I think it might be time to buy some gold (and silver).

[Borodog]

I came to the conclusion over the weekend that it is time to acquire some hard currency. This epiphany came after I learned an astonishing fact that I had never known before: gold very nearly spontaneously "remonetized" in 1980.

When the rapid inflation of the 1970s was revealing the "savings" of most Americans to be completely illusory, losing value daily, many people began holding gold as an inflation hedge, a store of value. About a quarter to a third of the US population was doing so; this increased the market price of gold practically exponentially. People began accepting gold in payment of debts, completely ignoring the laws against it.

The IMF then began a systematic dumping of gold onto the market to depress gold prices (ca. 1974), and make it appear that gold was not a good inflation hedge. This worked for a few years, but gold was set to spontaneously remonetize right at the turn of the decade. This was forestalled by massive coordinated gold dumping by central banks that began in 1980, a tactic that has been seen again and again over recent decades, right up to and including late last year. I had known about this (central bank gold dumping) from way back, but never really understood why it was done (this was from pre-libertarian days; I'd totally forgotten it).



The point being; this cannot continue indefinitely. I believe we are poised for a 70s style international collapse of the dollar, a subsequent influx of foreign held dollars into the US, a resulting massive inflation, and a flight from the dollar into gold as an inflation hedge. This could again lead to a spontaneous remonetization of gold; in fact, I believe it will do so; as I believe that market gold prices are radically depressed from their natural market values, and I don't think there is enough gold in all the central banks of the world to dump on the market in the event of the collapse of the dollar to prevent the remonetization of gold.

And here's the kicker: by dumping gold reserves, the central banks are putting the real money back into circulation. If and when the gold-dumping begins anew, driving the price down, buy more.

[UlidEyes]

What about those who insist on having gold on hand and not gold funds. Would you suggest buying tangible gold coins, then?

[pvn]

[ QUOTE ]
What about those who insist on having gold on hand and not gold funds. Would you suggest buying tangible gold coins, then?

[/ QUOTE ]

If the [censored] REALLY hits the fan, owning fourty bazillion shares of GLD isn't going to help you much. I think a lot of the real hardcore "the sky is falling" types recommend some diversification in your gold holdings; some small amount in physical gold buried in your back yard, some larger amount in a readily-accessible safe-deposit box, some other percentage in some sort of gold fund.

[adios]

I've pointed this argument out before in another thread about gold. There are many investors, traders that feel the central banks have basically manipulated the price of gold for a long time. I wouldn't bet against the central banks being able to perpetuate the manipulation if indeed it does exist (and it could) but that's what makes a market. Your analysis could be right and you could make a ton of money. The downside risk to buying gold may be low too. Credit markets right now are in total disarray, IMO a major credit crunch is underway. Gold has basically gone sideways this year so not sure how that all plays into your analysis.

[John Kilduff]

[ QUOTE ]
I came to the conclusion over the weekend that it is time to acquire some hard currency. This epiphany came after I learned an astonishing fact that I had never known before: gold very nearly spontaneously "remonetized" in 1980.

When the rapid inflation of the 1970s was revealing the "savings" of most Americans to be completely illusory, losing value daily, many people began holding gold as an inflation hedge, a store of value. About a quarter to a third of the US population was doing so; this increased the market price of gold practically exponentially. People began accepting gold in payment of debts, completely ignoring the laws against it.

The IMF then began a systematic dumping of gold onto the market to depress gold prices (ca. 1974), and make it appear that gold was not a good inflation hedge. This worked for a few years, but gold was set to spontaneously remonetize right at the turn of the decade. This was forestalled by massive coordinated gold dumping by central banks that began in 1980, a tactic that has been seen again and again over recent decades, right up to and including late last year. I had known about this (central bank gold dumping) from way back, but never really understood why it was done (this was from pre-libertarian days; I'd totally forgotten it).



The point being; this cannot continue indefinitely. I believe we are poised for a 70s style international collapse of the dollar, a subsequent influx of foreign held dollars into the US, a resulting massive inflation, and a flight from the dollar into gold as an inflation hedge. This could again lead to a spontaneous remonetization of gold; in fact, I believe it will do so; as I believe that market gold prices are radically depressed from their natural market values, and I don't think there is enough gold in all the central banks of the world to dump on the market in the event of the collapse of the dollar to prevent the remonetization of gold.

And here's the kicker: by dumping gold reserves, the central banks are putting the real money back into circulation. If and when the gold-dumping begins anew, driving the price down, buy more.

[/ QUOTE ]

It's worth noting too, that as the USSR was experiencing hard-cash shortages, the Soviet government began selling off large amounts of gold bullion holdings over time, in order to try to stave off gradually looming financial collapse. You might wish to research this to find out how much of a role that played in depressing the price of gold as well.

[ojc02]

Does anyone have any suggestions on the best place to buy gold?

[Borodog]

[ QUOTE ]
Does anyone have any suggestions on the best place to buy gold?

[/ QUOTE ]

I'm investigating this, and will report back when I know something more.

[Borodog]

Some more gold date from '00 through the present:



Note the rapid acceleration in price in the latter half of '05 through the first half of '06, before the latest round of gold dumping flattened the market for the past year.

[iron81]

If you're actually wondering if you want to buy gold, I'll move this to BFI, they'd be better at giving advice. If this is just your way of saying "The end is nigh", Politics is fine.

[adios]

[ QUOTE ]
If you're actually wondering if you want to buy gold, I'll move this to BFI, they'd be better at giving advice. If this is just your way of saying "The end is nigh", Politics is fine.

[/ QUOTE ]

Seemed like more of a market call than the end is nigh call. Anyway as far as how credit crunch is affecting the U.S. $.

Subprime-Infected Funds Drive Dollar Demand

The dollar is no longer the currency you love to hate. Now, it's the currency you can't live without.

Last week's credit crunch has set off a worldwide rush for dollars as banks and fund managers scramble to pay back loans used to buy risky mortgage securities. They are competing with firms such as AXA Investment Managers, Investec Asset Management Ltd. and FX Concepts Inc., which are also buying dollars in a bet on further appreciation.

After a five-year tumble that took the U.S. currency to its lowest level in a decade, it has rallied 1.4 percent against the euro and 1.2 percent against the pound in the last three trading days. And it's ``likely to keep benefiting,'' said Mansoor Mohi- Uddin, head of currency strategy in London at UBS AG, the world's second-largest foreign exchange dealer.

We'll see how far this rally goes. OP wrote originally:

[ QUOTE ]
...The point being; this cannot continue indefinitely. I believe we are poised for a 70s style international collapse of the dollar ...

[/ QUOTE ]


Looks exactly the opposite is happening, at least in the short term. Timing is everything I guess.