You cannot possibly appreciate what it feels like to sit quietly among reader/posters who know that they know what they know.
Although I have been a reader and finally a subscriber of Peak Prosperity for several years, today was my first foray into the Discussion/Comments Section. It was not only a highly educational experience, but it was also a 'conversational' delight.
The exchange of thoughts and ideas, while certainly not always in agreement, was done with great cordiality and good manners - something all-too-seldom unseen these days in Internet commentary sections. I am deeply grateful to see both sides of an argument being explored in a manner that is thought-provoking rather dogmatic or ideological cant. No flames, no all CAPS.
I'm here to learn; eyes and ears wide open, mouth (usually) firmly shut. Thanks to one and all for your input on one of my favorite subjects - the precious metal markets.
Ooops! I don't think I will wake my wife tonight to reveal this:
"Gold has a tendency to be very volatile in the short-term, but is a good store of value in the long-term, with “long-term” defined by centuries." Source
If our predicament can be defined as floating down the river and headed over Niagara Falls and we have a chance to do this with a barrel (PMs) or without I think I'll grab that barrel and hope for the best!
There seems to be two diverse perspectives represented here:
Hedge: Gold and some precious metals are a long term place to protect wealth against equity market crashes and fiat currency irresponsibility. As such worrying about the Comex price everyday is irrelevant as long as people will always value the physical bullion at somewhere near the value you do.
Investment: Gold and PMs are not immune to market forces, independent or manipulated, so to manage these you need to use all the tools at your disposal. Paying attention to things like supply, demand, price and volume is important.
With the same knowledge of the future as Dave and Jim (0%) I think both perspectives are rationale and must be respected. I really appreciate the discussion here and realize that even though I want Gold as hedge I won't be able to sell it when I need to if its value is manipulated or it becomes illiquid. Paying attention to the market for your hedge or investment is not optional.
Please forgive the deviation (link below), but here's one thing that might break the Comex and the planet well before Gold hits $10,000 / oz. Imagine the value of Gold or Cash when there is less Oxygen and half the food on the planet. 16 years is not that long from now. I thought it fit with the Peak Prosperity theme.
Hooleyman -Interesting post. Respect for the known-unknown future (and perhaps some unknown-unknown outcomes too) is required if you are to avoid a possibly catastrophic over-commitment of resources to one basket or the other.
I don't have any special knowledge about climate change, so I can't comment other than on the mechanics. A carbon tax would seem to drive prices of every extractive commodity higher, including food prices, since they all use reasonably large amounts of energy. And from a 30,000 ft view, if you're a "carbon is pollution" believer, it would seem to be unfortunate spending all that carbon to mine gold, since its major use is monetary and/or jewelry.
And strictly from an "fossil energy is a limited resource" viewpoint, it would also seem that spending that energy to mine gold is also…an unfortunate use of society's resources.
Naturally, any attempts to restrict gold mining will drive the price higher. And of course the higher the price of gold goes, the more of our energy/carbon budget society will want to spend mining it. That makes for an interesting paradox.
My guess: climate change mitigation will increase the price of gold. Unless of course the response of climage change control efforts is to make private gold ownership (above a few ounces of jewelry) illegal, kind of like they did with ivory & elephant tusks. Gotta love those unknowns.
@ davefairtex
I appreciate your point about how taxing carbon would change the playing field. Food, transportation and earth element/mineral extraction will become much more expensive. Some estimates would suggest double to triple. This flows nicely from my original point. With prosperity as a goal we need to pay attention to what is changing in the world (economy and environment) and recalibrate our actions to bring prosperity. That unchecked CO2 pollution will kill us is a very different kind of prediction than Gold prices. There is no reset on a human incompatible climate disaster. There is no financial hedge, only a policy one.
So getting back to prosperity and your points, if we tax carbon pollution then the costs of our current society go up in the areas you stated and others. As an exercise, what might that do? Short term this would raise costs, slow economies and frustrate the usury class. I would guess at least some of them are aware of this. Longer term new leaders would eclipse the established industries with alternative energy, food networks and dense energy storage. Coal, Oil and Natural Gas would not disappear as energy options. To be prosperous you would do and invest in different things than you do today. Gold may or may not be as important or useful as a hedge.
Our investments, including PMs, are a tool to prosperity and not actual prosperity. We need an environment to prosper so I constantly wonder if in 16-20 years I will witness human greed actually kill the vast majority of us in a non-nuclear event. I am sorry this may seem hyperbolic, but do your own research. The actions necessary to improve our situation would suck for the 0.1% WAY more than they would for us.
I just came back from vacation and found this debate helpful and hope to make a contribution below.
At times of rapid devaluation of fiat currencies as trust in the purchasing power of such currencies declines , people gravitate to assets with real/tangible value, such as productive land, stuff in the ground that has useful value like iron, potash(fertilizer), wood, copper, aluminum, etc, all things that we use to make life and living possible...gold is not such an asset. However at such times, especially as the trust in the value of fiat currencies is declining rapidly in proportion to their purchasing power, the same people gravitate to use of a medium of exchange they perceive as trustworthy especially if it can't physically and/or digitally be diluted and it is reasonably liquid. Gold has historically served this purpose for obvious reasons. If we assume, or agree that the world has and is going through a period of unprecedented debt expansion that can not possibly be payable, then the scenario of reaching the inflection point of loss of trust is inevitable and should ultimately lead to a much larger demand for gold. Manipulation or not, smart money and smart traders( I excluded) attempt to take advantage of rapidly shifting currents at points of inflection such as the current one to make unusual moves back and forth into various assets and currencies to 'maximize' their profits, without materially affecting the end result . That is why we have trends and counter trends in all markets whether in secular bull or secular bear regimes. The fact that gold has suffered such sharp price decline suggests that smart money expects a serious deflationary period with all assets suffering large price declines and perhaps gold as a currency is leading this decline and with possibly even more declines before it is all over. To hold on to one's gold at this point one has to assume that following the recognition and the spreading of the global recession underway , central banks everywhere will unleash massive QE's that will dwarf the current ones. This will undoubtedly lead to very large gold price escalation and possibly to a gold "bubble" as the trust in fiat currencies may very well be completely lost.
I own gold and I'm holding on to it as I think that the above scenario is reasonably likely and I need to hedge against it.
Inflation and even higher gold prices, so forth and so on. Which of course just slams every working person in the United States and we become deeper and deeper indebted to the Over Lords. Isn't life grand. Personally, I love it, I really do, until, I don't.