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  1. #21

    Default

    According to the link I posted:

    In 1980 dollars (nominal) gold was somewhere around the $500 to $650 per ounce mark. Fast forward to 2001 and in nominal dollars it was around $300 per ounce. In nominal terms gold lost purchasing power relative to the $USD (fiat money) over the period 1980-2001.

    Re-do the analysis in real (inflation adjusted) dollars (to 2006) the picture is even more damning. 1980 real was $1200-1700 per ounce, and 2001 real was about $350 per ounce. In real terms gold lost purchasing power relative to fiat currency over that period.

    That being the case.....

    Quote Originally Posted by Austrokiwi View Post
    Even with the 1980-2001 period gold maintained its purchasing power.
    Not against the $USD, it didn't.


    Quote Originally Posted by Austrokiwi View Post
    fiat money did not [maintain its purchasing power over the period 1980-2001]
    That would depend on where it was kept.

    If it was cash under the mattress then, yes, of course it did (save for any periods of deflation, of which I don't believe there were any between 1980 and 2001).

    Otoh, cash invested in the short term money market (and even well chosen term deposits) should always at least match inflation, thus maintaining it's purchasing power.

    M
    Last edited by Mark_B; 24-05-2008 at 08:42 PM.
    Comments may not be relevant to individual circumstances. Before making any investment, financial or taxation decision you should consult a professional adviser.

  2. #22
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    Default

    I stand corrected................. !

  3. #23
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    Default

    I think there are two points here.
    First is that 1980 was a massive peak in the gold price. So any comparison with that can be rather misleading.

    Of course any talk of inflation adjusted numbers relies on the inflation numbers, which are well known to be fiddled.

    The other point is purchasing power, which I think is a better and safer way to judge the performance of any fiat currency against gold/silver etc.

    For example, looking at the change in the number of US$ needed to purchase a barrel of oil versus the number of grams of gold needed.



    For a really long-term view:

  4. #24

    Default

    Steve

    You're obviously a true believer in regards to gold (if it works for you, I say go for it)....

    Quote Originally Posted by Steve Netwriter View Post
    I think there are two points here.
    First is that 1980 was a massive peak in the gold price. So any comparison with that can be rather misleading.
    It was an analysis over a substantial period of time (21 years).

    Like the years 1575 to 1850 (275 years of pretty bad results for gold there, eh?).

    Quote Originally Posted by Steve Netwriter View Post
    Of course any talk of inflation adjusted numbers relies on the inflation numbers, which are well known to be fiddled.
    Fiddled by whom?

    I didn't fiddle with them.

    I also didn't produce those graphs in wikipedia - if they were inaccurate I am sure the self-moderation that occurs on that site (wiki) would have sorted them out.

    There are some who argue that the inflation figures (as produced by western governments) are bogus because they understate true inflation level because the money supply has grown so much. If we apply that approach to inflation (and I don't have the figures), then what I suspect would happen would be that inflation be waaaay higher than the few percent it usually is and any analysis of real gold prices over the period 1980 to 2001 would be even more inglorious for gold.

    Quote Originally Posted by Steve Netwriter View Post
    For example, looking at the change in the number of US$ needed to purchase a barrel of oil versus the number of grams of gold needed.
    If possible, I'd like to see that graph re-done with the blue line deleted so the red line is on a more meaningul vertical scale please. Ta.

    M
    Last edited by Mark_B; 25-05-2008 at 10:59 PM.
    Comments may not be relevant to individual circumstances. Before making any investment, financial or taxation decision you should consult a professional adviser.

  5. #25
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    Default

    I was waiting to see the response: I would love to see that Graph posted by stevenetwriter extended back to Pre-Nero I suspect if it were possible ( which I doubt can be done to any meaningful degree) it would show the effect of Neros and subsequent Caesars debasement of the currency.

    The discussion is interesting but I think Realitive, if you regard Gold as the only relaible currency you will likely interpret things differently.


    That Gold value graph, the period from 1933 - 1971 was extremely flat because of US pegging to Gold. The huge bounce up in the 70's and 80's may well have been bigger than it might otherwise have been if gold had not been "held back" for such a long time.

  6. #26

    Default

    Quote Originally Posted by Austrokiwi View Post
    The discussion is interesting...
    It is, and I hope the true believers on this thread don't see me as some troll out to hijack.

    It's a discussion. Nothing more, nothing less. A bit of intellectual banter...

    Quote Originally Posted by Austrokiwi View Post
    ...if you regard Gold as the only relaible currency you will likely interpret things differently.
    And vice-versa (such as in my case).

