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Wednesday, November 4, 2009

The FRN-Denominated Price of Gold and Silver Rose Sharply Yesterday

The FRN-denominated price of gold and silver rose sharply yesterday. There was a new record high for gold at $1080/oz, an increase of 2.5%. There was a greater percentage increase in silver, over 5%, but not a record high.

The gold/silver ratio was getting pretty high 6-12 months ago. Silver was pretty cheap compared to gold. Silver has outperformed gold recently, and the gold/silver ratio is decreasing.

It's amusing to see the pro-State trolls on the Communism Channel come up with excuses for why gold investors are idiots. If the Dow index went up 2.5% in a day, they'd be saying "Hooray! The recession is over!" If the FRN-denominated price of gold surges sharply, they downplay it as much as possible.

This story was funny. My father was quoting this joke from the Communism Channel.

Gold prices surged to a record high Tuesday after the International Monetary Fund said it had sold 200 metric tons of the precious metal to India's central bank.
The pro-State trolls say "The IMF sold a bunch of gold to India's central bank. Therefore, the price of gold sharply rose. The price of gold rose because of the gold sale, and not due to devaluation of the dollar." That makes absolutely no sense. The price of gold rose because a central bank sold a bunch of gold?

At every opportunity, pro-State trolls say "Gold investors are idiots!"

Desperate to keep the price of gold down, the banksters are selling/leasing their gold reserves. A rising gold price makes fiat money look worthless in comparison. When the price of gold rises faster than the stock market, that exposes the scam of the financial system.

Suppose people started refusing State paper investments (stocks, bonds, cash). Then, there would be accelerating inflation as people bought gold or tangible assets instead. If inflation is too high, then people will stop using State paper money and the parasites' scam might end.

Over the past 10 years, gold has been a much better investment than the stock market. So far in 2009, gold has been a better investment by 10%. When you consider the huge discrepancy, it seems really stupid to own stocks instead of gold. Compared to stocks, gold has a higher expected return and lower volatility. A 10 year trend is a significant time period. A comparison before that is invalid, because it was illegal to own gold until 1975, and in the 80s and 90s the banksters were selling off their gold to keep the price down.

The real value of gold does not change. It's ridiculous to think that an ounce of gold has a real value that's 20% more than on January 1. If you believe "Gold is money!", then the value of gold never changes, by definition. Gold is a good measure to track inflation. The CPI is a biased measure of inflation.

The price of gold is an accurate measure of inflation. It matches an informal comparison of other things I buy, but I haven't done a scientific analysis. I should start tracking the "FSK inflation index", based on things I actually buy.

It's wrong to think "The value of gold is rising!" A more accurate statement is "The value of the dollar is crashing!"

1 comment:

Anonymous said...

Of course, that's because a Non-Federal Non-Reserve Non-Note isn't worth the paper it's printed on. But they can always pull an FDR and use the police power of the State to steal your gold. Or they can sell counterfeit gold futures that they know can't be delivered (which would be like printing more gold certificates than gold to back them). COMEX will let them short sell more gold than even exists. They have a long history of doing things like this to protect their dollar bubble, which is the next bubble to burst. They can short sell counterfeit Bear Stearns shares to put their rivals out of business, they can short sell counterfeit silver futures against people "cornering the market" (what the heck is the Federal Reserve then), they can short sell counterfeit gold futures. COMEX is a Ponzi scheme anyway.

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