Does anybody know what the traditional price of gold has been?
has it lost its value forever? what’s the new precious metal?
thanks in advance
At some point in the future, I can practically guarantee that gold will cost $300/oz. Figure it this way: gold’s price in absolute terms has been fairly stable (excepting times when gold itself was inflated, as when the Spanish conquistadores flooded Europe in the 16th century) and unlike the old days, gold now has several bona fide uses. It makes a good connector, especially because it cannot become oxidized, and it’s easy to work with in solution (eg electroplating). So now that it has a use, I imagine its value (in dollars) will go up in the long run, as raw gold in mines becomes scarcer and inflation devalues the dollar with respect to every commodity.
Answer to thread title: yes, given time and a little inflation.
Gold has lost much of its value because there are other better stores of wealth available. I seriously doubt metals will ever take as much of the store of value function again.
This is not because inflation is dead, but because there are other financial assets (indexed bonds for example) which provide protection against inflation and a return to capital.
Can’t answer your other questions really, except to say that the price of gold has usually been 1, since it was the unit of account in many societies.
picmr
The nice thing about gold is that it always has been worth something and it (probably) always will be worth something. The current low gold price, IIRC, is due to a combination of a period of low inflation (gold holds its value in the face of inflation, which means that when gold is low the price stays pretty much the same), a vibrant stock market (which offers better annual returns than investing in gold), and several countries’ central banks dumping gold on the market.
As interest rates seem to be going up, moderately, and the stock market is cooling down, I look for gold to rise in price in the next year or two. As a pawnbroker, I’m certainly not selling our scrap gold until the price hits at least $350.
Anybody have an intelligent estimate as to what gold would be worth today if it had absolutely no place as a monetary standard or reserve, and the price only reflected its demand for industrial and ornamental uses? Keep in mind that as price drops, industrial use probably increases since it becomes feasible for applications it was previously too costly for.
No, yabob, but I have a reason for not having an intelligent guess: the degree to which gold is valued for its ornamental quality is at least partly dependant on its use as a store of wealth. Maybe people would think it pretty if it grew on trees, but I suspect less so.
picmr
Three words, Gold Pressed Latinum.
Thats the future.
Based on supply alone, maybe $30. I got this by comparing its price and supply with that of platinum. Today’s quote for platinum is about $600, and this site says that the annual supply of gold is over 20 times that of platinum.
(As a check on this procedure, the price of silver by this method comes out to just under $5, which is what its price is.)
Of course, this ignores the industrial demand for the two metals. I have no idea as to the relative demand for the two metals, but as that site points out, platinum is also a valuable industrial material.
An old rule of thumb was that in normal times an ounce of gold will buy a fairly good men’s suit.
A couple thousand years ago an ounce of gold would get you a pretty good toga.
These days an ounce will get a nice suit to address the Rotary Club. Or make a pledge drive.
But that’s at current prices. $30 is below the cash costs of production of every mine in the world that I know of. At that price, the only gold available would be that which is created incidental to copper production.
In fact, the price of gold would likely be higher right now if it weren’t used for monetary purposes. The reason is that central banks have recently been net sellers of the metal, artificially increasing supply.
And the dissenting opinion is…
Gold is a commodity that will never see its high point again. After '73 it raced up, and now struggles- if you look at a graph of gold prices since 1980, its a nice rolling downhill average. Yes, it will hit $300, but no, it probably won’t hit $400 ever again. Why? Because its a hedge against inflation- the above arguments prove it. “Its always worth something.” Well, fine, if it makes you feel secure owning a little gold- go for it. But the fact remains that it is traditionally a safety call against inflation, and the nice little thing you are using RIGHT NOW is causing its decline. The Internet is suppressing inflation by spreading information quicker, easier, and cheaper. Gold has been declining in value for over 20 years and will continue to do so(yes it has- I just pulled up my graph- a nice decline I would say). Short term bets- sure, go for it. You might make a buck or two. Long term? Why? If its uses as a valuable money substitute are taken away, then its use gets relegated to that of an industrial metal- and that means cheaper prices for everyone because its just used for industry (like steel is). As the production costs come down, so will the price. And now the production costs are just over $250/oz. So you want to make a bet that human’s will “See the value of owning gold.” and “Give it worth.” ??? Yeah, right. It’s dead, it just doesn’t know it yet. My bet- 10 years, below $200.
