Intrinsic Value, Valuations, & Expected Returns

[Sheikh_yer_Bu'Tay]

Thanks iluc. Great OP and good comments on this thread by everyone. Enlightening.

One question nags at me, though. Just because the price of PM's and base metals have shadowed gold's price over the centuries... why do they have to do so now? Isn't supply and demand more important?

Don't get me wrong. I hope what you say comes true!!

[iluc]

Sheikh, I'm sure normal supply-demand will continue to exert a powerful effect, but fiat currency debasement strongly influences that demand factor. Here is why gold and copper literally MUST go up as the debtors attempt to inflate away their unfunded liabilities (not without volatility, to be sure):

If prices of desirable commodities did not respond to debasement, a country could simply print enough to buy the entire world's supply! That can't happen! If the next leg of the depression hits the industrial space and copper falls to $1 or 50 cents, do you think any country will stand by while, say, India prints 10,000% more money and hoarded industrial copper? Hell, no, they'd all get in on the act or the commodity would quickly disappear entirely into the hands of the debaser.

This applies to every single physical asset. Gold, I think, tends to respond first.

[silverflake]

iluc and fellow realcenters, there is an issue here that has only been hinted at in the posts on this thread and it goes beyond current pricing of copper, nickel, gold and silver. I am going to give us all credit by saying this - WE are so far ahead of the game that we cannot rationally put a price on the 4 above mentioned metal. We have watched gold go from ~$250/ounce to $1900/ounce. We have watched silver go from $5/ounce to almost $50/ounce while nickel and copper have had their ups and downs too. HOWEVER, and I've said this in many other boards, the general public is CLUELESS!!!! I am telling you that most people are still watching the gold bull from the sideline. Silver? People still give me funny looks when I talk silver. Gold and silver mining shares? They think I am certifiably crazy. Add it up - small number of investment instruments (bullion and mining shares whose toyal maket cap combined don't equal Microsoft), and a public not in on it yet - potential is the only word I can think of.

Now, if the investing public is just waking up to gold and silver, they are still in a coma regarding the potential of copper and nickel. If they take away the penny and change the make up of nickels, will that change the publics awareness? I don't know, most folk still live only to use paper FRNs. Point is public is always last in on things. We all were ahead of the gang with gold and silver. Take pride in knowing we are in waaaAAAAaaayyy ahead in term of copper and nickel.

I do not know if copper and nickel will have gigantic price increases. I do know that I truly enjoy turning in my FRNs for ingots of copper (pennies). Just know, that we are picking the low hanging fruit. Continue stacking and keep the faith.

[biglouddrunk]

I agree with iluc on the fact demand will go up as currency is debased. Let remember that gold is valuable because humans decide it is. Don't get me wrong it has some of the best physical properties, but if human did not like gold it would be sold by the pound for industrial uses. To get back to my point people will want to hold copper and nickel when they can't afford silver anylong. They already can't really afford to hold gold already.

[iluc]

silverflake, I do have young airmen I work with that are actually getting it, between the ages of mid-20s and mid-30s. One of them has literally cut out drinking with his bros (in a VERY alcohol oriented career field, the TACP) dramatically so he can accumulate silver. The other just asked me what I thought of 10 oz APMEX bars. A captain aviator I met at my current assignment, who had always invested in rental properties and mutual funds through USAA, bought Gold Eagles last year and Silver Eagles during the silver price dip last May. I had, in the back of my mind, when I chose the illustrator for Treausure Hunt, the fact that she was a Google web developer that likes to do children's art -- in other words, all very sane, mainstream people that are hearing, understanding, and acting on these things. I asked the the illustrator if she would like to get paid in silver and gold; she's thinking about it, but I think she may just say Yes. Now you tell me who the hell else is receiving their compensation in precious metals?!