Comments on: Gold Bought by Some of America’s Most Successful Investors http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/ An independent perspective on the Australian and global investment markets Sat, 21 Nov 2009 17:27:32 -0600 http://wordpress.org/?v=2.8 hourly 1 By: Paul http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-94116 Paul Fri, 21 Aug 2009 08:04:58 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-94116 People seem fixated on the price that gold may or may not rise to. It's a worthy way to spend your time, but what is missed is that you don't actually need gold to climb to $2000 and above in order to make great money. Even at $1000 per ounce, junior gold producers ramping up production and reducing total cash costs in the process will be achieving excellent margins of $500 per ounce or better. 100,000 ounces per year at a margin of $500 per ounce equals $50M cash pa. Unhedged, low cost miners ramping up production under sound management will provide savvy investors with a bonanza. People seem fixated on the price that gold may or may not rise to. It's a worthy way to spend your time, but what is missed is that you don't actually need gold to climb to $2000 and above in order to make great money. Even at $1000 per ounce, junior gold producers ramping up production and reducing total cash costs in the process will be achieving excellent margins of $500 per ounce or better. 100,000 ounces per year at a margin of $500 per ounce equals $50M cash pa. Unhedged, low cost miners ramping up production under sound management will provide savvy investors with a bonanza.

]]> By: JD http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-77815 JD Thu, 14 May 2009 11:13:25 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-77815 The IMF will not sell any gold, it is just pure BS. They might sell paper gold, but not physical gold. No gold will move from one location to another. When you can buy physical gold cheaply, then you can state that gold prices are falling. But the paper ETFs and the comex aka crimex, are managed by the likes of GS, JPM, and Wells Fargo, shorting the paper gold and silver to control the price of the physical precious metals for the US FED, there by propping up the US Dollar. That is how the system works. Any other fantasy spread by the business media propaganda outlets, is just a story of the man behind the curtain in the wizard of OZ. BTW - What is the US "Federal Reserve Note" Dollar backed by? The IMF will not sell any gold, it is just pure BS. They might sell paper gold, but not physical gold. No gold will move from one location to another. When you can buy physical gold cheaply, then you can state that gold prices are falling. But the paper ETFs and the comex aka crimex, are managed by the likes of GS, JPM, and Wells Fargo, shorting the paper gold and silver to control the price of the physical precious metals for the US FED, there by propping up the US Dollar.

That is how the system works. Any other fantasy spread by the business media propaganda outlets, is just a story of the man behind the curtain in the wizard of OZ.

BTW - What is the US "Federal Reserve Note" Dollar backed by?

]]> By: david http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-76970 david Fri, 08 May 2009 01:31:44 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-76970 Thank you Pete, your answer is much appreciated, very well written and easy to understand ;) Cheers Thank you Pete, your answer is much appreciated, very well written and easy to understand ;) Cheers

]]> By: Pete http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-76877 Pete Thu, 07 May 2009 04:38:31 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-76877 Also here is a good article explaining the properties of good currency: http://cij.inspiriting.com/?p=391 Also here is a good article explaining the properties of good currency:

http://cij.inspiriting.com/?p=391

]]> By: Pete http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-76876 Pete Thu, 07 May 2009 04:37:48 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-76876 Sorry David, sometimes my posts are a bit sporadic. My answers to your questions: Gold 'can' be divided up. It is just that it is hard to check its authenticity if you go into a shop and say "would you take this chiselled chip of my ounce bar?" That is when gold coins are handy (but they come at a premium for this reason). Silver is considered the general alternative for small transactions as it's worth is less. What we need to consider is the need for money in general. What is money? Well currently the form of accepted currency is fiat money. Basically this money is accepted as a form of payment as people trust it's worth. They trust that they will be able to exchange their money for things of approximate worth (prices of items naturally fluctuate due to supply, demand, opportunity cost, etc) When all trust in a currency is lost (eg through hyperinflation), the currency becomes worthless. Now the question on whether gold would be a currency comes down to exactly this: Trust. And it is pretty trustworthy. Because we know that gold cannot be 'created' easily like fiat currency, and that it is a stable element that cannot be easily destroyed. Therefore, besides its intrinsic value as jewelry (which is a factor), gold has value as a 'measure'. If we consider the environment of hyperinflation for instance, people will lose trust in their fiat currency. It will become worthless (and therefore useless). If you have no national currency at all, what can you do if you have to trade? - You can barter (and arrange service agreements, same thing really) - You can trade using other national currencies - You can trade using items of standard value For one, barter is pretty awful. The reason - if you have a car for trade, and you want to buy an apple...what can you do? Trade a tyre? The steering wheel? Without a generally standard measuring tool (currency), trade is tricky. Trading with other national currencies is viable. Unless they are also unstable/untrustworthy (which is likely). Items of standard value. Apples is not one of them. They don't store well and it would be cumbersome to carry 5000 apples to buy a car. Plus people can easily create orchards and oversupply the apple market. So we need items that are a) hard to come by (rare), b) durable, c) portable, d) divisible, e) unconsumable (eg not apples), f) fungible (not unique, eg diamonds, pearls, art) Another thing to consider, re: divisibility is that new paper currency can be built 'based' on gold. Eg, a gold backed currency. For instance, Pete might have 1 ounce of gold. Pete takes that to an 'institution' of some sort (eg bank?) and the bank trades the gold for 100 '1/100 ounce' gold notes. Those notes can be traded as normal, and also redeemed at the bank for solid gold (probably not redeemed for 1/100th ounce portions though). Using this system, the gold could be divided very flexibly. The trust involved is a) that the bank would actually let you redeem gold (and assume it doesn't go crazy lending it...hooray for fractional reserve lending, etc) b) that gold continues to be a currency (very likely - it needs acceptance by only a few). I hope that helps :) Sorry David, sometimes my posts are a bit sporadic.

My answers to your questions:

Gold 'can' be divided up. It is just that it is hard to check its authenticity if you go into a shop and say "would you take this chiselled chip of my ounce bar?" That is when gold coins are handy (but they come at a premium for this reason).

Silver is considered the general alternative for small transactions as it's worth is less.

What we need to consider is the need for money in general. What is money?

Well currently the form of accepted currency is fiat money. Basically this money is accepted as a form of payment as people trust it's worth. They trust that they will be able to exchange their money for things of approximate worth (prices of items naturally fluctuate due to supply, demand, opportunity cost, etc)

When all trust in a currency is lost (eg through hyperinflation), the currency becomes worthless.

Now the question on whether gold would be a currency comes down to exactly this: Trust. And it is pretty trustworthy. Because we know that gold cannot be 'created' easily like fiat currency, and that it is a stable element that cannot be easily destroyed. Therefore, besides its intrinsic value as jewelry (which is a factor), gold has value as a 'measure'.

If we consider the environment of hyperinflation for instance, people will lose trust in their fiat currency. It will become worthless (and therefore useless). If you have no national currency at all, what can you do if you have to trade?

- You can barter (and arrange service agreements, same thing really)
- You can trade using other national currencies
- You can trade using items of standard value

For one, barter is pretty awful. The reason - if you have a car for trade, and you want to buy an apple...what can you do? Trade a tyre? The steering wheel? Without a generally standard measuring tool (currency), trade is tricky.

Trading with other national currencies is viable. Unless they are also unstable/untrustworthy (which is likely).

Items of standard value. Apples is not one of them. They don't store well and it would be cumbersome to carry 5000 apples to buy a car. Plus people can easily create orchards and oversupply the apple market.
So we need items that are a) hard to come by (rare), b) durable, c) portable, d) divisible, e) unconsumable (eg not apples), f) fungible (not unique, eg diamonds, pearls, art)

Another thing to consider, re: divisibility is that new paper currency can be built 'based' on gold. Eg, a gold backed currency.
For instance, Pete might have 1 ounce of gold. Pete takes that to an 'institution' of some sort (eg bank?) and the bank trades the gold for 100 '1/100 ounce' gold notes. Those notes can be traded as normal, and also redeemed at the bank for solid gold (probably not redeemed for 1/100th ounce portions though). Using this system, the gold could be divided very flexibly. The trust involved is
a) that the bank would actually let you redeem gold (and assume it doesn't go crazy lending it...hooray for fractional reserve lending, etc)
b) that gold continues to be a currency (very likely - it needs acceptance by only a few).