You will make far more money with your investments by choosing smart life-long plans and investing accordingly. Go to any one of a hundred pages on getting your finances under control (get rid of your credit cards!), then look at places for investing by yourself, and if you don’t want to deal with that hassle, find an investment house/program/manager that you trust. Then stick to your plan! Don’t follow the market too much and get caught in that silly loop of “OH! X is on the run! I should BUY!!!” then 6 months later “OH! X is falling, I should sell!!!” THAT is buying high, selling low! Stupid! Follow a plan. Stay with it even during the rough times. BTW- Investing in pure stocks has paid off more than any other portfolio for the past 100 years (except for a rolling 5 year period after 1929- IIRC).
Take care,
-T
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*Originally posted by manhattan *
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*Originally posted by dtilque *
Based on supply alone, maybe $30.
Yes, I realized that after I’d logged off for the evening. Every mine keeps track of its costs per ounce. When the price falls below that, the mine shuts down, thus reducing the supply. So the supply would be reduced long before the price dropped that low and it would stop dropping.
I think you mean “hadn’t been used for monetary purposes”. No currency is on the gold standard anymore, but many governments have large quantities stashed away (curiously, most keep it in the vaults of the Federal Reserve Bank in New York). A few are unloading theirs, but the majority of that gold, especially the stuff in Ft. Knox, is still goldbricking.
But what this means is that ever since the US went off the gold standard, keeping it stashed away has artificially inflated the price of gold. Ideally, after dropping off the standard, the gold should have been sold, albeit slowly to avoid disrupting things. That would have eventually brought the price of gold to its natural level as an industrial and decorative metal. (There also shouldn’t have been any restriction on private ownership of gold; that was one of the stupidest laws ever passed by Congress.)
But selling the gold would have been unpopular. Lots of people thought we should never have left the gold standard, and if sold we couldn’t have gone back to it. There are still a few gold standardists running around, and they are probably helping keep its value a bit higher by foolishly keeping most of their money in gold.
The US is selling some gold in the form of American Eagles. I’m not sure if they are using the bullion from Ft. Knox or buying new bullion to mint them. All I can find on the net is that the gold must be mined in the US.
Having lived through the high inflation of the 70s, with gold above $800/oz., it is quite conceivable to me that gold prices can soar to any level, at least compared to a particular currency.
Precious metals are a hedge in inflationary, or more accurately, unstable times because they have (sort of) an intrinsic value. Currency, stocks, bonds, etc. can all go to zero value if faith in the supporting organizations fails. Think of Confederate currency. Precious metals, while not entirely proof against this, are much more likely to retain their value in these extreme circumstances. If you believe the economy is going to fail, gold starts to look like a pretty good way to save some of your net worth.
The drawback, of course, is that you have to have physical possession of the gold, not a certificate that says you own some gold in a vault somewhere. Now you’ve traded one kind of security for another. It only has value to you as long as you can keep it safe.
Looks like there are no guarantees in life.
Right, in the 70s some brothers tried to corner the silver market by buying all the silver. They couldn’t get it all but the price went sky high & so the trickle over to Au also rose the prices.
That’d be the Hunts, handy.
Just wanted to briefly let other gold-bugs and coin collectors know that U.S. gold coins (especially $20 gold pieces from the 1800s & 1900s) are selling for unrealistically low prices right now. No, I’m not selling them–get 'em on eBay or something. Last I checked, a common-date $20 St. Gaudens in uncirculated condition was going for $500-550; I saw them advertised in Coin World this morning for $349. eBay seems to be about the same.
Out of interest (duh) Usurer you wouldn’t know the premium over the “melted down” value would you? From your comment, I take it you think it’s low. How much does it vary?
picmr
I started nipping at a gold mutual fund a couple of months ago based purely on technical analysis: the prices of the stocks, which have been declining steadily since 93 or 94, have stablilized, and sometimes stability will lead to an up leg. Longer term, commodities do tend to decline in price given a healthy economy because one of the things a healthy economy does is throw off new processes that find ways to substitute raw materials that are becoming more expensive with cheaper ones in a given industrial process. Companies are always looking for ways to make things cheaper and faster after all.
The premium for an old $20 gold piece in Uncirculated condition seems to range from $75 to $95 right now. Usually the premium (IIRC) for these coins has been about $200-$250. I attribute the difference to changing trends in the coin market (i.e., U.S. gold is no longer “hot”; people have switched to collecting the new state quarters or whatever).
Gold spot price as of yesterday was $275, BTW.
Usurer It’s kinda difficult to say what the “usual” premium for $20 gold coins has been. You would have to define the time frame and give a lot more data.
You are correct that the current price of a $20 gold piece over its “melt” price is on the low side. But I think saying a $200-250 premium is normal isn’t fair. It has just varied too much during the last 20 years.