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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (66855)	7/26/2006 8:34:45 AM
From: Mike Johnston	Read Replies (2) \| Respond to of 110194

Gold is a store of value, long term. Its value denominated in currencies can change, because gold, as anything, is subject to laws of supply and demand. Since 1971, there have been many demand and supply shocks in the gold market that caused significant fluctuations in its dollar price. In late 70's a demand shock occured as a lot of people were getting rid of their paper dollars, which culminated in a panic in 1980. In the 90's a supply shock was caused by central bank dumping and producer forward sales. The way i look at it, gold itself does not fluctuate in value. An ounce of gold is an ounce of gold. It is the dollar that fluctuates as people adjust their expectation of what it is worth on a daily basis. So, the 1980 event can be looked at not as gold bubble or runup, but simply as a dollar collapse. Conversely 1990's can be seen not as a gold collapse but as return of faith to the US dollar wchich enjoyed low inflation and good rates of return. The store of value aspect of gold can easily be explained by the fact that long term, its supply is limited. On the other hand there are rapidly increasing amounts of paper currencies in circulation everywhere.