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Gold ain't glimmering

Gold is often seen as an investment safe haven when the economy falls on hard times. But today it's down 11 percent, the biggest weekly percentage loss in 18 years. According to Gold and Silver's Mark O'Byrne: "Bearish sentiment [in the gold market] remains at extreme levels and all notions of fundamental value are being thrown out the window as the financial crisis morphs into a global economic crisis."

Why is gold dropping? The U.K.'s MarketOracle offers this explanation regarding gold versus comex gold. But I'm more inclined to believe Bruce Dunn, vice president of trading at New Jersey-based Auramet Trading: "All the mining companies are saying gold is going back to $1,000, but I think these people are living in la-la land. You've got a serious recession and people are not buying gold jewelry."

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Gold is no longer money, and has little value beyond jewellery and a few niche uses.
May as well hoard rare shells.

Guys, get real: Gold is money, the main reason the paper price of gold is down, is massive selling (manipulation) by central banks; if gold were allowed to do what it should (warn us of financial trouble) it would be closer to 2000- 3000 per ounce by now. Jewelery demand is a small fraction of the worldwide gold market.

These are my comments to Tess Vigeland on her brief discussion of gold on the 1-2 pm program today 10/26/08:

I heard your commentator today answer your question about gold, as an investment in these times, and almost choked when I heard the answer, shocked, I was shocked!
The reply was something to the effect that gold is a speculative asset, and should be avoided in an IRA!
Ouch! Nothing could be further from the truth. Gold has been for 1000's of years the ultimate currency (storage of wealth) of choice. Paper currencies have replaced gold on and off ever since Roman times, when receipts for gold holdings were traded as the actual thing. Eventually the issuers of such certificates (goldsmiths, banks, central banks) always started to issue more paper, than they held physical gold (fractional reserve banking), and paper representations would fail.
Gold is money, and in times like this gold can act as cash, but even better as insurance. In a world when everything else is at risk of failing, gold cannot default. Gold held in physical form has no counterparty risk; can you say that about any paper currency or certificate?
I would ask your commentator the following questions:
1) Name one paper (fiat) currency in all of history that has not failed - answer: there are none (ie all current currencies will predictably fail as well- we are well along in that process with the dollar)
2) Look at some long term charts on the purchasing power of gold vs the purchasing power of the dollar (ie the long term price (dollar denominated) of gold; and say with a straight face that the dollar is able to preserve purchasing power (it is not)
3) Current extremes of money creation (see long term charts of M3) are guaranteeing massive inflation down the road; what would you rather hold? the currency that is being massively diluted by any government (or its bonds), or gold, which cannot be created out of thin air.

Your commentator appears clueless as to what gold is, it is the ultimate currency (no counterparty to default). To suggest it is speculative is to only identify gold with the short term traders that play with futures contracts. Real assets always maintain value, paper rots (now more than ever).

I could go on for a long time, but I'll stop. A small position in physical gold at a time like this should be considered prudent, and not risky.

Sincerely,
Andreas Kaubisch.

PS. All this reverence for the Federal Reserve has to go; please do your homework: the Fed is a PRIVATE entity, owned by mostly European banks; and was created for the purpose of maintaining monopolies, and to continuously and steadily defraud the American people of their wealth (through money creation and inflation). This is a statement of fact, not opinion. Read "The Creature from Jekyll Island" by Griffin for a well referenced summary of what the Fed is all about; it has very little to do with the government.

PPS: Your commentator also makes a mistake by recommeding inflation- indexed bonds; these bonds are indexed to "official" estimates of inflation> It is no secret that our government massively under- reports real inflation (well documented by Mr Williams at shadowstats.com), quoting us this bogus "core" inflation of 2.x %; real inflation is now well north of 12% annually, and any standard inflation indexed bond guarantees the holder a negative return. Bad idea.

Andeeas is on the numbers.

I doubt that Ms. Kaplan has ever held an ounce of gold in her hand. That's probably she is working as a radio reporter.

I hold about 15% of my assets in gold. I consider it an insurance policy -- portable and recognized in more places than American Express.

In a financial literacy class I offer to I present, I show the kids an ounce of gold and a 100 dollar bill. I ask them what each as valued at in 1971. ($35 and $100) I then ask them the value today. Case closed.

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