Clarification needed for those who claim metals rising in price is mirage.

gecko109

You often hear someone say something like, "wow, silver is really going up in value", quickly followed by a person in the room who thinks he is an economics major declare "no, silver isnt rising in value, the dollar is falling".


The follow up is true under ordinary conditions. For example, if silver rises in price by 20% over the course of 6 years, and inflation has been around 3% each of those years, then yes...we have a "mirage". Silver didnt really rise in value, it merely matched inflation...which is the devaluation of our money.

However, what we have witnessed in the past 24 months TRULY IS a rise in silver value. About 24 months ago, silver was in the $10 range. It has increased in value by a factor of 2.4x in those 2 years. I dont care what ANYONE says or claims, the value of the dollar has NOT decreased anywhere near that same rate. Therefore silver has actually gone up in value!!!

Mesquite

You are correct, of course. Silver, like gold, is being viewed as an investment (at least in the short-term). Increased demand as an investment leads to increased value.

BTW, for those who feel that fiat currency has had it's day - something other than what we currently use to make purchases will develop. For all of those who hold the worthless fiat ... with what will they acquire this new "credit" currency; worthless dollars?? Those holding gold and silver will have a tangible to exchange for the new "credit" currency. Bingo, the value of of gold and silver will increase. If, on the other hand, the dollar (fiat currency) rebounds, my Au and Ag will have been a good investment and will pay me more dollars than I paid for it initially. Sounds like a win-win to me.

roadrunner

Anyone looking at gold vs the dollar from 2001 through today will see a dollar index that has depreciated from 121 to 77 (-36%). And it's quite obvious that gold has advanced a lot more than +36% 77/121)...or even +57% (121/77). In fact gold is up 5.45X or 445%. Clearly there is exceptional leverage in play due to the tiny size of the gold market vs. the huge size of the dollar market. And gold earned no interest during that period. It didn't need to considering the principal was gaining 15-20% on average every year. That more than makes up for a missing dividend or interest payment.

roadrunner

gecko109

<< <i>Anyone looking at gold vs the dollar from 2001 through today will see a dollar index that has depreciated from 121 to 77 (-36%). And it's quite obvious that gold has advanced a lot more than +36% 77/121)...or even +57% (121/77). In fact gold is up 5.45X or 445%. Clearly there is exceptional leverage in play due to the tiny size of the gold market vs. the huge size of the dollar market. And gold earned no interest during that period. It didn't need to considering the principal was gaining 15-20% on average every year. That more than makes up for a missing dividend or interest payment.

roadrunner >>




So would you agree that while historically speaking, the value of metals is closely linked to the value of the USD, however in the recent past this relationship has become uncoupled almost completely?

wpr101

What about the saying that a $20 double eagle in the 1920s would buy you a nice suit, and today it would buy you a nice suit.

Is that saying no longer valid you think as gold becomes worth more?

1jester

I think he mentioned silver, not gold. But I feel that the perceived value of fiat paper has been vastly overstated/overrated especially since 1971. So in my opinion, the smart money is changing that paper to real money at the earliest possible time.

jmski52

what we have witnessed in the past 24 months TRULY IS a rise in silver value. About 24 months ago, silver was in the $10 range. It has increased in value by a factor of 2.4x in those 2 years. I dont care what ANYONE says or claims, the value of the dollar has NOT decreased anywhere near that same rate. Therefore silver has actually gone up in value!!!

And when silver cratered from over $21.00 to $9.00 in early '08, it actually went down in value! Welcome to the world of volatility and speculation. There's no doubt in my mind that silver is becoming more valuable, but the price is usually determined by the market - not by its value per se'.

You're looking at the wrong mirage. Silver isn't the mirage. The value of the dollar is the mirage, and it's constantly being manipulated by "the government" in order to keep the scam going.

If you don't believe that, just wait - the minute that bond yields are forced up to any significant degree, the balance sheets are busted (again) and the pressure will be on places like Illinois to "do something" and whether you are paying for or receiving a government check, the picture isn't pretty either way.

That being the case, you can be fairly certain that interest rates will be manipulated downward if possible and that gold & silver will continue up as people realize that they've been had, because the only way to keep interest rates down is to "inject liquidity" or to print money like it's going out of style (which it is). probably.

And let me be the first to note that I am not, "a person in the room who thinks he is an economics major".

SeaEagleCoins

<< <i>What about the saying that a $20 double eagle in the 1920s would buy you a nice suit, and today it would buy you a nice suit.

Is that saying no longer valid you think as gold becomes worth more? >>




With all due respect... IMHO anyone who chooses to pay $1500+ for a suit... is a well-dressed fool...

fivecents

<< <i>You're looking at the wrong mirage. Silver isn't the mirage. The value of the dollar is the mirage, and it's constantly being manipulated by "the government" in order to keep the scam going. >>

Great point jmski52

pmcollectour

Supply and demand also plays a big part in this. There is a huge demand for both gold and silver right now.

dbcoin

What about the saying that a $20 double eagle in the 1920s would buy you a nice suit, and today it would buy you a nice suit. Is that saying no longer valid you think as gold becomes worth more?

When I started buy gold in early 2005, I bought coins that were worth a little over a days gross pay for me. I have been selling them for about 2.5 days gross pay. My pay kept pace with "inflation" so my purchasing power increased.

gecko109

<< <i>What about the saying that a $20 double eagle in the 1920s would buy you a nice suit, and today it would buy you a nice suit. Is that saying no longer valid you think as gold becomes worth more?

