It often amuses me how so many people/nations see gold as such an important asset when it is most likely one of the most volatile forms of investing around.

Since the early 90's it's price has gone from the high $700's, dipped to about $190, then peaked at around $1900, and is now falling again and is now at $1277.

So, let's assume back in the early 90's you had a house worth $100,000 and, you had $100,000 in gold.

Your house would have steadily gained in value, experiencing a few peaks and dips and would be worth say $400,000 today. (many variables I know)

Your $100,000 in gold on the other hand, about 133 Oz dropped to around $25,000 by 2001, then peaked at about $253,000 in 2013, and is now back to about $170,000 today.

Add to this the fact that your house has earned you money along the way, either directly via rent, or indirectly by saving you rent, and your modest $100,000 house has left gold in it's tracks, yet so many worship the space it occupies.

I just don't get it.

Gold is portable.

It's value escalates in an emergency.

You can't eat it, it wont keep you warm at night. But it is shiny, and it does appeal to the simple mind of the Capitalist, and like capitalism itself. its all based on a delusion. So if you are deluded by the "value" of capitalism it entirely appropriate that you should be deluded by the "value" of GOLD!
Hassy a nice observation there, when the world runs out of resources, and there is nothing to eat, she'll be right mate, me gold will be worth a zillion dollars.

You can't eat it, it wont keep you warm at night.
Paul1405,
There are many, many, many lefties out there who are being afforded exactly what you said, all due to Gold. Because the wealth created by Gold Government can afford to keep people like yourself. So, whilst you technically can't eat Gold, you can have a nice cosy existence from cradle to grave because of it & all the other minerals dug up by those bad, bad white industrialists.

"There are many, many, many lefties out there who are being afforded exactly what you said, all due to Gold."
Indie, are you some kind of reverse alchemist, turning gold into useful labour. "wealth created by Gold". Wealth is not created by gold, wealth is created by the labour of the worker!
"Government can afford to keep people like yourself" and what gives you the idea government is keeping me, you know nothing of the sort. Not content with that rubbish you as per normal go on to play your race card, with reference to "white industrialists" is there any black industrialists, always seeing thing in terms of black and white.

Paul1405,
Cheers for letting me whenever I hit a nerve, it is in a way gratifying to realise I'm right.

With the world seemingly in such a financial pickle, makes you wonder just who would be buying it anyway. And with what!

It is quite impossible on these pages to debate the qualities of gold as a medium of exchange or value. It has been used as money for the last 5000 years and it is basically a store of wealth, An ounce of gold still buys approximately what it has bought for the last several hundred years, which is more than can be said for any of the fiat currencies which eventually lose all of their value. The US dollar has lost about 92% of it value in the last 100 years. (inflation)

Gold has a number of qualities that make it ideal money and is purchased as an insurance policy

Durability
Fungibility
consistency
possesses value
limited in quantity
has a long history of acceptance

Ask yourself the question why so many countries and central banks buy it. Why China and Russia to name just two countries are trying to accumulate as much of it as they can and have banned all exports.

Gold is accepted as money everywhere in the world because most appreciate it's qualities and use it as an insurance policy. Nixon took the world off the partial gold standard in 1971 because too many countries were exchanging dollars for gold and the US was losing its gold because the dollar was backed by it

I suggest that if you want to study the subject of bullion as money, a good start would be Gold & Silver by Michael Maloney. It's one of the "Rich Dad Poor Dad" series

The one problem now is the manipulation of gold and silver by the likes of JP Morgan and HSBC in the derivatives market where futures contracts amounting to the total annual production of silver, for instance, is bought and sold on a daily basis with absolutely no chance of actually delivery. The US is terrified of losing its Reserve Currency status to any alternative and aids and abets this…… As I said , it's a whole subject on its own and affects the whole global financial system and cannot be discussed in a few paragraphs.

We have been told that gold is only sold on paper. So are you going to find your own.

Dear rehctub,

A currency only has value because we,
as a society decide that it does.

There is a question over gold being held by central banks.
Example Germany asked to audit its gold holdings at the US Treasury.
They were refused access.

Venezuela took delivery of their gold because they were doubtful of its
existance. I saw it paraded down their main street, but was it actually
exhibited ?

Austria has just asked the Bank of England to audit their gold holdings.
It will be interesting to see if they get access.

