The Return of Gold
In the London Telegraph, a fascinating column by Ambrose Evans-Pritchard. Excerpts:
The world is moving step by step towards a de facto Gold Standard, without any meetings of G20 leaders to announce the idea or bless the project.
Some readers will already have seen the GFMS Gold Survey for 2012 which reported that central banks around the world bought more bullion last year in terms of tonnage than at any time in almost half a century.
They added a net 536 tonnes in 2012 as they diversified fresh reserves away from the four fiat suspects: dollar, euro, sterling, and yen....
Neither the euro nor the dollar can inspire full confidence, although for different reasons. EMU is a dysfunctional construct, covering two incompatible economies, prone to lurching from crisis to crisis, without a unified treasury to back it up. The dollar stands on a pyramid of debt. We all know that this debt will be inflated away over time – for better or worse. The only real disagreement is over the speed....
We may not be experiencing inflation yet, but central bankers in Russia, China, and elsewhere are reducing their holdings of dollars in favor of gold.
Thank you very much, Ben Bernanke.
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May '10
Re: The Return of Gold
...and his comments the other day were incredibly stupid.
May '12
Re: The Return of Gold
The price of oil against gold has hardly changed in the last 40 years. The world loves gold, the politicians hate it.
May '10
Re: The Return of Gold
There's nothing like the touch of gold...
Re: The Return of Gold
I have been puzzling where a man in his mid-60s ought to put his money. Gold seems to me increasingly risky. The inflation is already priced in. Methinks real estate might be a good bet. What else?
Mar '11
Re: The Return of Gold
The return of a Gold Standard is not something to hold one's breath for I would say, even if only a de facto one. Still there is some rather interesting movement in this area:
Interesting.
I do find this particular observation by Ambrose Evans-Pritchard to be significant:
Edited on January 18, 2013 at 12:58amJun '10
Re: The Return of Gold
Commodities like metals, timber, oil, and natural gas usually rise with inflation. At least that's the theory.
May '10
Re: The Return of Gold
Ammunition, coffee, tobacco, aspirin, and so forth; and bunker to keep them in.
Oct '10
Re: The Return of Gold
There isn't enough gold in the world to meet the world's demands for foreign exchange reserves. The price of gold is itself unstable. Besides, a true gold standard would take a great deal of government intervention in the economy; at one point in the 60s, Keynesian interventionists favored gold for that reason. Fixed exchange rates actually make Keynesian fiscal policies more effective (even necessary).
Nov '10
Re: The Return of Gold
Unit price of gold is high -- even at 1/10th ounce coins. Suggest that you look at silver. “Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.”
Jul '11
Re: The Return of Gold
Unfortunately, I would imagine that a return of inflation ala the 1970s or worse, would bring about the situation we had back then - people chasing ROI as fast as possible as loan rates skyrocketed. My first paralegal job back then was for a NY sole practitioner and I remember assisting in a closing on a co-op - the purchasers signed on the dotted line for a mortgage at 21%, and they felt relieved to have gotten in for that rate! For a glorified apartment! Lord, I really would not like to go back to those days, but I'm afraid we're fast chasing that scenario.
Re: The Return of Gold
So what you're saying is, Mr. T will soon be the richest man in the world?
May '11
Re: The Return of Gold
On the NRO cruise, Alan Reynolds said (I believe) that for the first time in his life he is investing in gold and Florida real restate. That worked out pretty well for Henry Flagler a very long time ago and will probably work out well again.
Dec '10
Re: The Return of Gold
Paul, don't use the late 70s as the predictive model for our current economic quagmire. Neither the boundary conditions nor the dynamics are in anyway the same or even remotely similar. Even thought the Fed has added well over 2 trillion dollars to it's balance sheet and mortgage rates are 3.2%, most people and businesses would rather hold their assets in dollars than invest in physical assets like real estate ... that's the definition of deflation ...
Ricochet should consider setting up a permanent mechanism for this exact discussion.
Edited on January 18, 2013 at 3:06amJan '11
Re: The Return of Gold
What hasn't been mentioned so far here is that Germany is asking for all of its gold back from the USAZerohedge mentions that its gonna take SEVEN years for that to happenhttp://www.zerohedge.com/news/2013-01-16/it-will-take-fed-seven-years-deliver-300-tons-german-goldI always thought Ron Paul was kinda weird asking for that audit on the gold at Fort Knox.(Sorry for no embedded hyperlink, posting from an iPad)
Jan '11
Re: The Return of Gold
Oh my sorry. http://www.zerohedge.com/news/2013-01-16/it-will-take-fed-seven-years-deliver-300-tons-german-gold. Formatting is bad with the pad
May '12
Re: The Return of Gold
Here's the link.
I never used to buy into Ron Paul & GATA's claim that the gold in various depositories like Ft. Knox had IOU's of some form in their place. However, if that article about Germany's 7 year gold repatriation plan is accurate, Paul & GATA might be on to something.
Oct '10
Re: The Return of Gold
Jim Ixtian
Here's the link.
I never used to buy into Ron Paul & GATA's claim that the gold in various depositories like Ft. Knox had IOU's of some form in their place. However, if that article about Germany's 7 year gold repatriation plan is accurate, Paul & GATA might be on to something. · 20 minutes ago
Looking at the article, it looks like the problem isn't that the gold isn't there, it's that no one knows for sure who owns it, or there might be multiple ownership claims.
Feb '11
Re: The Return of Gold
Is it?
I still recall a post at zerohedge by Gonzola Lira who made a case that the run up in the price of gold in the 1970s was an incipient hyperinflation averted only by Paul Volker's brutally high interest rates.
A similar policy today would wreck the US government as a rise in interest rates would create an unsustainable financial situation for the US government.
So I'm not sure I'd say inflation is already priced in our present situation.
Jan '11
Re: The Return of Gold
Joseph Eagar - regarding who owns the gold - does this mean there is fractional ownership of the US physical gold, much like banks and cash? That means that perhaps if there's a run on US physical gold..... Problematic
Aug '10
Re: The Return of Gold
It has to do with rehypothecation, using other's assets on deposits to make purchases of shorter duration than the deposit length; and gold leasing, which is lending a gold asset to someone else for a few fractions of a percent.
The gold conspiracy theorists have good reason to believe (in part based on MF Global's blowup) that central banks are using their gold stores to commit multiple rehypothecation via gold leasing; basically, lending the same bar of gold out to multiple parties, because those borrowers never take physical possession of the asset, they merely hold it on their books for a set period of time.
And then they lease that "paper gold" to other parties, multiple times... you can see where it might all collapse if someone actually demands to take physical delivery of a paper promise.
Those pesky Germans. (And those pesky Dutch, too, if the rumors that they will follow suit are true...)