Date: Fri Apr 04 2003 10:19
trotsky (strat, your 7:46) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
" ( It's rather a hybrid these days... ) ID#274189:
...still trades as a monetary asset, but even more so as a commodity."
referring to gold i presume? this is imo complete nonsense - the bulk of gold's demand base has ALWAYS been jewellery - in other words, this fact is nothing NEW. it was the case 5,000 years ago, and it's still the case. however, due to its scarcity, fungibility, transportability, etc., gold's role as the money of the free market soon emerged. it turned out to be the commodity best suited to be used a money.
the PRICE of gold as measured in the paper currencies that compete with it is however entirely a function of the monetary demand for gold. so it does NOT 'trade as a hybrid' - jewellery demand has no effect whatsoever on gold's price, as it is the 'price elastic' component of gold's price. when jewellery demand hits a record high, gold concurrently hits multi year lows ( as the statistics since 1970 clearly show ) - when the monetary and investment demand that determines gold's 'price' drives the price up, jewellery demand crumbles. in short, jewellery demand is a function of gold's price, which in turn is a function of the monetary and investment demand for gold. but gold's price is definitely NOT a function of jewellery demand. when gold's price went up 25-fold in the 1970's, jewellery demand was cut in half. when gold hit a 20 year low in '00, jewellery demand hit a new all time record high. if one were to base one's decision to buy/sell/hold gold when it is in a trending market on the effect gold's price changes have on jewellery demand, one would be certain to lose money in short. |