Some say there is next to no gold physically in the vaults.

http://usawatchdog.com/u-s-gold-holdings-close-to-zero-rob-kirby/

Obviously, I don't have a clue but seems that some are starting to raise the question.

Hi 579

I'm not sure what point you are making. You could swap silver for gold… There would be a premium of course, but yes we use fiat money to buy gold. Little else I fear although Iran has been selling oil to Turkey for gold to avoid sanctions and then using the gold to import goods. Forbes reports that China is doing the same with gold. There is no problem with buying gold here from the Perth Mint if you feel inclined…… With paper money of course at the moment. Gold may be confiscated as it was in the US by FDR in 1933….. Many things may be undertaken by governments. I do know that a number of countries around the world are worried that their gold might have been leased out or hypothecated, as has been suggested on this blog, because they are unable to get it returned. The Federal reserve refuse to have their gold audited. I wonder why. It was last done in the 50s even though Ron Paul asked for it to be done again in the Senate. The banks have enormous power in the United States and of course are "too big to fail"

Utah has made gold legal tender in the USA as has Arizona and Oklahoma is putting a bill before parliament to do so. The University of Texas invested one billion dollars of its endowment fund in gold recently. The US constitution states ..“No State shall…make any Thing but gold and silver Coin a Tender in Payment of any debt".

continued

The number of countries now trading their own imports and exports and dealing in their own currency is expanding… even Australia has an agreement to trade in Ozie dollars and renminbi. A few years ago the percentage of world trade done in US dollars was about 68% I think and has now dropped to around 50%. Gold will play a huge part in a new world financial developments in the not so distant future I feel sure and the USA will lose its valued reserve currency which it can now print to infinity. It has no way of paying back what it owes. It either debases or defaults. There is even suggestion that the price of gold will be revalued upwards to reflect the way fiat currency has been inflated and could then be used in some kind of gold standard together with a basket of currencies………Who knows.

Indi, you are so right, in fact I never think of you other than being right, extremely right, your definitely right. Yeah..... somewhere right of Genghis Khan! Your right out there, that's for sure! Am I right?

Come on Paul.

From way out there left of Khrushchev, you're too far away to know where anyone else is.

What is the value of gold and who says it is worth that amount. If gold was not traded it would not have a value.
Any market based commodity is only worth what someone is prepared to pay for it.
If we did not have paper money, what would you trade for gold to give it a value.
If gold was the only tradable currency how much would it be worth.

579, that's my point as well, because while anyone can say gold is worth say $1500 an once, if economies collapse (and they may well) what's to stop someone saying, il pay you $700 an once, because, if there are no other buyers out there and, you need to cash in, what choice do you have.

It's no different from someone having to sell off assets in a bare market, all too often the buyers just are not out there, so one often takes what he gets.

Remembering, the world is pretty much in unchartered waters, as we speak. In fact, many suggest America can not possibly pay down it's debts.

Let's just assume China says to the US, we want our loans paid off. The US can always say, we will pay you 60% of the debt, in gold as full settlement. What then!

Paper money is worth what is printed on the note. Gold without any printing of value doesn't make sense, you are leaving yourself wide open to the market value on the day.
Paper money is not going to be replaced with gold ever.
A vault full of gold can become worthless over night. A note has face value because it says so.
The same applies to diamonds, if it wasn't for women what would diamonds be worth.
America is not going anywhere soon, the utube is full of conspiracies from would be film makers.

Rechtub said;
The US can always say, we will pay you 60% of the debt, in gold as
full settlement. What then!

Except as we were discussing elsewhere, what if the US no longer has
the gold ?
There is a suspicion that the US Treasury no longer has the stock of
gold as reputed to be in Fort Knox.
Why else was Germany refused access to do a physical audit of its gold ?
Very recently Austria has asked the Bank of England to allow access so
it can do an audit on its gold.
It will be interesting to see the reply.

579 said;
Paper money is worth what is printed on the note.

Until someone says "No its not !"

< Paper money is worth what is printed on the note. >

What a stupid comment!

Can someone please hand me a 100 trillion dollar Zimbabwe note then, I'm feeling a little short at the moment.
https://en.wikipedia.org/wiki/File:Zimbabwe_$100_trillion_2009_Obverse.jpg

Gold has been a universal store of wealth for thousands of years and probably will be for thousands more. If you ever need to cash some in, any Indian will buy it off you with pleasure!

