Gold is not Bull

As of today I’m officially freaked out. Who am I and in what world am I living in? I’m an inexperienced nobody listening to a bunch of well-to-do economists that have been around probably since the creation of the world, at least it seems, and everyone is arguing about what the hell’s going on. The spectrum of answers vary from “nothing at all life will always be this great” to “OMG! We are heading into a world depression and restructuring worst than that of the 1930s”. But what do they know. As the Daily Reckoning so eloquently put it…“Like most market commentators, we have no idea what we are talking about – but at least we can admit it”

No one has a clue what we’re in for. It could be devastation “Armageddon-style” like the world has never known wiping out wealth, lives and hope or it could be utopia, the euphoric era many religions have forecasted for centuries. It could be another Depression or better yet, just a slowdown. But one thing in common coherent with every speculation is the fact they don’t know a thing.

I just read an amazing discussion/comment board on Barry’s Big Picture regarding Gold. It ran around the bush with “what entity truly describes wealth today?” Power? Gold? Labor? Barter?

In regard to gold it was simple. Gold is a hedge against just about everything. It was, remains and most probably always be the only secure form of wealth in the world with a 5,000 year history to back it.

“Bullion doesn’t pay interest or dividends, nor does it grow or expand by itself. That’s the price you pay for tranquility.”

It will get you nowhere on its own. It has no true worth until its evaluated against something else. It could however be evaluated versus anything history has given us as a commodity.

It holds one true purpose other than (how many, including Warren Buffett put it) being “dug out of the ground, refined, sold, passed around, sold, held valuable and the dug back into the ground waiting to be dug up again” and that is that is stands for one thing.

Security. More so it is the only commodity on earth known for its

  • Beauty
  • Unique color
  • Weight ratio
  • Divisibility
  • Portability
  • Scarcity
  • Durability
  • Uniformity
It is thus no doubt why great nations and empires have chosen it as their primary measure of currency. It is also reasonable why such an item would be held tight during radical economic, political and sentimental times of volatile change. It holds a bottom line that can remain calm in times of tranquility but at the same time increase the wealth of its owner rising many times in value during times of unrest and insecurity.

Meyer Anschel Rothschild said “The most important thing is not to lose money”. No wonder how he developed a fortune primarily with gold. He was also known for his simple money-making strategy “Buy Cheap, Sell Dear”. I guess he would have held until he can buy some stocks at a better Dow/Gold Ratio is a bit lower.

A few economic factors regarding gold:

  • It follows Oil, so if there’s $150 oil, gold is there
  • As a commodity it can never really lose its value
  • If there’s a limit on supply it will skyrocket from demand
  • If there’s an oversupply it will…skyrocket (for the same reason)
There have been people predicting gold’s revival for the past quarter century. They’re gonna end up being right sometime.

In the words of Alan Greenspan himself

“An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other… This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

(Editor: Is “statists” Greenspanese?)
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