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The Gold Bubble... Just how badly have the silly goldbugs failed?
Topic Started: 21 Jun 2014, 11:46 AM (27,219 Views)
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SittingOnDeFence
21 Jun 2014, 11:40 PM
Do a lot of people take out huge loans to buy gold?
And then pay interest only on the loan, would it be a bubble then ?
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derp
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goldbug
21 Jun 2014, 11:08 PM
What's this load of crap? Who brought up the gold standard anyway.

You clowns haven't a clue do you. For your information a gold standard is the last thing a goldbug wants to see. We don't the governments sticky fingers anywhere near our gold.
Oh wow. So you subscribe to the even more extreme fantasy that commerce will actually go back to being conducted with hunks of metal?
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derp
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SittingOnDeFence
21 Jun 2014, 11:40 PM
Do a lot of people take out huge loans to buy gold?
Yes. It is called paper gold. Gold mines borrow huge sums of money to buy paper gold which they then sell to whomever wants to receive the physical gold the mine promises to produce in the future. Gold mines don't actually sell real gold. Yes it's weird. But the finance world is very bizarre.
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Lef-tee
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Gold versus real estate as an investment isn't really an area that I take a lot of interest in. People have their preferences for one or the other. Though I don't think gold will ever face the same constraints on price growth as a lot of real estate ultimately will. The cost of a bar of gold is immaterial to basic human wellbeing - the cost of the basic need for shelter from the elements is a different kettle of fish.

The social costs of ever escalating dwelling prices ultimately outweigh the economic benefits generated by the rising credit growth. Vested interests will continue pushing at far as possible of course but the pace of price growth will ultimately become constrained by the purpose of a houses existence. I can't really see where the shiny yellow metal would face any such constraint.
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Foxy
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Zero is coming...

Shadow
21 Jun 2014, 11:46 AM
Gold is an epic failure.

Below 2009 levels in nominal terms. Even worse in real terms.

The gold bubble popped, yet the silly goldbugs think it's a great investment, despite falling in value for years and paying zero yield...

Posted Image

And still the goldbugs keep hoarding it. But never selling. Goldbugs never sell. So it's completely pointless.

They will die with their little hoard of shiny trinkets still intact, it having provided them with zero income and therefore zero financial benefit during their lives.

That's not an investment. It's a hobby, like collecting stamps.
I would feel like a complete failure if i owned a ton of gold.

Gee i may even buy a rusty old razor and start hacking at my wrists…………………………

Peter
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Lef-tee
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Quote:
 
I would feel like a complete failure if i owned a ton of gold.


Just like real estate - it would depend on when you bought that tonne of gold. I can remember gold being $400 an ounce.

But this is immaterial to the broader welfare so I'm only marginally interested.
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Curious Non-Economist
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derp
21 Jun 2014, 06:56 PM
Ok I'll bite. If goldbugs don't plan on selling their gold then how does it protect wealth?
India, earlier this year, started experiencing high inflation. India imports most of it's energy. It imports 75% of it's crude, nearly all of it's LNG, all of it's enriched uranium (ironically, India has one of the largest known deposits of Thorium, so if fast breeder reactors ever become a commercial reality, India is set for electrical power for hundreds of years).

India also has one of the most corrupt, inept and incompetent governments in the world, and is highly dependent on exports to the US and Europe of mostly services to balance it's trade deficit. When those exports went into sharp decline last year and early this year, the Indian Rupee began losing value against the dollar, and almost everything started increasing in price. Inflation averaged 7% per MONTH for more than 6 months. Fortunately for many Indians, they are big holders of gold, and as the Rupee dropped in value, the value of their gold increased. Those who had gold were hedged against inflation and government incompetence.

Ironically, this started the biggest gold buying spree for 20 years in India, as Indians sought to quickly convert their rapidly depreciating Rupees for gold, leading the government to introduce (largely useless) capital controls, and ordinary Indians to stuffing gold bars in their jockstraps to get the precious yellow through custom.

Gold has no issuer, so you are not exposed to the incompetence of the issuer when you own it.

Disclaimer: I don't own any gold. In the event of financial collapse, I will move to tropical Queensland.
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Lef-tee
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Quote:
 
Disclaimer: I don't own any gold. In the event of financial collapse, I will move to tropical Queensland.


Yep, it's ok here :oo:
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Shadow
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Evil Mouzealot Specufestor

Gossamer
21 Jun 2014, 05:59 PM
WRONG! Gold is bought to protect one's wealth.
How does gold protect your wealth if it falls in value for years?
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Strindberg
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Curious Non-Economist
22 Jun 2014, 04:43 PM
India also has one of the most corrupt, inept and incompetent governments in the world, and is highly dependent on exports to the US and Europe of mostly services to balance it's trade deficit. When those exports went into sharp decline last year and early this year, the Indian Rupee began losing value against the dollar, and almost everything started increasing in price. Inflation averaged 7% per MONTH for more than 6 months. Fortunately for many Indians, they are big holders of gold, and as the Rupee dropped in value, the value of their gold increased. Those who had gold were hedged against inflation and government incompetence.
Some data.

The Rupee has fallen about 10% against the US dollar since the beginning of last year. Nothing exceptional in that - the AU$ has also fallen about 10% against the US dollar over the same period.

Inflation of 7% per month for 6 months (which you claim) would be 50% over 6 months. CPI for India for the last 12 months was 8.2% and it was 9.9% for the whole of 2013 (see here).

At the beginning of last year an ounce of gold cost over 90,000 Rupees (see here). It now costs about 79,000 Rupees. In what way were "those who had gold ....hedged against inflation and government incompetence"?

The gold they bought at the beginning of last year will now get them less Rupees than they paid and those Rupees will now buy less goods. By buying gold they have lost more purchasing power than they would have lost by sticking the Rupees under the mattress.


Lef-tee
22 Jun 2014, 05:20 PM


Yep, it's ok here :oo:
I thought you were in Gladstone. That isn't quite tropical Queensland.
Edited by Strindberg, 22 Jun 2014, 05:51 PM.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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