Nailed It
Posted: Wed Aug 10, 2011 5:43 pmThis guy on Zerohedge makes a great argument for PMs. I would truly like to hear a counter opinion that can soundly dismiss his points. Here's the portion I really like:
"Gold bubble?
Much ink (and binary 1s and 0s) has been committed to the topic of whether or not gold is in a bubble. For the record, my view is a clear and unequivocal no. There are a number of factors that help form my opinion, everything from the estimate of the ratio of paper gold to physical gold (45:1) to the amount of outstanding USD vs the total value of all gold currently above ground (hundreds of trillions vs. approximately $6tr). In my opinion, gold isn’t in a bubble, but rather is reflecting the largest bubble on the planet, US Treasuries. Over time, foreign central banks will hold fewer and fewer US Treasuries as Chairman Bernanke and company consistently devalue the dollar. As this process unfolds, many central banks will opt to own precious metals, commodities and commodity based currencies. However, with most foreign central banks holding over 60% of their reserves in USD, the flight out of dollars and in to other alternatives will cause bottlenecks and price spikes which could cause some assets to see their prices rise exponentially. Of course, this isn’t to suggest that gold won’t fall in price from time to time, it certainly will. In fact, given the recent price rise over the last few days, a correction in gold could be forthcoming soon. But given the strong demand for alternatives to the USD, gold will always be bought on dips. In my view, investors should not view gold as a commodity but as a currency. True, you can’t buy much with gold these days given our legal tender laws, but it will generally protect your wealth better than other fiat currencies and certainly better than the soon-to-be devalued US Treasuries once rates eventually start to rise. Further, as the world searches for an alternative to the USD as reserve currency, gold is almost certain to find some kind of role in that new economic reality."
And the link to the whole article:
http://www.zerohedge.com/news/guest-post-macro-commentary-cost-fiat-money-and-gold
So Bernank, what were you saying about gold not being money?
"Gold bubble?
Much ink (and binary 1s and 0s) has been committed to the topic of whether or not gold is in a bubble. For the record, my view is a clear and unequivocal no. There are a number of factors that help form my opinion, everything from the estimate of the ratio of paper gold to physical gold (45:1) to the amount of outstanding USD vs the total value of all gold currently above ground (hundreds of trillions vs. approximately $6tr). In my opinion, gold isn’t in a bubble, but rather is reflecting the largest bubble on the planet, US Treasuries. Over time, foreign central banks will hold fewer and fewer US Treasuries as Chairman Bernanke and company consistently devalue the dollar. As this process unfolds, many central banks will opt to own precious metals, commodities and commodity based currencies. However, with most foreign central banks holding over 60% of their reserves in USD, the flight out of dollars and in to other alternatives will cause bottlenecks and price spikes which could cause some assets to see their prices rise exponentially. Of course, this isn’t to suggest that gold won’t fall in price from time to time, it certainly will. In fact, given the recent price rise over the last few days, a correction in gold could be forthcoming soon. But given the strong demand for alternatives to the USD, gold will always be bought on dips. In my view, investors should not view gold as a commodity but as a currency. True, you can’t buy much with gold these days given our legal tender laws, but it will generally protect your wealth better than other fiat currencies and certainly better than the soon-to-be devalued US Treasuries once rates eventually start to rise. Further, as the world searches for an alternative to the USD as reserve currency, gold is almost certain to find some kind of role in that new economic reality."
And the link to the whole article:
http://www.zerohedge.com/news/guest-post-macro-commentary-cost-fiat-money-and-gold
So Bernank, what were you saying about gold not being money?