And if you really feel it's worth nothing, then I'll happily give you that Zimbabwe note for all the gold you have; after all, paper money is worth the number that's printed on it!

That 100 trillion zimbabwe note, is worth 10 c au, so try all you like to see if you can get an exchange for some gold.
The 100 trillion is only any good in zimbabwe.

As i said paper money is as good as what is printed on it. We have no control over exchange rates. That is left to market forces.

Hey Bazz If you had a stack of $2 notes and you wanted to sell them for $1.50 ea I bet you would get a byer.
Tell me why people would be happy to give you your price for the notes.

As I have pointed out Gold is a store of value. All fiat currencies in the world have been eventually inflated away. Gold has always kept its value for thousands of years and has always been regarded as money. Paper currency has a counterparty risk. In other words someone (Government) has to be prepared to exchange it and demand taxes for value. This value has been dropping and dropping over many years and has always had a relationship with gold.

If you buried $10,000 in paper currency and the equivalent value in physical gold and dug it up in 100 years, how much do you think the paper would be worth and what it would buy compared to the gold ? That's why you don't park your paper under your mattress because it loses it's value. Everyone in the world regards gold as money and it is accepted everywhere in payment of debt. Paper currency is not, and is only backed by individual governments who have the ability to print it and thus inflate it. Even the Roman government did it by substituting gold for an alloy and why the origin of milled edges on coins could be seen if people were scraping the gold off. Coins containing gold and silver held intrinsic value at one time because they held valuable metal.

Watch what will happen when populations lose their confidence and trust in governments and their paper. They turn to something of value.
Not only bullion but physical things of value. Gold is preferred because it is fungible.

It all depends on what level of technological and political/social evolution has been achieved.

For instance in ancient Rome when Pompii fled the capital Rome to avoid Ceasar's marching army across the forbidden Rubicon into the capital, Pompii took as much gold as he could from the treasury.

Ceasar knew he had to get the gold back to have ability to purchase more soldiers etc.

However in today's world gold is more likely to be on the backfoot behind the various natural resources the world now has completely uncovered and use in trade.
This might mean that oil could be a better investment than gold at this time, as for land most especially since land like other resources is stagnant in amount whilst the competing traders and consumers is rising drastically and dangerously.

That said though, I would wager that throughout history as a holw over centuries something like gold will remain relatively mor constant in value than even oil or land.

Imagine in future when we can travel to unlimited worlds then natural resources will become much, much less of importance and expense. Yte perhaps the higher and rarer metals like gold and silver and cadmium etc. [use and needed for technical advance] will again at that time become more valuable.'

However IF someone invents a replicator like in star trek TNG we could have all the gold and diamonds we could see. Quite futile.

This just reminds me that the truly most valuable thing in existence is life, love and knowledge.

"However IF someone invents a replicator like in star trek TNG we could have all the gold and diamonds we could see. Quite futile."

Not really, because then we would rely on non-replicable latinum, at least for the Alpha and Beta Quadrants... for convenience it would still probably need to be gold-pressed.

Well, yes and no, snake.

>>As I have pointed out Gold is a store of value.<<

Any commodity is a "store of value". That's why there are exchanges for everything from gold to pork bellies (although I've never quite got my head around the latter).

Fact is, though that you have to convert the "store of value" into some form of tradeable instrument before you can actually use it to buy the groceries. So in that sense, gold is no more "special" than uranium, tin, oil, copper, alumina etc.

Historically of course gold has held a pivotal role, principally, I suspect, because it could be easily turned into a tradeable instrument, with an understood value. For the same reason, silver was also used for many years in the same manner - but, being less scarce in itself, it commanded a lower rate of exchange.

However, if we had, globally, stuck to gold as the standard medium of exchange, there simply isn't enough of the stuff to fund all the investments that have been made in the development of the world economy. Estimates vary, but the most accepted figure is that only around 180,000 tons of the stuff has ever been mined. That would back around 10% of today's world trade, even if it was all available for the purpose (i.e. not in the fillings of your teeth).

But the other half of the story is that for the first time in its history, gold is being "consumed", i.e. taken out of circulation entirely.

This is because of its widespread use in today's technology - computers etc. Here, it is used in such individually small quantities, across millions of devices, that it is uneconomic to recover it to put to other commercial use. Unlike, say, gold fillings.

Estimates of around 12% of annual production goes in this manner.

