Under sober second thought,...I realize that your mustang example has further emphasized a point of mine from a while back. You example seems to prove that gold as an investment from 1964 to 2002, using your mustang example, just moved sideways on an inflation adjusted basis. Why invest in a dead metal?
Your example has emphasized that what you want is a good management team running your gold company, not a speculator. As Lassonde, new president of Newmont says paraphrased, "Why would you buy shares in a gold company if you didn't think the POG was going to rise" indicating the nonhedger Lassonde is betting on the POG rising, but Barrick is betting on good management lowering costs, acquiring and exploiting good low cost assets, ensuring a fair future price for their gold by hedging, and not betting it all of the POG rising. Homestake bet on an increasing POG so waited too long to hedge. When they finally hedged, the POG rose,...they lost the bet and Barrick scooped them up. If Lassonde loses the bet on the POG rising, he better hope that he can manage costs and revenues as well as Barrick, or Newmont may find themselves going down Homestakes road to takeover. Lassonde is a good speculator,...but will his luck hold?
On the US dollar,...
the interesting thing is there is nothing that links the US dollar to gold, except what's in the minds of pro gold investors. In fact both could rise in a crisis, and both could rise even if interest rates fall or rise, and both could rise if inflation increases in the US. They are both subject more to supply and demand worldwide, than anything else. There is no fundamental causal relationship between them, except in the minds of speculators. Both are world currencies,...but one is used millions to billions more times in transactions per day than the other,...can you guess which one? Gold may compete with US dollars in some places, but other things compete with gold as stores of wealth too.
Gold lease rates,...
are based on supply and demand. On the supply side, the central banks have received nothing but depreciation on their gold hoards for 2 decades,...yet it costs several percent a year for storage, insurance, security, etc. Lowering these costs by lending out the gold saves them money. On the demand side, people will only borrow the gold from the central banks, if they can make a fair return selling it, investing the proceeds in something that makes money, and making a good return in the process. If the lease rates are not lower than prevailing interest rates, no one would bother borrowing the gold in the first place. Some conspiracy,...the central banks try to make some money on a dead to depreciating asset by lending it out,...a pre war accumulation of gold makes them look foolish holding for so long losing money each year holding a depreciating asset. Perhaps the creation of the atomic bomb holds the key to the declining value of gold. It guarantees world stability, or mutual annihilation.
Meaning of gold,..a color?
I submit a small percentage of the billion Chinese care much for gold, or use it in everyday transactions. Same for Indians and Pakistanese beyond ritual. Just as in the west, most use the local currency to buy their basic living needs,...food, shelter, clothes, fuel. Only a few can store wealth in any other currency, and most I know prefer to buy furniture, land, buildings, animals, a vehicle, or something that can make them money. Even in these lands, gold has done little to appreciate over the long term,...dead money. Lots of short term movements up and down, but not something you can count on. Japanese have been buying gold lately, but I read that it might be because it is easier to buy gold than exchange currencies and other refuges from a depreciating currency for the average man. I believe I read this on this thread a few weeks back. Keep in mind that what you hear a few elites in a country doing, is not representative of the average man/woman in those countries.
http://www.siliconinvestor.com/subject.aspx?subjectid=32953
This too is a good thread to try to expose your beliefs on. Some good thinkers there,...some may agree with you, some may not. |
