« Any Spare Change? Nope | Main | My Net Worth »
$1000/oz Gold!
By JD Bluefield | March 13, 2008
I know I said that I’d post “What’s in My Wallet” today, but its just come to my attention that for the first time in history, the futures price of Gold reached $1000/oz. What does this mean for you and me? Well, if you’ve been investing in metals such as Gold, Silver, Platinum or Copper, you’re likely sitting with a smile.
Why invest in gold? Well, to put it simply, gold has been a universal store of value for thousands of years. It cannot be created or destroyed, it does not rust or tarnish and is universally recognized as “currency”. After WWII, the US$ became the “standard currency” to which other countries currencies were pegged by default. For decades you could go into virtually any country in the world and they would gladly accept your US$ for the goods you desired. Times have changed with the induction of the Euro, increased trade deficits and the no-holds printing of US$. The demand for the US$ is no longer what it used to be and there are more of them chasing too little resources. It’s the basics of supply and demand.
This is my best analogy for gold is this: Lets say you work at a store, lets call is US$Mart. Every year you get 100 US$Mart credits with a yearly 5% raise. Today 30 credits will get you one gold coin. Next year, you get 105 US$Mart credits. So you’re thinking maybe you can pick up an extra coin, but wait! That exact same gold coin is now 35 credit. Maybe you can save them for next year. But next year, its 40 credits per coin. The year after that its 45 credits per coin. And only 4 years later the price has doubled to 60 credits per coin! What’s going on you might say? Well, little did you know that while US$Mart was giving you an alleged 5% yearly raise, it was printing those same credits like confetti and dumping them off the roof onto the streets. Now everyone in the neighborhood has a handful of credits. What would you do with the remaining US$Mart credits you’ve been scrimping and saving? Sit on your hands and wait for US$Mart to decide to stop giving away credits? Me, I decided to ditch the credits and hold onto the coins. BTW, multiply those numbers by 10 and they become the price of gold between 2002 and 2006, $300/oz to $600/oz. In the last 2 years, gold has risen exponentially to $1000/oz.
Now, there are numerous websites which follow the price of gold/silver, it’s mining industry and the economics which affect them. The sites that I follow most are Kitco.com and GoldPrice.com. They go into much more intricate fundamentals behind gold. I don’t have any ties to these site, but they are constantly updated with the latest news and updates.
I’m not a fanatic predicting the collapse of the US$ or that all fiat money will become worthless, but I do believe that the dollar will continue to decline and the stock market with it. To combat this loss of value, I’ve been accumulating positions in gold/silver stocks and bullion since early 2002. So far they have since become the most profitably investment decisions I’ve ever made.
Topics: Gold/Silver/Metals, Investing |
One Response to “$1000/oz Gold!”
Comments
You must be logged in to post a comment.
March 17th, 2008 at 1:32 pm
[…] Jewelry: Jewelry, like a car, will lose 25% of it’s value the moment you walk out of the showroom. Diamonds are worst of all as they are not rare at all. Diamond prices are kept at artificially inflated levels by the DeBeers Cartel, similar to oil controlled OPEC. Industrial-grade diamonds have been synthetically produced for decades, but recent advances have now made near-perfect gem-quality diamonds a reality. See very interesting article in Wired Magazine. If you want to invest in a rare precious resource it needs to be in a recognized, standardized form that is universally accepted, such as gold/silver coins. […]