6 ms·

Gold is priced in dollars. If the dollar loses real value, gold goes up. It's the same reason oil is $100, its baseline price is getting set ever higher, becaus

by shingen 15y ago

Gold is priced in dollars. If the dollar loses real value, gold goes up. It's the same reason oil is $100, its baseline price is getting set ever higher, because it's priced in dollars. Price oil in silver or gold and you'll see that oil hasn't gone up in price, the dollar has gone down. It's not paranoia or speculation primarily driving the price increase, but the objective destruction of value represented in what a dollar can buy today versus, say, 12 years ago.

Aloisius 15y ago
I know you're heavily invested in gold, but what you say is simply not true. The Gold-Oil ratio has fluctuated from upwards of 36:1 to 1:8 over the past 40 years. Further, if it were true then in 2009 when oil plunged from $140 to $50 a barrel, the value of the dollar should have shot up significantly. When gold dropped 20% last year, there wasn't a corresponding increase in the purchasing power of my dollar. You only have to look as far as the sleazy companies selling gold to old people on tv and charging 20-30% markups to know that speculation is driving this market.
- shingen 15y ago
  I own zero gold. I'm being objective about what it does, and does not do. It's a store of value, that's it. I'm heavily invested in my self. I own a business. Which is also why in one of my posts, I said the best investment you can ever make is: you. Tracking lines on oil and gold requires that you do so over an actual duration, not on select spot prices. Over time, oil and gold have tracked each other extraordinarily well. Ultimately the point is really simple: check out a graph on oil and gold prices since 1970. To the moon. Why? They're priced in junk dollars.
  - andylei 15y ago
    >> Over time, oil and gold have tracked each other extraordinarily well. you're just wrong. here's prices over the last 6 years: http://imgur.com/a2mMZ http://imgur.com/a2mMZ (CLH is crude oil) >> They're priced in junk dollars. you're confusing real and nominal prices. if your point is that inflation exists, i don't think you will find anyone that disagrees with you. if your point is that real prices of oil and gold are driven primarily by inflation, you're absolutely wrong.
  - Aloisius 15y ago
    If you open up a graph of the ratio between gold oz and barrels of oil over the last 40 years, you will not see anything resembling a straight line. They don't track each other. At all. Not even a little bit. There are literally thousands of charts and graphs that you could find a reasonable correlation with gold, but oil is not one of them. I don't know where you got the idea that they tracked each other, but it is simply wrong. Gold does not track oil, CPI-U does include food and energy and inflation is not anywhere near where you think it is.
  - onemoreact 15y ago
    If you bought 1 lb of gold in 1970 and sold it today after taxes you would not have kept up with inflation. Also, the S&P 500 does not include dividends. If you actually buy it's stocks or a fund that tracks the S&P 500 you do much better than the graphs suggest.
herge 15y ago
Right, because the price of gold in US$ has tripled in the last five years not because of speculation but because the dollar is one third as valuable as before. That's why the average US wage and minimum wage has also tripled over the same time period, right? Or have we become less efficient and our hour of labour is "worth" a third less? The price of labor eclipses the price of commodities in most of the economy, which is the true value of your dollar.
- shingen 15y ago
  That's exactly right, it's because the dollar is collapsing in real value. I dare you to spec out the price of a basket of 10 to 15 commodities from a decade ago compared to where they're at now.
  - herge 15y ago
    But what about labour prices? Why have they not shot up?
  - onemoreact 15y ago
    And I dare you to compare the cost of a big mac from 3 years ago vs today in comparison to gold.
    - kyrsey 15y ago
      McDonald's won't take my gold flakes, and anyway I don't think a 3-year-old big mac will be edible...
  - woobar 15y ago
    I don't have prices at hand. But a look at my Quicken database revealed that my total food-related expenses (groceries, school lunches, dining out, etc) were: 2001 $12K (family of three) 2011 $17K (family of five) I was surprised when I compared these two numbers first time. Gut feeling was that food prices went up a lot. Housing costs: 2001 $10800 (aparment, rent) 2011 $14800 (house, PITI) Edit: formatting
andylei 15y ago
actually if you adjust oil prices for inflation, you'll see that oil prices (in real terms) has gone up. http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_chart.asp http://inflationdata.com/inflation/inflation_rate/historical... > It's not paranoia or speculation primarily driving the price increase the price of oil is driven by supply and demand. the useful of oil has gone up, but the amount of oil we extract has not kept up. that's why the price has moved.
- InclinedPlane 15y ago
  I fear this might be too much a tangent... The price for oil is affected by supply and demand but also by speculation. People invest in oil, and people speculate in oil. More so, the price for oil includes a substantial degree of risk assessment. If buyers and sellers both agree that the future of oil production (due to geopolitical instability, for example) is at risk and could lead to oil shortages tomorrow then they will settle on higher oil prices today. The same sort of effects don't enter into the price of, say, Aluminum which is much less entertwined in complex geopolitical situations.

