The only thing gold can do is precisely why I have been buying; it works extremely well as a store of value. An average automobile in 1950 would have cost the equivalent of approximately 30-40 ounces of gold. The same holds true today at the recent spot gold prices above $1000. Had you instead decided to hold cash, you would not even have enough money to pay for the down payment.

The most common reason cited by people bullish on gold is inflation and although it is certainly a contributing factor, I do not feel that this is the most important issue affecting gold prices. Instead, I believe that there are three other overarching trends taking place right now that are exerting much more upward pressure on the price of gold.

You can read more at http://lucidinvesting.wordpress.com/2009/10/20/why-warren-buffett-doesnt-like-gold-and-why-i-do/

[...] time highs and investors believe gold is a great place to invest. Frugal Dad recently answered a readers question regarding gold, here are my reasons why gold is a bad investment. Although alternative investments have their [...]

In a nutshell, it was exchanged for scrip in Argentina which would in turn be used for purchases that day at the local swap meet type places that popped up.

As far as the dollar goes, it only has 38 short years of existence without gold backing. That’s not really a long track record to bank on (pun intended).

Of course anything can happen. But the track record of our government (including Republicans TARP program etc.) doing the right thing and this current administration adding health care, cash for clunkers, $8k housing handouts, environmental polices, cap and trade, more bailouts (there talking of a 3rd) added to Social Security and Medicare shortfalls as well as a growing Welfare state and state bailouts, I don’t see any real long term solutions to improve GDP.

Adding spending to spending results in more debt. That’s why the dollar is in peril despite any potential short term bounces.

It’s the long term I’m worried about because “of” governments doing what they do best. Who is stopping them?

What a wicked game we play….

You may call it “crazy” but hey…I still believe that someday my Cubs will win the World Series! Faith only takes one so far. It is this “faith” that the dollar is based on without any connection to gold. In 38 years since Nixon took us off the gold (backed by) standard, the dollar hasn’t fared too well and since 2000 I’m afraid the game has changed for good. Until the government is curtailed or held accountable, the game will continue to be wicked.

At least the Cubs got new ownership! My faith has increased!

I happen to believe that the dollar will recover as the it always has. I don’t believe we will see the US default and hyperinflation and all that crazy stuff.
Mike

The truth of the matter is that gold counteracts the fall of the U.S. dollar and since the year 2000 and the addition of more competition to the U.S. dollar like the EURO, the dynamic has changed for gold. Prior to that time there was no real competition to the U.S. dollar. Now we have the EURO and in 2004 the introduction of the first gold ETF in America and other ETFs that offer alternative currencies and liquid instruments for investors.

The dollar index is what one needs to watch. It’s presently in a downward trend and gold naturally is in an uptrend. Gold has broken out to a new high but the Dollar Index has not broken to a new low (below the March 2008 72 area. Until that 72 on the index is broken, I’d be cautious about gold short term.

That said, a holder of physical gold cares not that it falls to $700 an ounce on its way to $2,000 an ounce or higher once that dollar index does break down…and it will.

I’ve written quite a few articles on gold, challenging financial advisors on their understanding of how it fits into a diversified portfolio. You can find the various articles under my “gold” category here: http://fedupbook.com/blog/category/gold/

Disclosure: I don’t sell gold. I write about it. I’ve written a book on it with the intention of helping people understand it better. I was a financial advisor for over 20 years and left to tackle more pressing issues in America that need addressing.

Also, gold’s 25 year annual return is less than the S & P 500 and the annual inflation rate. Gold is a panic commodity. As the economy recovers, gold prices will come down.

You know what you call an investor who tries to time the market? Broke.

It certainly has place in a portfolio or at least some ETF’s that follow precious metal prices.

However I doubt if this is the time to buy. I would wait for it to cool off then enter at a lower price point