When I started buy gold in early 2005, I bought coins that were worth a little over a days gross pay for me. I have been selling them for about 2.5 days gross pay. My pay kept pace with "inflation" so my purchasing power increased. >>





Therefore it is completely accurate to say that the value of gold has actually INCREASED rather than the dollar is simply losing value. In other words, we have an obvious decoupling of PM's in relation to the value of the USD.

RedTiger

<< <i>

<< <i>What about the saying that a $20 double eagle in the 1920s would buy you a nice suit, and today it would buy you a nice suit.

Is that saying no longer valid you think as gold becomes worth more? >>




With all due respect... IMHO anyone who chooses to pay $1500+ for a suit... is a well-dressed fool... >>



Brooks Brothers is an institution for some of the "old money" crowd. Even their name brand suits are well under the price of gold. A quick Google check shows several models under $1000. For those that just want a nice suit well-made suit without the name, there are plenty of places that will sell a decent wool suit, for under $500, some under $300, so three to five good quality suits for one ounce today. A custom-made, hand-fitted suit, from a Hong Kong based tailor might be had for under $800.

There are some brands that are still over, like a top flight Brioni at $4600 per at Neiman Marcus, but those tend to be bought by top CEOs and the like, not anyone who makes their money primarily on their paycheck.

Baley

You can buy a very nice suit for a lot less than $1300.

How many ounces of gold did a computer with 2 gigs of memory cost in the 1920's, vs now?

what about things like a haircut, a nice sitdown meal, a one week vacation in Hawaii, how do those compare in terms of ounces of gold (or silver, if you will)

I'd be curious to see a table with lots of everyday things denominated over the years in ounces (or fractional ounces as the case may be)

jmski52

Therefore it is completely accurate to say that the value of gold has actually INCREASED rather than the dollar is simply losing value. In other words, we have an obvious decoupling of PM's in relation to the value of the USD.

To assume there has ever been any type of linear relationship between the dollar and gold since 1971 would be a mistake in your basic assumption.

If you express the value of gold in terms of dollars or vice versa there will always be an inverse relationship in the price of one vs. the other - by mathematical definition.

But to have assumed that there was ever a knowable variable that defined the magnitude of the inverse relationship is a different question. If there is such a variable, I don't recall ever reading about it although I'm not discounting that it could exist.

That type of variable would have to be measured by comparing it to a currency index or a basket of commodities for reference. Even so, if you could see changes in the magnitude of the relationship, would it change anything? There would still be an inverse relationship between the dollar and gold.

I don't like the way that Kitco's site tries to separate "strengthening in the dollar" from "predominant selling". Notice the obvious bias against gold? Why not "weakening in the dollar" and "predominant buying", because that is certainly the case in what we see going on these days?

The price is the price is the price, regardless of what Kitco wants to do with the number. The price of gold is the pure indicator - don't fool yourself.

yellowkid

<< <i>

<< <i>

<< <i>What about the saying that a $20 double eagle in the 1920s would buy you a nice suit, and today it would buy you a nice suit.

Is that saying no longer valid you think as gold becomes worth more? >>




With all due respect... IMHO anyone who chooses to pay $1500+ for a suit... is a well-dressed fool... >>



Brooks Brothers is an institution for some of the "old money" crowd. Even their name brand suits are well under the price of gold. A quick Google check shows several models under $1000. For those that just want a nice suit well-made suit without the name, there are plenty of places that will sell a decent wool suit, for under $500, some under $300, so three to five good quality suits for one ounce today. A custom-made, hand-fitted suit, from a Hong Kong based tailor might be had for under $800.

There are some brands that are still over, like a top flight Brioni at $4600 per at Neiman Marcus, but those tend to be bought by top CEOs and the like, not anyone who makes their money primarily on their paycheck. >>



I don't think Brooks Brothers means anything anymore, the name is on everything under the sun. I know Marks and Sparks got clobbered when they sold it.

Bear

There are times when the increase of the value of PMs exceeds the value loss of the dollar.

This is the emotional factor. It is a temporary situation which lasts only a finite period of time

and then PMs fall to their correct relationship to the value of the dollar in purchasing power.

Konahead

<< <i>You are correct, of course. Silver, like gold, is beKiing viewed as an investment (at least in the short-term). Increased demand as an investment leads to increased value.

BTW, for those who feel that fiat currency has had it's day - something other than what we currently use to make purchases will develop. For all of those who hold the worthless fiat ... with what will they acquire this new "credit" currency; worthless dollars?? Those holding gold and silver will have a tangible to exchange for the new "credit" currency. Bingo, the value of of gold and silver will increase. If, on the other hand, the dollar (fiat currency) rebounds, my Au and Ag will have been a good investment and will pay me more dollars than I paid for it initially. Sounds like a win-win to me. >>



Amen!

DeutscherGeist

Being a well informed indivdual, but not an economist, I believe that gold and silver are on an upward trend with some dips along the way. Its a bull run for both metals. There has to be some speculation factored into the price, not just a weaker dollar or economic uncertainty.

The speculation that I suspect currently built into gold and silver values comes from the anticipation of further quantitative easing (printing money) in November. Since the latest unemployment data shows no improvement, the FED will opt to print more money to help the economy, as a side effect, it drives up gold and silver prices to some extent.

Why would quantitative easing help the economy? That's one I cannot put my finger on, but it is a one of the options in helping the US economy. Perhaps it lowers interest rates, but those don't really have much room to fall. Zero interest rates did not help Japan when they implemented that gimmick for their economic recovery--perhaps other variables were involved.

JoesMaName

This whole discussion feels so 3rd century.

I can't remember if the value of silver was rising so less was needed per coin or if because less silver was in each coin...
Well anyway - been there, done that, know how it ends.

calleocho

You could also look at it as gold is insurance...so the risk of holding dollars has just gone up.