by shingen 15y ago

Aloisius 15y ago

I know you're heavily invested in gold, but what you say is simply not true. The Gold-Oil ratio has fluctuated from upwards of 36:1 to 1:8 over the past 40 years. Further, if it were true then in 2009 when oil plunged from $140 to $50 a barrel, the value of the dollar should have shot up significantly. When gold dropped 20% last year, there wasn't a corresponding increase in the purchasing power of my dollar. You only have to look as far as the sleazy companies selling gold to old people on tv and charging 20-30% markups to know that speculation is driving this market.

shingen 15y ago
I own zero gold. I'm being objective about what it does, and does not do. It's a store of value, that's it. I'm heavily invested in my self. I own a business. Which is also why in one of my posts, I said the best investment you can ever make is: you. Tracking lines on oil and gold requires that you do so over an actual duration, not on select spot prices. Over time, oil and gold have tracked each other extraordinarily well. Ultimately the point is really simple: check out a graph on oil and gold prices since 1970. To the moon. Why? They're priced in junk dollars.
- andylei 15y ago
  >> Over time, oil and gold have tracked each other extraordinarily well. you're just wrong. here's prices over the last 6 years: http://imgur.com/a2mMZ http://imgur.com/a2mMZ (CLH is crude oil) >> They're priced in junk dollars. you're confusing real and nominal prices. if your point is that inflation exists, i don't think you will find anyone that disagrees with you. if your point is that real prices of oil and gold are driven primarily by inflation, you're absolutely wrong.
- Aloisius 15y ago
  If you open up a graph of the ratio between gold oz and barrels of oil over the last 40 years, you will not see anything resembling a straight line. They don't track each other. At all. Not even a little bit. There are literally thousands of charts and graphs that you could find a reasonable correlation with gold, but oil is not one of them. I don't know where you got the idea that they tracked each other, but it is simply wrong. Gold does not track oil, CPI-U does include food and energy and inflation is not anywhere near where you think it is.
- onemoreact 15y ago
  If you bought 1 lb of gold in 1970 and sold it today after taxes you would not have kept up with inflation. Also, the S&P 500 does not include dividends. If you actually buy it's stocks or a fund that tracks the S&P 500 you do much better than the graphs suggest.

herge 15y ago

Right, because the price of gold in US$ has tripled in the last five years not because of speculation but because the dollar is one third as valuable as before. That's why the average US wage and minimum wage has also tripled over the same time period, right? Or have we become less efficient and our hour of labour is "worth" a third less? The price of labor eclipses the price of commodities in most of the economy, which is the true value of your dollar.

shingen 15y ago
That's exactly right, it's because the dollar is collapsing in real value. I dare you to spec out the price of a basket of 10 to 15 commodities from a decade ago compared to where they're at now.
- herge 15y ago
  But what about labour prices? Why have they not shot up?
- onemoreact 15y ago
  And I dare you to compare the cost of a big mac from 3 years ago vs today in comparison to gold.
  - kyrsey 15y ago
    McDonald's won't take my gold flakes, and anyway I don't think a 3-year-old big mac will be edible...
- woobar 15y ago
  I don't have prices at hand. But a look at my Quicken database revealed that my total food-related expenses (groceries, school lunches, dining out, etc) were: 2001 $12K (family of three) 2011 $17K (family of five) I was surprised when I compared these two numbers first time. Gut feeling was that food prices went up a lot. Housing costs: 2001 $10800 (aparment, rent) 2011 $14800 (house, PITI) Edit: formatting

andylei 15y ago

actually if you adjust oil prices for inflation, you'll see that oil prices (in real terms) has gone up. http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_chart.asp http://inflationdata.com/inflation/inflation_rate/historical... > It's not paranoia or speculation primarily driving the price increase the price of oil is driven by supply and demand. the useful of oil has gone up, but the amount of oil we extract has not kept up. that's why the price has moved.

InclinedPlane 15y ago
I fear this might be too much a tangent... The price for oil is affected by supply and demand but also by speculation. People invest in oil, and people speculate in oil. More so, the price for oil includes a substantial degree of risk assessment. If buyers and sellers both agree that the future of oil production (due to geopolitical instability, for example) is at risk and could lead to oil shortages tomorrow then they will settle on higher oil prices today. The same sort of effects don't enter into the price of, say, Aluminum which is much less entertwined in complex geopolitical situations.