So, not completely a "store of value", then. Just another mineral commodity, in fact.

also used as the electrical heating element in aircraft windshields where its property of being rolled so thin that it is transparent is most useful.

Pericles,

In my last post I indicated that any physical commodity could be a store of value, but I also mentioned that Gold has all these convenient characteristics that make it ideal for money, whereas Pork Bellies are not unless you run an abattoir I guess. Likewise real estate property cannot be a useful exchange medium and I listed the seven most useful qualities previously that makes gold the ideal money

You are exactly right about Gold when it was on the gold standard. It was linked to gold and could be exchanged for a set and agreed price. World War one was the catalyst that took Great Britain off the full gold standard because it had to print money to pay for the war. However when paper replaced Gold, governments were still obliged to exchange it for gold at a set price at just over $20 per ounce which was then increased to $35 after WW2 at Bretton Woods conference and then abolished entirely in 1971 by Nixon.

As you point out, there isn't enough gold to back the world financial system and why there have been a number of comments by influential people suggesting that Gold will rise by a value of 10 times. I think this is unlikely, but gold may become part of a system that will include a basket of currencies. It can't be ignored entirely in my opinion. If it does rise in value, then of course it become much more economic to mine and solves the problem of availability and quantity whereas at the moment it is marginal at present price. Just imagine the search for the stuff even if it doubles in price.

Continued

A certain amount of gold is used commercially, but not a great deal compared with silver which is used at about 50% of production with very little retrieved from scrap. Again because it is relatively cheap and uneconomic to reclaim. In my opinion silver is a better bet than gold if investment for gain is considered. Its ratio with gold is well above the historical figure of 16:1 At present its around 50:1 in favour of gold. If it comes down to its historical figure against Au then the value would soar.

If you have followed the manipulation in the market by the banks constantly shorting bullion using derivatives, you will understand why the price of PMs are so low. They are crooks in the same way they manipulated LIBOR and High frequency trading.

At present the Chinese are not buying gold but they are buying lots of
copper instead. There are wharehouses full of copper in China just
sitting there as a form of money.
Also they do run into currency regulations with copper.

Whoops should have said;
Also they do not run into currency regulations with copper.

Bazz

You are right in saying China has been buying a lot of copper, but I don't think you are right about Gold. The Chinese are still accumulating it as fast as they can. According to "The Street" in partnership with Casey Research....

"China's consumption reached a record 11.3 million ounces in the first quarter of this year
Purchases of gold bars surged 49 percent to 4.2 million ounces, and jewelry gained 16 percent to 6.2 million ounces
As recently as June 14, over 10,000 Chinese civilians lined up in the streets of Jinan to buy physical gold"

If you are interested in reading the article it can be found here

http://www.thestreetgoldevent.com/why-us-enemies-buying-all-the-gold/

Just one of many articles I read on a daily basis.

Remember China is also the largest producer in the world, followed by Australia and they have banned all export of Au for the last few years. South Africa comes in third as a producer now. I think I am right in saying that Australia exports about 5 billion dollars worth of gold annually which helps our balance of payments. We also produce a quantity of Ag as a bi product of refining lead and copper I believe.

Thanks Snake for the update.
I think my now old info was that they were diverting to copper.
The whole thing is looking very dodgy.
It would not take much to drop the whole house of cards.
Any move on Basra in Iraq could bring it all down as to take the 2nd
largest exporter of oil out of the market could even put us into
petrol & oil rationing.

I notice Shell sold out of Woodside which is a continuation of asset
sales that the oil majors are continuing with.

Shell sold off a lot of their tight oil holding in the US so as to pay dividends.

Bazz

I noticed that Shell had sold out of Woodside. and the shares fell in price. Maybe now is the time to buy !

Even more than the bullion market, oil prices are subject to volatility created by geo political disturbances, and I only follow such things in the main stream press. Whereas I study Bullion to a greater degree on-line, particularly the shenanigans the central banks get up to. It looks very much as though an alternative to the London Gold Fix is next in line for reform, particularly as it is/was being manipulated in their own and client's interests. As I said they're a load of crooks. What JPM get away with naked shorting silver on the CME is nothing short of criminal and the CFTC do absolutely nothing about it. Even though it's all documented !

What's happening in Syria and Iraq is not good news of course and will affect a lot of things, not only oil and gold.