    People will see what they want to see (that's what makes the world so interesting - we are all different - thankfully.)

    I'm just not a gold person (though I am sure that's plainly evident to all reading this thread).

    But as I said, the world would be a boring place if we all thought the same.

    So don't let me rain on your parade. It's certainly not my intention.

    M
    Comments may not be relevant to individual circumstances. Before making any investment, financial or taxation decision you should consult a professional adviser.

  7. #27
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    Default

    NO worries You have made me think and challenge assumptions.............. So I am better off for it.

  8. #28
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    Default

    Mark,
    As I've said before, it's all about cycles. Pick the right area to invest in depending on where you are in the cycle.
    Yes, at the moment I am bullish on gold & silver.
    I would not have been until 2001. And I probably won't be in x years time.

    I'm also bullish on Yen, and have been since Sep/Aug when you could buy ~96 Yen for each NZ$. Now it's down to ~80, and I expect it to go lower.

    I think some people (I don't know about you) make the mistake of thinking that anyone bullish on gold/silver have always been and are narrow minded and can think of nothing else. From my experience talking to other goldbugs, this is very far from the truth.

    Anyone who has studied gold, will understand that at some times it is not something to hold too much of, and at other times, you'd be practically barking mad not to hold quite a bit.

    Now tell me, do you see people popping up and posting about the negative sides of investing in houses, a particular stock or company ?
    How about the Warehouse ? A good investment or has it had a bad track record as an investment ?
    It seems to occur more on gold/silver than anything else.
    This is not a criticism of you. Far from it. But an observation generally.
    I wonder, and it is just a wonder, whether there is some inherent dislike for investing in precious metals. Maybe our education system and political system purposely discourages an interest in holding a lump of metal.
    I can see why this would be the case, as precious metals are a direct competition for fractional reserve banking creation of fiat currencies.

    Maybe those who appreciate the benefits of precious metals just see something about our system of money that others don't.

    For example, when you go into a bank and ask for a loan, where do you think the money you borrow comes from ?
    If the answer is "from someone else who deposited it" then you don't see the same thing goldbugs do.

    I can't give you altered charts I'm afraid as I did not create them.

    I can make a point about where would have been a good place to invest recently though

    This shows that the energy sector has been the clear winner. Precious metals have done quite well though. Likewise industrial metals.


    But beware holding your money in a falling currency. The best of the bunch has been the Yen:



    I do find it interesting that there has been so much talk about how high NZ house prices are. How well they have done. Up until very recently.
    Interesting because since 2005, holding a lump of metal did better.
    To think you could have sold a median priced NZ house in 2005 and got 450oz of gold, and now you'd be able to buy back the same house with only 300oz of that gold, with 150oz spare. Enough to buy another half of a house.



    It makes NZ house prices look rather volatile doesn't it.


    Re real inflation numbers, you can get a good idea for the US as an example from here:

    John Williams' US CPI analysis
    http://www.shadowstats.com

    Estimates of real M3 money supply. Also forecasts. Interesting.
    http://www.nowandfutures.com/

    There is a good reason why governments want the reported inflation rate to be lower than the real inflation rate. It connected with "inflation proofed" payments, and also the calculation of GDP, which I understand is calculated as growth minus the inflation rate. Hence the latest "growth" figures out of the US are only positive because the reported inflation rate is so small. Subtract the real much larger inflation rate and you get negative growth, which is what they really have right now.

    For me one of the ominous signs for the world economy, and the stability of the world money system, is the fragility of the US$ world reserve currency.
    And the US$ is fragile and at risk of falling.

    IMO this is exactly the time to hold a good insurance against potential catastrophe.
    And that means things that do not involve counter-party risk. You see it's not really about profit. It's about holding insurance so if the worst happens you don't loose everything.
    There are not many of those to choose from. You can own outright a house, or you can own gold/silver.
    Last edited by Steve Netwriter; 26-05-2008 at 02:15 PM.

  9. #29
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    Default AS an aside comment

    This is off the topic:
    You never no where investment opportunities are hiding. In 2003 I bought a paper back from Amazon.com in all I think it cost me 25.00. I found it a really good read But look what some sellers think that book is worth now!!!!
    ( I am incredulous over the asking prices: Something isn't right!!)

    http://www.amazon.com/Future-Money-B...1778518&sr=8-1

  10. #30
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    Default

    Wow, that's incredible !

    So, what was the conclusion of the book ?


 

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