Questions on gold

On Sat, Mar 8, 2008 at 6:48 AM, Alex Lane <a.l.> wrote:

Hans,

You have some great videos.  However, I think there is something you’re overlooking with respect to gold.  First, it’s important to stop thinking of money as U.S. paper dollars.  Gold is money.  Paper is a government promise and has no intrinsic value.  While the dollar value of gold is very interesting to watch, it is more accurate to view the rise of gold prices as a fall in the dollar.  This is the inevitable consequence of fed inflation.  Inflation is the fed’s only option at this point.  They will do everything within their power to continue to expand the money supply, as that’s the only way for the government to continue to service it’s debt.  The collapse of our fiat monetary system is inevitable.  It can not be avoided, only delayed.  The global monetary system will be radically transformed in the next 10 years. I’m buying as much gold and silver as I can, and I hope you do the same.

Cheers,

A. L, Chicago

Hi Alex,

You are right.

But, and this is a big but.
People who “get” gold, like yourself and me, tend to go a bit over the top about it.

While gold is a better gauge of value than paper money it is important to see that gold also has speculative ups and downs.
It is not a 1:1 relationship where gold by definition is the right value of the dollar.
Some people seem to believe in this definition approach.

Right now it is important to see that gold is being pushed hard up by speculative “hot money”. The last USD 300 rise has been extremely fast, the momentum builds on itself.
This momentum will eventually vane.

It will vane the day the S&P falls 10% in a day. Then the hot money will sell, just sell anything that has a bid price.
Gold could easily fall back to USD 750 or 600 for that matter. It could also go to 1200, but not to 2000 this time around.

In a recession without hyperinflation pretty much all capital assets will fall in nominal prices. The USA is still strong enough to hold off hyperinflation this time around, but every dip puts the inevitable forward. Perhaps the next dip in 8-10-15 years will bring it about, perhaps the one after that in 20-40 years time.

It is my firm belief that the stock market will crash and that gold will follow down with it, for some time.
We will see gold at 2000 in our lifetime, but not this time around. Maybe in 10-20 years.

Are you prepared to see gold at USD 600, will you keep your cool or freak or panic then?

Every gold enthusiast should ask themselves this question.
Diversified currency cash might be a better way to preserve capital in and during the fall.

Thanks for asking!
I will use your question as a piece on Farmann.no.

Regards,
Hans Lysglimt

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