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The IMF had slated the sell off of some gold for about a year now, although I can't remember the reason. Gold is getting a bunch of attention right now because

by jeromec 17y ago

The IMF had slated the sell off of some gold for about a year now, although I can't remember the reason. Gold is getting a bunch of attention right now because it's a commodity, a hedge against inflation, and these are historic economic times. However, there is a problem with gold. It's heavy. People don't want to carry or trade it. It can go out of fashion just as rapidly as it's rising. Next year the Fed will begin raising rates and the dollar will regain strength, taking some momentum off gold. Betting against the dollar is betting against the future of the U.S. economy, and Warren Buffet made his stand clear on that yesterday. I expect gold to continue to be up though, as the dollar and economy are in for less-than-stellar performance for several years in my estimation.

steveplace 17y ago
However, there is a problem with gold. It's heavy. People don't want to carry or trade it. We have electronic exchanges now, we can trade contracts based off the underlying. We do the same thing with stocks, bonds, oil, etc. We're probably going to see a little more irrational exuberance in gold, getting frothy and bubbly for the next few years. It's an asset class that is still in a bull market, and there are few of those left. Full disclosure, i'm long some miners and gold.
- jeromec 17y ago
  It's true that we can represent commodities with paper and digital bits (in fact some say silver prices are misrepresented by paper and would explode if the SHTF, and physical delivery was demanded), but that doesn't change the meaning of my statement much. Unlike oil, stock or bonds, gold just sits there, heavily, not doing much of anything. It's only attractive when people lose faith in the ability of un-backed paper currency to hold its value. When and if the U.S. can solidify that mentality gold will fall out of favor. I agree, though, with a long gold position.
daniel-cussen 17y ago
Compared to the amount of value it represents, gold is not heavy. On a dollar-to-weight basis, it is as heavy as carrying money in $20 and $50 bills (US bills weigh a gram each, and gold is worth roughly $35 dollars a gram). For comparison, the lightest form of fungible contemporary currency is the 500 Euro bill, worth 743.6 US dollars per gram. Diamonds are lighter, but they are not fungible. There used to be US bills of higher denominations, but they are no longer worth anything. I might be forgetting about paper stock certificates, but...they are not always anonymous or easily come by.
- jeromec 17y ago
  That's still heavier than cash when you look at the purpose of owning physical gold - as a store of value. People usually want to store increments of 10K, 50K or more, and that gets heavy/bulky enough even as paper 100s - so with your gold calculation we'd multiply that by three. Bank transfers or checks are far easier to handle. For everyday trade or barter it's not so much the weight of the metal as the drag on trading - using scales, checking for shaving or lead etc. What I meant was that gold has no valuable purpose, aside from some jewelry application, so people primarily use it as a store of value, and as that it's not the best, whether you're a wealthy individual, bank or country.

by jeromec 17y ago

steveplace 17y ago

However, there is a problem with gold. It's heavy. People don't want to carry or trade it. We have electronic exchanges now, we can trade contracts based off the underlying. We do the same thing with stocks, bonds, oil, etc. We're probably going to see a little more irrational exuberance in gold, getting frothy and bubbly for the next few years. It's an asset class that is still in a bull market, and there are few of those left. Full disclosure, i'm long some miners and gold.

jeromec 17y ago
It's true that we can represent commodities with paper and digital bits (in fact some say silver prices are misrepresented by paper and would explode if the SHTF, and physical delivery was demanded), but that doesn't change the meaning of my statement much. Unlike oil, stock or bonds, gold just sits there, heavily, not doing much of anything. It's only attractive when people lose faith in the ability of un-backed paper currency to hold its value. When and if the U.S. can solidify that mentality gold will fall out of favor. I agree, though, with a long gold position.

daniel-cussen 17y ago

Compared to the amount of value it represents, gold is not heavy. On a dollar-to-weight basis, it is as heavy as carrying money in $20 and $50 bills (US bills weigh a gram each, and gold is worth roughly $35 dollars a gram). For comparison, the lightest form of fungible contemporary currency is the 500 Euro bill, worth 743.6 US dollars per gram. Diamonds are lighter, but they are not fungible. There used to be US bills of higher denominations, but they are no longer worth anything. I might be forgetting about paper stock certificates, but...they are not always anonymous or easily come by.

jeromec 17y ago
That's still heavier than cash when you look at the purpose of owning physical gold - as a store of value. People usually want to store increments of 10K, 50K or more, and that gets heavy/bulky enough even as paper 100s - so with your gold calculation we'd multiply that by three. Bank transfers or checks are far easier to handle. For everyday trade or barter it's not so much the weight of the metal as the drag on trading - using scales, checking for shaving or lead etc. What I meant was that gold has no valuable purpose, aside from some jewelry application, so people primarily use it as a store of value, and as that it's not the best, whether you're a wealthy individual, bank or country.