Goods priced in gold

Came across some interesting charts regarding various items priced in Gold, instead of US dollars. It really shows the ability of gold to maintain purchasing power, and why gold has always been considered real money for centuries...unlike fiat money such as US dollars. Note how prices for certain commoditities oscillate around a mean, and generally remain stable for years.

First read the top most article on the following link before looking at the charts below: http://pricedingold.com/

Yale college expenses priced in gold: http://pricedingold.com/college-tuition/

Crude oil (Note that crude oil in US dollars went from about $20 to $148 from 2000 to 2008, but the price in gold never changed much. Also note the lower chart outlining the price of oil from 1950 to present): http://pricedingold.com/crude-oil/

Dow Jones: http://pricedingold.com/dow-jones-industrials/

US GDP: http://pricedingold.com/us-gdp/

USD, Euro, Canadian dollar, Australian dollar: http://pricedingold.com/cad-vs-usd/

Bank of Korea joins the gold bashing bandwagon

The Bank of Korea, diversifying foreign-exchange reserves away from a falling dollar, said that additional gold holdings aren’t attractive as most other central banks aren’t buying and the metal offers no cash returns. “There’s an illusion in gold,” Lee Eung Baek, head of the bank’s reserve-management department, said in an interview. “We follow the big trend. Gold isn’t the trend. Out of more than 200 nations, how many countries have bought bullion?”

Full article link: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ag2cRG2_O1Jk

Sounds like another Central Bank head once again makes a disastrous investment decision. Let's not forget how the head of Britain's Central Bank sold its gold holdings at around $250/ounce at the beginning of this decade, right at the bottom. If gold is not the big trend, then why is it virtually the only asset class out there touching new records? It has risen consistently every year for the last decade from $250/ounce to $1150/ounce. If this is not the big trend, then I don't know what is. Let Lee Eung Baek continue to hold on to the 'big trend' of ever depreciating US dollar reserves. Or maybe the 'big trend' is the 'safety' of the S&P 500, which is no higher than it was 10 years ago. Some Central Bankers will never learn.

Top Wall Street Economic Forecasters

Gold most definitely NOT a bubble

Iacono claims gold is currently not a bubble. They are very right. Just look at the charts. This is not the first time gold has shot up so fast. And each time in the past, there have been plenty of nay-sayers calling it a bubble.

http://www.iaconoresearch.com/PublicArticles/public_articles.html

Also, the following chart from Agora Financial speaks volumes. It shows how in spite of steadily increasing expenditure on gold exploration over recent years, there has been a equally steadily decreasing rate of new gold discoveries.




Factors supporting much higher future prices in gold:

1) Heavy buying by Central Banks around the world. Central Banks are now net buyers, after being net sellers for the last 10 years. David Rosenberg today called for a target price of $2600 based JUST on China buying enough gold to sufficiently diversify its reserves. This is not considering the heavy buying other Central Banks around the world are bound to do.

2) Peak gold production has been reached. This is confirmed by both the above chart as well as an admission by a leading gold mining company last month.

3) Money printing by Western nations. And I anticipate this getting much worse in the future, particularly in the US and UK, as deficits spiral out of control and governments seek to pay the future unfunded liabilities- which by the way are mind boggling in their size. A currency crisis is bound to unfold and people will flock to real money (gold) at an accelerated pace.

All this well take gold to many thousands of dollars per ounce. Eventually, there will be a bubble, and this will manifest in the form of a "mania", just as other bubbles have. Only once there are lines of people waiting to buy gold, and when more people than not find it 'normal' to own gold, will there be a bubble. That would be the time to sell. But most definitely not now. As Marc Faber recently pointed out, gold at these levels (currently around $1200/ounce) is very likely more "inexpensive" than it was at $250/ounce in 2001, considering the fundamentals of the economy we live in;

Friedrich Hayek quotation- food for thought

Austrian School economist Friedrich Hayek, in his book 'Monetary Theory and the Trade Cycle', London, 1933 said "....to combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure which can only a lead to a much more severe crisis as soon as the credit expansion comes to an end."

From http://www.ritholtz.com/blog/2009/11/cramer-people-like-overpaying/

By Rick Ambrose - November 22nd, 2009, 7:30PM

(CCN ­ Englewood Cliffs NJ)

With The Dow at new highs of 10440, CNBC¹s resident revisionist historian Jim Cramer encouraged what remains of his audience To “Buy! Buy! Buy!” recommending the purchase of Williams Sonoma (WSM $22) who sells over-priced culinary gadgets that few actually need. “People LOVE over­paying for things!” he exclaimed.

The Carnival Barker host of CNBC’s “Mad Money,” Mr. Cramer’s assertion has a solid basis in truth for those who listened to him. His most notable “Buy” recommendations have been Sears Holdings (SHLD) at $197 ­down 60%, Google (GOOG) at $700 ­ down 20% and the almost daily reiteration to “Buy” natural gas stocks like Chesapeake Energy (CHK) at $43, which currently
trades for half that at $21. “Hey!” he told a befuddled caller “If you liked the stock at $43, you’ve got to be just nuts about it at $21!”

Coincidentally, Nielsen reports that his viewership has moved in lock-step with his recommendations, and is also down 50%.

Cramer remains his own biggest fan despite studies which show his picks have actually underperformed the markets and are no better than those chosen randomly by a chimpanzee.

Cramer’s most notable calls have been the “Buy!” recommendation of Bear Stearns at $65 which fell to $30 and then $2 the following week, before rebounding to $10. His call of the “market bottom,” which records show he made at 13,000, 12,500, 11,800, 10,000, and 9,000 before advising viewers to get out of the markets at 7900. His revisionist claim that he called the actual bottom at 6500 cannot be verified in print or on tape, and a $15,000 reward posted by a former follower for just such evidence remains unclaimed.

Apparently feeling better than a few weeks ago when he advised viewers to exit the market at 9100, Cramer extolled “I feel really good about the market here” as the Dow peaked for the day.