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Old 07-13-2012, 10:54 AM   #1
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The future of the value of gold

Forgive my ponderings...

Things to do NOT affect the value of an ounce of gold:
1) Money supply: No matter the price in fiat currency, gold value does not change

Things that affect the value of an ounce of gold:
1) Fear indicator is positively correlated
a) using VIX as indicator:

2) Ratio between Total gold ounces mined and current world population
a) Dropping worldwide production, possible peak in 2000:
b) While the rate of increase is dropping, worldwide population is still rising:

Humm, ignoring the fluctations due to changes in money supply or short term fear effects, the underlying value of gold may increase simply due to the population increasing faster than the total suppy of mined gold increases.
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Old 07-13-2012, 01:54 PM   #2
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I look at it this way - value of gold is largely constant. The old saw about the $20 dollar piece getting you about the same stuff in cowboy times as now. This might change as other things become more intrinsically expensive, like the energy that makes up part of absolutely everything else you need to live.

Then there's the wiggles due to fear about other currencies. When fear is low, so is gold (relatively). When high, it makes gold pop. This can also drag the price of gold around due traders to having to sell to meet margin calls and so on, or some big bank or country buying to use it for collateral. That's what a trader plays - those wiggle around the norm, which is basically inverse the dollar value at any given time (or whatever your currency is doing and which one you use for a baseline).

The wiggles are large enough to sometimes obscure the long term trend, and make it tempting to "time" the market if you think you can, even if you plan to hold "forever". However, most people find they can't time it well enough to make any added value, and eventually just resort to dollar cost averaging which over time, gets you the value of the stuff without the wiggles. For almost everyone DCA is the way.

I trade paper and hold physical. I more often than not DO get the timing right, enough to be worth the effort. Not always, but net is good on my trades.

You observation about the gold/human population ratio is interesting and might be right. I'd be looking at various other ratios (too) myself - gold to housing, gold to oil, stuff like that. The world (sigh) really could exist just fine without any gold at all - but oil, right now? Shelter? Depends on what you value, I suppose.

Unless you intend to die with your stash intact, it really does matter (and if you intend never to cash out, how about letting me keep it for you! - Since you'll never want it back, I have a plan here!). DoChen mentions that he intends to leave his to his kids, so he's got that good reason.

I don't have kids, or anyone else to leave it to, and intend to die broke - else all this work to get it in the first place is wasted. I'm not going to leave any for the government, by golly!

I don't buy into the dichotomy between investing and trading - it's all a trade, since you ain't gonna live forever, it'll be cashed out someday.
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Old 07-13-2012, 04:25 PM   #3
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My biggest concern is the possibility that Fulford / Wilcocks report that indicated huge amounts of unallocated gold exist and simply wait quietly for their moment ...... are factually correct.

We all seem to want to accept the swimmimg pool volume as beyond argument, yet who is it that pushes this idea hardest ?
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