Australian Money Forum

[greenback]

Gold, Derivatives, and the Dollar

Posted by Dan Denning on Jan 5th, 2007

With gold futures near two-week lows in early trading today, we thought we’d take a look at long term gold charts in terms of both the Australian and U.S. dollars.

What do the charts show? To the extent that the chart patterns are similar, both charts show the depreciation of paper currencies relative to a precious metal.

They also show the same historic pattern and leave us with a historic question. If gold rose by dramatic amounts in terms of both currencies the last time inflation swept the globe, where does that leave us today? According to the charts, gold in both currencies is near the same highs (in dollar terms, not real terms) that it traded at in the 1970s. And steep as this first phase of gold’s recent bull market has been (beginning in earnest in 2000), is the current leve a high, or just a resting plateau?

Full article here...
http://www.dailyreckoning.com.au/gold-d ... 007/01/05/

[Miller]

is the current leve a high, or just a resting plateau?

it’s a resting plateau

Whatever unfolds, gold remains the ultimate hedge against inflation, whether it’s in a currency like the dollar or in financial weapons of mass destruction like derivatives.

Have nothing to add. Totally agree.

However I reckon it won’t stay flat long. It needs a little push to test new highs. It might come from middle-east, China, Russia or USA itself. Meanwhile in short term I can imaging gold going a bit bellow 600 but as soon as it happens I will happily put more in it.

[wulfgar]

The Australia dollar chart is most interesting. Gold stagnated at around 500 aud from 1980 until the breakout in late 2005. This made gold an absolutely worthless investment for gain. Since any dollar invested in the money market would return something.
The markets would cry gold is dead.
But lets look back further in time. Gold stagnated at 35 usd from 1933 until 1969-71. Over 25 years!
It is most useful for the fiat masters that gold should stagnate. But how do they do it?

[Miller]

The Australia dollar chart is most interesting. Gold stagnated at around 500 aud from 1980 until the breakout in late 2005. This made gold an absolutely worthless investment for gain. Since any dollar invested in the money market would return something.
The markets would cry gold is dead.
But lets look back further in time. Gold stagnated at 35 usd from 1933 until 1969-71. Over 25 years!
It is most useful for the fiat masters that gold should stagnate. But how do they do it?

And how do they do it?

By threatening to release gold reserves? Using tricky ways to calculate inflation?

[greenback]

I think gold futures play a big part in controlling price as well. I have no figures, but ounce for ounce there is far more paper gold changing hands than physical gold.

[Miller]

Interesting link:

http://www.the-privateer.com/gold3.html

[wulfgar]

The thing that got me about the great gold debacle of the 30's. And this is the arguement of the fiat brainwashed. That there is not enough gold!
Everything that I have checked into says the opporsite. Now gold may may even be a silly luxury and yet it is this very feature that makes it so useful as money.
It is price driven, therefore there can never be a true oversupply or undersupply. Gold is very flexible! Set the price right and the jewelry hoarders will monetarize their gold. Creating much needed liquidity in the worst deflationary scenario. Fiat money dies when nobody will except it. When that day arrives, then the printing press will not save you. When there are no buyers. Then you get fiat deflation, more horrible than gold deflation. Anybody will accept gold as money in a downturn.
But the US banned domestic monetary gold in 1933. They said there wasn't enough! Yet a decade and a bit later the US government was swimming in at least 1/3 of the world's above ground stock. The government placed Americans through deflationary hell building the world's largest gold reserves. On the grounds that they were protecting them from deflation?
The US had plenty of gold to honor its domestic comitments by the end of WW2.
Please explain?