Iron Age. Gold was an icon of metal technologies. Its use as money probably predated written history.

https://bitflate.org/post/2019/11/29/how-gold-became-money.h...

IgorPartola6• 6 years ago

That’s true, but history of something does not equal it’s value today. Otherwise companies like DEC would still be around, no?

_7fvc5• 6 years ago

Harari sees history as fiction. But I think we need to make a distinction between fiction and physical reality. Gold is a physical reality that got married into human's fiction.

DEC technologies are still around. They just got replicated and extended into other technology stacks. It's not easy to replicate gold. The easy way is to mine more gold. Technologies are ideas. Gold is physical.

Bronze and iron became less popular after BC. Will steel go away any time soon? No. Humans have worked with gold much longer. Gold has had its ups and downs. It has always come back for thousands of years. This suggests it's not going away (Lindy effect).

j_walter2• 6 years ago

The real questions is: Why has gold risen so much and platinum (which is much rarer than gold) stayed relatively flat recently (down since 2009) and is currently worth less than have as much? Platinum was > $2K/oz during the 2008-09 financial crisis...it's now under $1K/oz. What makes gold's intrinsic value so much higher?

"The price of platinum changes along with its supply and demand; during periods of sustained economic stability and growth, the price of platinum tends to be as much as twice the price of gold; whereas, during periods of economic uncertainty,[7] the price of platinum tends to decrease because of reduced demand, falling below the price of gold, partly due to increased gold prices."

https://en.wikipedia.org/wiki/Platinum_as_an_investment#:~:t...

Nasrudith3• 6 years ago

Perhaps platinium prices arr more set by practical uses for things like catalytic converters and the demand is down with the rest of the economy?

Of course gold's speculation value is essentially memetically driven by history and platinium tends to lack that.

j_walter2• 6 years ago

Platinum prices have declined every year, more or less, for the last decade. Car manufacturing world wide has increased in that same time frame (even excluding EV that wouldn't need platinum).

DoreenMichele• 6 years ago

The article seems to suggest it's rising because of the lockdown. In other words: we aren't mining it currently, or not mining it very much.

My general impression is that gold is going up because of its use in electronics. Platinum is also used, but in smaller amounts.

A typical iPhone is estimated to house around 0.034g of gold, 0.34g of silver, 0.015g of palladium and less than one-thousandth of a gram of platinum.

https://www.bbc.com/future/article/20161017-your-old-phone-i...

autokad3• 6 years ago

I use to scoff at gold investors, I was one of those 'only the sp500 is the right asset class, it always beats every other asset class over the long run' type people.

then in 2019, I saw a chart of asset prices over the last 20 years. Gold, oil, and real-estate out performed the sp500 over that 20 year period (to me, a reasonable 'long period of time').

its actually still true today in 2020, probably will remain so for a long time.

gold aug-2000:aug-2020 = 409:2000 or 4.89x sp500 aug-2000:aug-2020 = 1471:3327 or 2.26x

that is serious under performance over a 20 year period, which has been true for ever a year now. not true with oil anymore though.

prepend2• 6 years ago

Compare that to all the other 20 year windows. So unless you think this 20 year period is useful for predicting the next 20 year window, it’s not very helpful.

Gold really sucks over long term investing windows (eg 30-50 years) although it, like pretty much everything, will have specific windows of outperforming the s&p.

autokad3• 6 years ago

"Compare that to all the other 20 year windows. So unless you think this 20 year period is useful for predicting the next 20 year window, it’s not very helpful."

No window is good at predicting any asset. As in, previous returns can't be used to predict anything.

Nobody cares about 50 year windows if that is well outside of their investment window. realistically, a person has about 20 years to build up assets before they need to switch to more safer bonds so talking about 50 year windows is like me saying I want to live in this geography for nice weather and you saying 'well over geological epochs, this place is far more stable'.

I think the sp500 should be most people's primary investment. but I also hate people who say the sp500 is infallible, when they used research that only looked at 1952 - 1999. so when you see people parrot 'the sp500 beats all asset classes over any long period of time'. well 20 years is a long period of time.

jcheng• 6 years ago

For stocks[1], August 2000 is just about the high water mark of the dot-com bubble; for gold[2], August 2000 is the bottom of a "V" that extends 20 years in either direction.

I'm not saying you cherry-picked August 2000 as a starting point to make gold look good (20 years is a nice round number and a reasonable time span), but if you were cherry-picking you couldn't do better than that.

[1] https://www.google.com/search?q=sp500+historical&oq=sp500+hi...

[2] https://www.macrotrends.net/1333/historical-gold-prices-100-...

autokad3• 6 years ago

That's true, but stocks are also at all time highs now, so its not a completely unfavorable position for stocks. This is the reason why I said it will likely out perform over that window for a few years.

The problem is, someone who is working and saving money away doesnt get to choose the window they are in.

I wouldn't buy gold here, but if gold ever drops around the range of 1500, I am not going to miss that chance again at having some of it in my portfolio.

refurb5• 6 years ago

Your dates are deceiving you.

Aug 2000 was the near bottom for gold and the near .top for the sp500.

If you bought gold in 1980 (the peak) you’d still be underwater even with the current jump in price.

BMSmnqXAE4yfe14• 6 years ago

Wow 263 comments ... interesting to see what hackers really care about)

Gold price rises above $2k for first time

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