Hypothetical question to the "PM Professors"

OPA

Is it possible, in a booming economy, to have record breaking Gold prices?
What about Silver? .. Will it become more of an industrial based metal also tied to economic conditions?

Your wisdom or thoughts are appreciated. ...

Platinum & Palladium historically have followed economic conditions or anticipation and do not require an answer.

ProofCollection

Yes, why not? Supply and demand issues can influence the price regardless of economic conditions.

yellowkid

Most certainly. As a person who has investmnets that are diversified, that is the scenario that most benefits me.

ricko

Absolutely. Cheers, RickO

roadrunner

I don't think so, at least not in gold. Silver could fly in booming times since as it's supply eventually depletes it will have to rise in price. Gold on the other hand is just a currency substitute. And it's supply never depletes, just increases at a steady 1-2% per year.

I can't think of any truly boom times where gold went soaring. And I really don't consider the 2002-2008 as a booming economy, but more a financial mirage...robbing Peter to pay Paul. The dollar devaluing by 40% and the bankers/investors knowing what was sitting out there in derivatives is what started moving the gold market in 2001. How do you have a true economic boom when the currency is depreciating and commodities start soaring? Weimer Germany met those conditions but it was no economic boom. Sinclair and others like him knew what was coming as early as 2001-2002 as the writing on the wall was very clear to them. Gold tends to soar when currencies are flailing. The dollar moved upwards until peaking in 2001 as 20 yrs of booming times ended. Now the 80's and 90's were boom times in most respects and gold was kept at bay the entire time.

roadrunner

derryb

Agree with RR. Gold is nothing more than an alternative to other things when the other things are not in favor. If you were to see equities, real estate and other assets start booming again, gold price would drop.

OPA

Thank you, RR & derryb, your reasoning make sense & I agree with you.

yellowkid

<< <i>Thank you, RR & derryb, your reasoning make sense & I agree with you. >>



I guess you have to agree with the OP to get a thank you.

roadrunner

I guess you have to agree with the OP to get a thank you.

Had no idea what side of the fence the OP was on when this questioned was posed. I took the path of greatest resistance by not agreeing with everyone else. I figured I'd get taken out to the woodshed and spanked....not thanked.

roadrunner

yellowkid

<< <i>I don't think so, at least not in gold. Silver could fly in booming times since as it's supply eventually depletes it will have to rise in price. Gold on the other hand is just a currency substitute. And it's supply never depletes, just increases at a steady 1-2% per year.

I can't think of any truly boom times where gold went soaring. And I really don't consider the 2002-2008 as a booming economy, but more a financial mirage...robbing Peter to pay Paul. The dollar devaluing by 40% and the bankers/investors knowing what was sitting out there in derivatives is what started moving the gold market in 2001. How do you have a true economic boom when the currency is depreciating and commodities start soaring? Weimer Germany met those conditions but it was no economic boom. Sinclair and others like him knew what was coming as early as 2001-2002 as the writing on the wall was very clear to them. Gold tends to soar when currencies are flailing. The dollar moved upwards until peaking in 2001 as 20 yrs of booming times ended. Now the 80's and 90's were boom times in most respects and gold was kept at bay the entire time.

roadrunner >>



I answered yes to the OP, because I feel, although I certainly don't see any "boom" times in the near future, that a slow recovery combined with the inflation I still feel will rear it's ugly head could keep investors very interested in gold, or PM's. Just MHO.

OPA

<< <i> I answered yes to the OP, because I feel, although I certainly don't see any "boom" times in the near future, that a slow recovery combined with the inflation I still feel will rear it's ugly head could keep investors very interested in gold, or PM's. Just MHO. >>



yellowkid, I agree with your scenario, but the question was: "in a booming economy"

yellowkid

<< <i>

<< <i> I answered yes to the OP, because I feel, although I certainly don't see any "boom" times in the near future, that a slow recovery combined with the inflation I still feel will rear it's ugly head could keep investors very interested in gold, or PM's. Just MHO. >>



yellowkid, I agree with your scenario, but the question was: "in a booming economy" >>



Would that make it any different, couldn't you have boom times and inflation that worried people? If the economy was to turn around( yeah, right) and inflation picked up, I would think many people might decide gold was desirable. Oversea's demand, particulalry new third world type, could perhaps alone keep the price up, in any US economic climate.

jmski52

I'm pretty much in line with rr and derryb - that gold would not rise that much, if at all against a backdrop of a healthy economy and solid business growth. That scenario simply doesn't promote the kind of trepidation that causes people to buy gold instead of investing in businesses, whether as a principal or as a stock investor.

