Gold at $420 per Ounce

johnnymk · 01-06-2004, 07:49 AM

It seems that everytime I look at the price of gold, it's generally moving upward.

Approximately 4 years ago, it was hovering between $260-$280 per ounce. It is up nearly 60% from that period.

Tell me inflation is dead and I've got a bridge in New York I'd like to sell you.

We are a global economy. The foreigners finance over 60% of our debt. I know that the Fed is trying to keep interest rates low to keep propping up the Economy, but external factors are REALLY going to force their hand in the next 6 months.

LegendKiller · 01-06-2004, 07:32 PM

What external forces are you alluding to?

Also, I wouldn't use the past 4 years of gold appreciation as a good indicator of massive inflation. Consider that gold has been a good, secure, investment for investors and that gold contract volumes have been increasing along with prices and you come up with the fact that supply and demand are at an equilibrium over this price, not just inflation.

LK

johnnymk · 01-07-2004, 04:49 AM

The value of the dollar compared to other currencies.

The value of gold rarely is dependent on supply and demand, much like other rare metals such as silver and platinum. It is generally a reaction to other factors going on in the world.

LegendKiller · 01-07-2004, 07:10 AM

So, the price going up AND the volume going up doesn't indicate that trading is heavier making more demand and perhaps pushing up prices?

If we were to see price appreciation indepdendant of volume then I would believe that it was due to inflation. Furthermore, just the assertion that it is due to inflation is folly. If you consider that the rate of appreciation was $160 over the four years that would give an annual inflation rate of 13%, one of the highest rates EVER in the history of the US economy (CFA maxtrix shows 10.4% in 81).

Even if we take into account that inflation would only be %50 of appreciation that would STILL leave us with an inflation rate of 7%. Considering that consumer goods CPI hasn't gone up that much in TWENTY YEARS its hard to imagine that inflation has everything to do with the large appreciation of gold.

LK

johnnymk · 01-07-2004, 07:34 AM

I don't assume that inflation is the sole factor. It's a relatively good indicator that inflation is headed upward and not downward or sideways.

You are correct in the assertion that inflation is nowhere near the rate of appreciation of the rate of the price of gold. But it definitely indicates inflation on a global scale, which IMO will seriously affect interest rates very soon.

01-06-2004, 07:49 AM	#1
johnnymk Chief of Naval Operations Join Date: May 2000 Location: LEVITTOWN< PA> USA Posts: 12,601	Gold at $420 per Ounce It seems that everytime I look at the price of gold, it's generally moving upward. Approximately 4 years ago, it was hovering between $260-$280 per ounce. It is up nearly 60% from that period. Tell me inflation is dead and I've got a bridge in New York I'd like to sell you. We are a global economy. The foreigners finance over 60% of our debt. I know that the Fed is trying to keep interest rates low to keep propping up the Economy, but external factors are REALLY going to force their hand in the next 6 months. __________________ Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. - Ronald Reagan (1986)

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01-06-2004, 07:32 PM	#2
LegendKiller Vice Admiral Join Date: Jun 2002 Location: Northern VA Posts: 4,927	What external forces are you alluding to? Also, I wouldn't use the past 4 years of gold appreciation as a good indicator of massive inflation. Consider that gold has been a good, secure, investment for investors and that gold contract volumes have been increasing along with prices and you come up with the fact that supply and demand are at an equilibrium over this price, not just inflation. LK

01-07-2004, 04:49 AM	#3
johnnymk Chief of Naval Operations Join Date: May 2000 Location: LEVITTOWN< PA> USA Posts: 12,601	The value of the dollar compared to other currencies. The value of gold rarely is dependent on supply and demand, much like other rare metals such as silver and platinum. It is generally a reaction to other factors going on in the world.

01-07-2004, 07:10 AM	#4
LegendKiller Vice Admiral Join Date: Jun 2002 Location: Northern VA Posts: 4,927	So, the price going up AND the volume going up doesn't indicate that trading is heavier making more demand and perhaps pushing up prices? If we were to see price appreciation indepdendant of volume then I would believe that it was due to inflation. Furthermore, just the assertion that it is due to inflation is folly. If you consider that the rate of appreciation was $160 over the four years that would give an annual inflation rate of 13%, one of the highest rates EVER in the history of the US economy (CFA maxtrix shows 10.4% in 81). Even if we take into account that inflation would only be %50 of appreciation that would STILL leave us with an inflation rate of 7%. Considering that consumer goods CPI hasn't gone up that much in TWENTY YEARS its hard to imagine that inflation has everything to do with the large appreciation of gold. LK

01-07-2004, 07:34 AM	#5
johnnymk Chief of Naval Operations Join Date: May 2000 Location: LEVITTOWN< PA> USA Posts: 12,601	I don't assume that inflation is the sole factor. It's a relatively good indicator that inflation is headed upward and not downward or sideways. You are correct in the assertion that inflation is nowhere near the rate of appreciation of the rate of the price of gold. But it definitely indicates inflation on a global scale, which IMO will seriously affect interest rates very soon.

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