I hope that helps :)

]]> By: David http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-76865 David Thu, 07 May 2009 02:37:25 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-76865 oh bother, the answer to this question has evaded me once more =( oh bother, the answer to this question has evaded me once more =(

]]> By: David http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-76786 David Wed, 06 May 2009 02:22:25 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-76786 "Ultimately you can ask yourself this question: In an inflationary world, would you rather be someone who owns some gold, or no gold?" Pete: Morning Pete, I'd have to say own some gold ;) Why though? It would be because 'everyone knows’ rising inflation = rising (or is it just staying still, or perhaps really going backwards...) gold price wouldn’t it? The argument that gold is the oldest for of currency, is tried and true and when the currency you have becomes worthless, all you will have is barter, other currencies, and gold is what I have a conceptual problem with. Are true gold investors -who buy for wealth protection as opposed to speculation- doing so to enable them to buy stuff when currency becomes worthless? If so how does that work? Is the plan to take one of your gold bars to the market with you along with a hammer and chisel and chip off bits and pieces of gold to merchants to pay for goods? I would like an explanation of how gold is planned to be used by those anticipating economic Armageddon. Cheers. "Ultimately you can ask yourself this question: In an inflationary world, would you rather be someone who owns some gold, or no gold?"

Pete: Morning Pete, I'd have to say own some gold ;)

Why though? It would be because 'everyone knows’ rising inflation = rising (or is it just staying still, or perhaps really going backwards...) gold price wouldn’t it?

The argument that gold is the oldest for of currency, is tried and true and when the currency you have becomes worthless, all you will have is barter, other currencies, and gold is what I have a conceptual problem with.

Are true gold investors -who buy for wealth protection as opposed to speculation- doing so to enable them to buy stuff when currency becomes worthless? If so how does that work? Is the plan to take one of your gold bars to the market with you along with a hammer and chisel and chip off bits and pieces of gold to merchants to pay for goods?

I would like an explanation of how gold is planned to be used by those anticipating economic Armageddon. Cheers.

]]> By: Greg Atkinson http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-76741 Greg Atkinson Tue, 05 May 2009 12:35:35 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-76741 Pete, Actually gold is not the oldest form of currency. Copper for one has many years on gold. Also silver was minted into coins before gold. Pete, Actually gold is not the oldest form of currency. Copper for one has many years on gold. Also silver was minted into coins before gold.

]]> By: Tim http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-76718 Tim Tue, 05 May 2009 11:11:26 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-76718 One subject I have yet to read anything about lately is the value of Platinum. There is talk of Oil, Gold and Silver doing crazy things, both good and bad, but little is to be found regarding Platinum. At $1100/oz what do people think about this expensive little fellow? I see a rather volatile price history but could it be worth sending a few dollars Platinum's way in this current economic environment to accompany a bit of gold and silver bullion or is Platinum just a fancy looking metal for those who like the "bling" and "shine" in their cabinets? Given its rarity I can see the value in holding some of this stuff....But what would I know!!! One subject I have yet to read anything about lately is the value of Platinum. There is talk of Oil, Gold and Silver doing crazy things, both good and bad, but little is to be found regarding Platinum. At $1100/oz what do people think about this expensive little fellow? I see a rather volatile price history but could it be worth sending a few dollars Platinum's way in this current economic environment to accompany a bit of gold and silver bullion or is Platinum just a fancy looking metal for those who like the "bling" and "shine" in their cabinets? Given its rarity I can see the value in holding some of this stuff....But what would I know!!!

]]> By: Coffee Addict http://www.dailyreckoning.com.au/gold-bought-by-some-of-americas-most-successful-investors/2009/05/01/comment-page-1/#comment-76705 Coffee Addict Tue, 05 May 2009 06:06:38 +0000 http://www.dailyreckoning.com.au/?p=5824#comment-76705 This my not be the right forum to post this but gosh aren't the NZ courts lenient of on the All Black fraudsters and their elaborate pokie scam. By my reckoning the 275 hours of community service to work off a NZD 2m fraud delivers an hourly rate of $7272! It would be a different oucome in the US courts. Actually I expect a huge upswing in this sort of fraud as formerly well to do individuals try to keep up lifestyles and appearances. This my not be the right forum to post this but gosh aren't the NZ courts lenient of on the All Black fraudsters and their elaborate pokie scam. By my reckoning the 275 hours of community service to work off a NZD 2m fraud delivers an hourly rate of $7272! It would be a different oucome in the US courts.

Actually I expect a huge upswing in this sort of fraud as formerly well to do individuals try to keep up lifestyles and appearances.

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