Quote:
|
Originally Posted by PaceAdvantage
ETFs aren't being stripped of gold...they are dumping it because the price is cratering....
Has anyone considered that Gold may have actually been way overpriced? That this whole "end of civilization" thing was way overblown?
Inflation is still in check, relatively, given how much the Fed has pumped into the system. Didn't that give the Gold bugs any sort of pause?
There comes a point where one has to admit they might be wrong.
Do you guys actually think Gold is going to rebound back to where it was and beyond anytime soon? That would be a scenario never seen before, would it not?
|
Gold in NOT for the feint of heart.
The only way I know to value gold that makes any sense is production costs. If the price far exceeds the production costs, then profits and return on capital at the miners rises. That encourages more exploration and the opening of mines that were perhaps unprofitable at lower levels. Hence the supply rises and the price falls. The same thing happens in reverse.
There are still many mines that are profitable at these levels, but a bunch are not. So they are going to be shut. Some of the weaker miners may go out of business or be consolidated etc... So you could say that at $1900 it was probably too high, but at $1200 we are moving into good value range. That's why I bought it twice in the last 6 weeks or so after not having bought any since it was in the $400 range.
All that will become irrelevant the day the rest of the world figures out that our current banking and monetary system is woefully unsound and must be scrapped and replaced by a sound system. Whether they will figure it out intellectually or when the system actually collapses is anyone's guess, but I'm hoping for the former and keeping gold in case it's the latter.
The reason we have no inflation now is a 2 part answer.
1. The US government cooked the books to lower the reported inflation rate. That had a variety of favorable "political" impacts ranging from government spending (lower cost of living increases) and taxes (bracket creep). It also allows the government to say the economy is growing faster because real GDP
growth is the difference between nominal GDP and inflation. Lie about inflation and "reported" GDP growth rises. lmao So all this is a way to not cut spending or raise taxes in a bill where everyone can hold you accountable. You screw people via the back door of inflation that you are lying about and get to tell them everything is fine.
2. Much of the money that has been printed (several trillion right now) is sitting on deposit at the Fed and hasn't worked it's way out into the system yet where it could cause much higher inflation. That's what all these conversations about "tapering", "reversing" etc.. are about.
How do they unwind all that money printing without crushing the economy with much higher interest rates and if they don't how do they stop the inevitable inlfation?
IMO they petty much CANNOT. So they will probably come up with some other creative but unsound and irresponsible way to delay the inevitable for a few more years.
GDP is a terrible way to measure the health of an economy because:
1. They lie
2. It's hard to measure everything accurately
3. You can create the ILLUSION of a healthy economy with easy money and credit.
Let me give you an example.
About 1 1/2 years ago my father was in critical condition. It was fairly clear he was close to death, but they pumped him full of antibiotics, medications for is heart, blood pressure, water level etc...Even though he was on the verge of dying, his vital signs were normal. They wouldn't have been normal without tons of drugs, but they were normal.
Right now interest rates are artificially low (they are negative in real terms) because the Fed is pumping 1 trillion dollars into the economy annually while the Federal government is spending close to 1 trillion dollars it does not have. Our vital signs are barely normal despite massively more medication than the earth has seen in world history. We are basically in intensive care. So is western Europe and possibly even Japan and others.
We got to this place because the system is unsound. We won't get out of it easily and the system could die just like my father. If you want to bet on an unsound system and incompetent and irresponsible leadership to lead us out of this mess in an orderly fashion, you can. I have a portfolio of stocks also.
I just think a little gold in your portfolio is not such a bad idea even if it leads to some more short term losses.