Would that make it any different, couldn't you have boom times and inflation that worried people?

I guess it depends on what you consider a boom and how it is being sustained. If the boom is due to a thriving economy that supports full employment and growth in business profits, then competition for some of the resources, such as labor and raw materials might cause rising prices. If that is your definition of inflation, then that is half of the equation but I don't think that people would be too worried as long as their income rose with inflation and they could anticipate the level of price increases. In that case, I don't think that worry would result from rising prices. I would caution that - rising prices are only the symptom, and not the definition of inflation, which is caused by an increase in money supply.

If the economy was to turn around( yeah, right) and inflation picked up, I would think many people might decide gold was desirable.

Based on the economy turning around and prices rising as a result of competition for labor and raw materials, I don't think that gold would tower above stocks and new business formation, so gold might stagnate.

However, if the economy were being propped up via government spending and if taxes were being raised to compensate for loss of tax revenues due to poor business performance, then much of the spending would do little to create value, i.e. money is being injected into the system but there is no resulting increase in production or lowering of prices due to competitive price pressures and no job creation due to higher demand for labor. If the jobs aren't being created in order to increase production, then injecting money into the system only serves to raise prices in the long term, and by that time more people can see the handwriting on the wall and realize that gold offers some buffering from otherwise senseless rises in price levels.

Oversea's demand, particulalry new third world type, could perhaps alone keep the price up, in any US economic climate.

Not alone. And worse, as the US demand drops off it also wrecks the need for foreign factories to remain running at higher capacities. There may come a day when foreign demand supplants US demand to the extent that a dropoff in US demand will have only a small impact on foreign production, but it isn't yet. justacommem may state otherwise, and I'd be interested in his opinion on that.

RedTiger

China's economy is growing about 8% a year, has been averaging at about that for almost a full decade now, that would count as an amazing boom in the U. S. The price of gold in Chinese currency is also making new record highs. Many other smaller economies are also growing fairly rapidly, such as Turkey 10% this past year. I haven't checked, but I expect gold is also making record highs in Turkish currency.

So the obvious question is do those smaller economies count when answering the question? Some bonus questions: will the U. S. ever be classified again as a "smaller" economy? Can the U. S. economy be booming while most other countries are stagnating, and have gold boom ahead? How about this scenario: most of the major world economies are booming, and middle class people in many countries decide they want to salt away some hard assets, during the economic boom times, and gold roars ahead? Someone else posted that there isn't enough gold for everyone to even have one ounce. If it became the fashion in India and China to have a year's income saved up in gold, that would likely eat up more than the entire current world supply at current pricing. Food for thought.

CoinCrazyPA

I don't want to be morbid, some on here state gold never disappears just cycles from one holder to another and jewelry, some industrial plating usually electrical, airplanes, wire connectors etc, and back to melt, some industrial use plating and so on. I have a question, every family member I have seen over my life that have been buried, all have a minimum a wedding band and other assorted jewelry mainly gold that goes into the ground. Now my question is is this ever accounted for in any stats as gold non recoverable. just a thought.

7over8

maybe you meant to say "in an apparent booming economy"

as we are witnessing the greatest deception of all time in the equity/debt/currency markets.

OPA

<< <i>maybe you meant to say "in an apparent booming economy"

as we are witnessing the greatest deception of all time in the equity/debt/currency markets. >>



No ... It was a hypothetical question pertaining to "booming economy" ( I may not see one in my lifetime, but some of the younger PM buffs may)

yellowkid

I can see our role in the world economy diminishing( as pointed out) as we cope, or try to cope, with our massive debt and reduced manufacturing capacity while some foreign markets thrive( also pointed out). We could "muddle along" while the price of gold rises. JMSKI52 says we aren't there yet, agreed, but I think it may be closer than we think.