OK Snake, I have not watched gold prices but as far as shares go I
bailed out of them just as 2007/2008 was looking very dodgy.
I kept Telstra and two energy shares which have done quite well.
Telstra, I figured would do well if air fares do what I expect.
Already Telstra had heaving booking on their video conference suite.
Not that itself would matter but it is a straw in the wind.
The only mistake I made was to sell CBA, at a profit.

What is the London Gold Fix ?

I have not invested in any Australian oil or gas except via Origin.
I am no oil field expert, I just read what the experts have to say and
it does not take long to see who are the soundest sources.
I must have a look to see if Woodside has peaked.
Australia as a whole is well down the decline slope and there cannot
be many with much future.

Bazz

The price of gold is decided in London by five banks whose representatives meet twice a day each one suggesting a price they are prepared to settle contracts for. The price is conducted in US dollars and Pounds sterling . They sit on the telephone to their banks at the same time and negotiate and horse trade until they all come up with a set agreed price. It has been going on for years and is anachronistic and open to manipulation depending on their own proprietary trading and their client's wishes. It was originally set up by Rothchilds before the first world war. Deutche Bank is a member but has recently resigned its position. It is suggested that the enquiry into the whole price setting might reveal some untoward illegal activities. In fact Barclays, which is a member, was recently fined 26 million pounds for lack of 'oversight' They "fix" the price twice a day, the afternoon price at 3pm is designed to coincide with the opening markets in the United States.

It is a bit of a mystery to me why this method of arriving at a gold price based on 5 banks and their supply and demand is necessary and probably why it is going to be reformed as others obviously think the same thing. It seems a bit like LIBOR (London interbank offer rate) which does the same sort of thing where banks in London determine the interest rate at which they charge each other in 5 currencies I think, over differing period from overnight to 12 months. These interest rates are then used as base for other interest rates around the world and Barclays again have been accused of fraud and fined. There has been all sorts of collusion amongst banks and you have probably read all about it in the main stream press over the last couple of months.

I am sure if you google all this there will be masses of information to be found.

Hey Joe Blake, that is an extraordinary statement. You want to give up that utube or stop talking to arjay.
Either that or you are trying to get bazz excited.

Thanks Snake, I thought it might be something like that.
It could be like other resources and just be what someone was prepared to pay.
The average person has a feeling that banks are a club which looks
after the member's interest first, second & third.

Barclays Bank has been fined £26m by UK regulators after one of its traders was discovered attempting to fix the price of gold.

The trader, who has been sacked, exploited weaknesses in the system to profit at a customer's expense, the Financial Conduct Authority (FCA) said.

The incident occurred in June 2012, the day after the bank was fined a record £290m for attempting to rig Libor.

Barclays said it "very much regrets the situation" that led to the fine.

The FCA found the bank failed to "adequately manage conflicts of interest between itself and its customers", in relation to fixing the price of gold.

"Barclays has undertaken a significant amount of work to enhance our systems and controls and is committed to the highest standards across all of our operations," said Antony Jenkins, group chief executive.

The FCA also fined the trader, Daniel James Plunkett, £96,500.

"A firm's lack of controls and a trader's disregard for a customer's interests have allowed the financial services industry's reputation to be sullied again," said Tracey McDermott, the FCA's director of enforcement and financial crime.

"Barclays' failure to identify and manage the risks in its business was extremely disappointing."

Mr Plunkett was a director on the precious metals desk.

He was responsible for pricing and managing Barclays' risk on a contract that was specifically linked to the price of gold at 3:00p.m. on 28 June 2012.

If the gold price was above $1,558.96 (£925.57) at that time then Barclays would be required to make a payment of $3.9m to its customer.

But if the price was below that benchmark Barclays would not have to make the payment.

Mr Plunkett created fake orders with the intent of pushing the price of gold below $1,588.96, which he succeeded in doing.

The result was Barclays was not obligated to make the $3.9m payment to its customer, and Mr Plunkett booked a profit of $1.75m for the bank.

When the customer learned of this, an explanation was sought from Barclays. The concerns were then relayed to Mr Plunkett on 28 and 29 June 2012.

The FCA said he misled both Barclays and the regulator by providing a false account of events and failing to admit that he had placed the fake orders.

Gold Fixing is a price setting mechanism that allows investors to buy and sell gold at a single quoted price.

Barclays joined the mechanism in 2004. The other members are HSBC, Societe Generale and Scotiabank. Deutsche Bank was part of the group but has since left.