I'm a goldbug. The kind you disdain. I was 90% done reading your excellent post number 2340. I can see myself, in another frame of mind, agreeing with everything you said up to that point. Well done. Then you wrote: "even if the POG falls below $100 per oz,...as the price has been in the majority of history."
Ummm... No. The dollar is now worth 5 cents compared to 1900's dollar. 1/20th. In 1900, gold was not selling at $100/20 = $5/oz. Not even close. It was around $20/oz and so around $400/oz in today's dollars. I know the exact numbers are easy to argue, but I think your use of a historical average POG as $100 in nominal (today's) bucks is so far off the mark as to be sloppy at best. I'm willing to wager that through most of history, an ounce of gold bought more of life's essentials (things that were common and necessary in all ages) than it will buy you now. Obviously we can't compare how many cable modems an ounce would buy throughout history, but we can compare a month's rent and loaves of bread. You've heard of the penny loaf of bread? That was in 1900. Now you are lucky to get one at 100 times that.
Your overall point was very good. In your own words in post 2340, except for a brief gold bubble in the 70's and early 80's: "Barricks hedging program over any 30 year period in the last 300 years would have made them more money than a non-hedger". I don't know if this is accurate, but assuming it is, the goldbug's point is that this is one of those exceptional times in mankind's history - a time when POG has been distorted so low by so many for so long, that the natural counter reaction is upon us, or nearly so. If correct, there will be a violent reaction. If there is none within a reasonable amount of time, then we are wrong.
The market seems to agree that hedging is wrong right now, judging by the relative difference in the increase off the lows in equity prices of the blue chip hedgers versus blue chip non-hedgers. If you argue the market is not perfect, I will agree. But consider your comrade Enigma's words in post 2335: "I always have a problem with statements like 'gold should be three times the price it is'. Gold and any other commodity is only worth the amount someone will pay you at any given time. One could wish it weren't so, but there it is."
Finally, though I appreciated your well written post's content and style, I can't help but think the bon mot: "Gold is a rich person's bauble, a psychotic's vice, a criminal's currency, and a store of wealth to the uneducated, unmotivated or unprivileged" was too good. Tell me, was it yours or did you just assume we'd all know the source?
P.S. As always, I am behind in my reading, so apologies in advance if you addressed my questions later on in the thread. I'll no doubt catch up 1 minute after the 15 minute window closes. |
