Gold being a traditional financial preparedness tool in the face of economic meltdowns, I thought the article below would be of interest to many here.

If I really thought that end times were upon us -- economic or otherwise -- I'd be far more inclined to "invest" in useful, tradeable items such as guns and ammo.

If you get in on gold on the ground floor as it starts to shoot up in a crisis then you can make some money, if you sell at the right time. But I'll never forget the runup in the price of gold in 1979-80. My grandfather bought a pile of Krugerrands and then never saw a return on that investment before he died 15 years later.

http://online.wsj.com/article/SB10001424...personalfinance

Why I Don't Trust Gold

MAY 27, 2010

Warren Buffett put it well. "Gold gets dug out of the ground in Africa, or someplace," he said. "Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

I know we generally don't talk about the shiny stuff, but I think it's important to discuss a bit because things are getting rather out of hand now with gold IMHO.

I'm not anti-gold, but I think the vast majority of people who buy gold now will regret the decision. The pros know what they're getting into--and when to get out. The amateurs generally don't.

The fundamentals don't support the very high prices we have seen. Basically, it's fear and greed that have driven the price of gold into the latest bubble. Fear of a total collapse of fiat currencies, fear of hyperinflation, fear of investing your money in stocks or real estate, etc. And greed--"Look at how the price keeps going up and up!" It's the same greedy mentality that drove many people to buy homes in the past 10 years and either flip them or else use them as ATM machines.

Or just look at TV. When you see so many commercials about buying gold coins or how to "Turn your gold into cash!" or how often it's mentioned on CNBC, you know you're looking at a bubble. Remember, less than 10 years ago, gold was selling for only $200-something an ounce. Assuming the world doesn't end (I think that's a pretty safe bet), watch the price of gold eventually tank as people chase after the next bubble that comes along--could be oil again, or stocks, or TIPS, or anything besides gold.

Like I said, I'm not anti-gold. I think there is a legitimate place for gold in people's financial portfolios, but going hog wild in buying it now will likely lead to sorrow IMHO. Buy a little bit of the shiny stuff if it'll help you sleep at night, but don't cash out your 401(K) and go all in on Krugerrands.

More on gold:

http://online.wsj.com/article/SB10001424...personalFinance

...even at today's prices, the bullion that the U.S. government holds in places like Fort Knox is still only worth enough to back 15% of the U.S. monetary base. That is near a record low.

At the peak of the gold mania in 1979-80, gold prices rose so far that the backing exceeded 100%. How far would gold rise if that happened again? To around $6,300 an ounce, Mr. Grice says.

Buffet is dead-on, as he often is. Since antiquity gold has been seen as valuable, but until the space age that value has just been guarding the hole. Gold has many interesting properties for a technically advanced culture. First, it's non-reactive. It will never oxidize. Ever. Gold is eternal. Which wouldn't be a big deal if it wasn't also an incredible conductor of electricity. Couple that with gold's ability to be hammered out to about 1 molecule of thickness, and you've got a metal for the Space Age.

Still, in our culture the value of gold is still stuck in the Dark Ages, just based on our fixation with the "Bling" aspect of it. Which is ironic, since it never had any true value until the where it started to be decoupled from currency.

The reason gold is only worth "$1200" per ounce is because the bullion banks (primarily Goldman Sachs & JP Morgan) consistently beat it down to maintain the illusion of a strong dollar. The dollar is strong, when measured against the Euro. But it's not so much that the dollar is strong as that the Euro is failing.
Gold is not a currency substitute, gold is money; the Federal Reserve Note is currency -- big difference. The US Treasury can't print gold.

Note that world-wide, many Central Banks (The Federal Reserve, Bank of England, et al) hold gold as an asset. Currency is considered a liability. "liabilities are backed by the assets" would seem to indicate that currency is only valid if it's backed by something. Since we're no longer on a gold standard, what is backing the dollar? Debt?

If you would like to read the other side of the argument, go to GATA (Gold Anti-trust Action Committee). Do a search at GATA on the term "naked short", good reading.




$.02

Gold is a commodity, which is pretty compact, portable and easily storageable and in uncertain times when the virtual words of the promise 'I promise to pay to bearer on demand' cannot be met, makes for a reasonable wealth preservation system against inflation, when the government central bank begins to monetise its debts i.e. when it defaults on its debts. I would not see gold as an investment but in more uncertain times folks will see it as a basis for a monetary system for maintaining wealth rather than the paper or virtual promisery notes. Perhaps the return of the Gold standard might be the eventual outcome of the international currency bust, the end of the China financial bubble and the collapse of the derivatives and hedge fund market along with the failure once more of the banking system, which this time cannot be bailed out for a second time.

http://www.youtube.com/watch?v=U2pOsvEwQi8

I agree. When hard times come around, there is always some complex analysis about why gold is not up. However, hard times are not supposed to be that complicated. The value of guns and ammo always goes up during hard times. That's nice, simple and easy for everybody to understand.

I'll go further to say that ammo will be so valuable in REALLY bad times that the government would probably seek to confiscate private ownership of ammo if there is a dangerous shortage. Don't laugh. Recall that, in 1933, FDR confiscated private ownership of gold because of a so-called national banking emergency.

i never understood why the guys on the shortwave programs,and other places,worked so hard to sell you their gold for "worthless' paper money.same with silver,if i had bags of coins that i could trade,like the guy said,for bottles of water why would push so hard with tales of upcoming woe to sell them for paper money?
i have my investments in fish hooks and Coleman fuel-------

Goods exchanged for a single Viceroy Tulip Bulb,

Two lasts of wheat 448ƒ
Four lasts of rye 558ƒ
Four fat oxen 480ƒ
Eight fat swine 240ƒ
Twelve fat sheep 120ƒ
Two hogsheads of wine 70ƒ
Four tuns of beer 32ƒ
Two tons of butter 192ƒ
1,000 lb. of cheese 120ƒ
A complete bed 100ƒ
A suit of clothes 80ƒ
A silver drinking cup 60ƒ
Total 2500ƒ


Some folks were left desperately poor after failing to get out of the tulip market during the great tulip market crash of February 1637.

The Tulip Crash.

Humans are silly creatures.


Thanks for that info, AFLM.