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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: TheBusDriver who wrote (53314)	5/26/2000 1:02:00 PM
From: Hawkmoon	Respond to of 116762

Actually, I think the POG has reflected the fact that Central Banks are in the process of transitioning from the old financial system where gold played a role, to the new one where derivative instruments play the major role in spreading risk. If we take it to its lowest common denominator, the old gold standard was a hedge against the value of the paper currency depreciating due to poor economic policies or economic upheaval. When depositors began demanding their money to be returned in the form of gold during the bank runs of the '30s, it created the environment where gold needed to be confiscated in order to re-establish confidence in actual paper currency (since of course the "New Deal" was little more than massive deficit spending by the government oriented towards depreciating a wickedly strong dollar/gold currency, which in itself was created by consumers being unwilling to do what they do best, namely consume. No consumers, then no business recovery, and no reason to hire more workers. This is the same liquidity trap that Japan is currently facing, where Japanese hold something like $12 Trillion in assets, but are unwilling to spend them. It requires a devaluation of those assets to spur consumers into a use or lose mentality that spurs consumption, and ultimately economic growth that will provide opportunities to convert cash to other appreciating assets, thus recouping any original losses from the devaluation (if folks invest properly). Today's derivatives market is meant to provide the same instrument that gold represented, namely a liquid market where counterparties can spread risk among the investment public, thus limited the liability of any one particular entity. If inflation rises, I buy inflation adjusted bonds. If I think oil will rise, I buy call options in oil. If I think we're going to war, I buy puts on a particular currency, or even on gold (if I perceive that the financial system is in danger). Again, folks like to B&M about the "manipulation" in the gold market. But the greatest manipulation being pursued is the attempt by the gold miners/goldbugs to convince governments and Central Banks to continue to subsidize the gold market by holding 15 years worth of production in isolation where it can't be used to make jewelry, coat spacecraft, or other industrial commodity uses. End that manipulation and get gold out of the banks hands and you'll see greater reason for gold to trade freely. As it is, every hedge fund out there can see the hand writing on the wall with regard to the gold market and Central Banks plans to demonetize gold. And that encourages them to go short what they perceive as an overvalued commodity market. One final point with regard to gold as a hedge against a financial collapse. Gold originally came into acceptance as a means of exchange due to the difficulty involved in complex bartering systems. If the current financial system collapses, we would see a return to the previous one, namely gold. But if the system is so severely damaged, even a gold standard wouldn't suffice, and the method of exchange could easily return to hard assets bartered in exchange for other goods and services. Regards, Ron