Why I Like Gold (for now)

I have a theory that the stability of any fiat currency is a function of two variables...the money supply available to the economy (Supply) and the demand created by the ability to project military power (Demand).

The events over the past month brings the strength and effectiveness of our military into question around the World. If my theory holds true...the erosion of confidence in the United States military will result in downward pressure on the Dollar in the short term and possibly an end to the U.S. Dollar as the World's reserve currency in the long term...(if China has its way).

Even in the short term, money will slowly flow out of the U.S. Dollar and into competing currencies. This could set up a steady rise in interest rates as the Fed attempts to maintain price stability. If that happens, we could see a prolonged economic contraction.

As the Dollar falls, we should see a spike in Gold (in Dollar terms). However, as the Fed is forced to defend the Dollar, interest rates will rise and Gold will fall back to its mean. In other words, I think we will see a steady increase in Gold heading into the mid-term elections...and possibly an increase in military spending to ease the economic shock. Defense stocks are a bargain at current prices (imo).

What does everyone think of my "theory" and predictions?

For the sake of this thread, the current (9-1-2021) PM prices most commonly followed are...

Gold: $1810.00
Silver: $24.16
Copper: $4.21

10y Treasury: 1.298%
Dollar Index: 92.52


Btw, for @JoeNation ...If I posed such a question in the Bullion section of CT, I would be banned for life!
Seriously, does anyone see ANYTHING political in this post at all?

Perhaps we can have an experiment. If everyone here agrees that this post is totally apolitical, I'll start the same thread on CT (cut/paste) and we can all experience the Mod's reaction together. The "New" rule on CT is..."You can't post anything what might inspire someone to make a political comment in response".

This is like telling peiople to wear a mask because they may trigger a fear response in someone...the fear the Media has created. This is nuts...and CT Mods are buying into this Communist nonsense...Hook, Line, and Sinker. (It feels good to get that out! )

 

Well..... A couple of things I will respond to here....

I had a small windfall in the mid-1990's and I spent almost every nickel on pre-33 gold. It was something I wanted my whole life and never could afford. It had nothing to do with investing. It was an entirely selfish purchase.... Now twenty-plus years later, I look like a PM magnate. Heck, I was just lucky.... I said all that because there was a period that I did fancy myself as a PM magnate. I came within a hairs breath of withdrawing a sizable portion of my companies savings just prior to Trump being elected. I was confident of a spike in gold when he took office. Thank heavens I fought the urge as I would not have realized the gain I expected at the time.... All that to say this... I have come to the realization that the rational things that we believe affect the PM markets seem to have little effect at all. I have come to realize the things that do seem to affect PM costs are out of my pay grade and I will enjoy the stacks of PM's that I have accumulated over the years for what they are and not attempt to out-think the heavy hitters. You may very well be correct, Yakpoo. But I don't think we have the ability to predict what may or may not happen.

As far as CT goes, I see it like this.... For the longest time they allowed the Covid threads. Each and every Covid thread deteriorated into a brawl so they put an end to it. I applaud them for that. See, I think the idea of CT is to be a place that a youngster can go to find out something about the wheat cent his granddaddy gave him and that it be a safe place for those interactions. And us old farts can sit around telling fishing lies and all is well.... I like CT the way that it is. But then I do have a very "Mayberry" like vision of the perfect world too...

 

"Unless I, as the Moderator in charge of moderation, being fair and impartial and not having any personal interest, approve the post from one of my favorite minions, and not from members I don't care for. I reserve the right to be condescending, by using words like ya see and gotta, when being snarky. Such responses by moderation will indicate my superiority".

 

Gold and Silver -Advice - YouTube

 

I agree completely. I don't like it when threads spiral off-topic for politics or anything else. What I do is make statements of fact. Now, I can't even do that if anyone on the Left complains that it hits a nerve and might elicit a political reply. We're actually required to alter our reality to post on CT. That's just nuts!

For instance...When discussing the future value of the Cent, I made the statement..."Inflation has soared from 1.7% to 5.4% in the past six months". That was deemed "A political comment". When pressed, one mod said, "I know what you're trying to do and I want you to cut it out!" What am I doing? If someone responds politically to that, then cancel them...(geeze!).

Anyway...enough of that.

I'm a very conservative investor and only chase numismatic PMs...not more than 10%. I dollar-cost-average into low fee index funds...and a few dividend stocks from which I sell covered calls. I rebalance 2-4 times throughout the year as conditions dictate. That "conservative" approach has produced an average annual return of 16.4% since 1998. That's a nice return when you consider the low risk profile. The power of compounding is really something! I've been reading about day/swing trading, but I still have cold feet. It's mostly the expense fees that put me off...and the fact that I really don't know what I'm doing.

 

I like the CT moderators and understand/appreciate the job they do. I just don't think I should have to change economic facts to placate people who live in a fantasy world. The definition of "political speech" is being taken to it's 2nd and 3rd derivative. That's what I object to...having to parse my words to accommodate craziness.

 

There are 2 threads now that are without a doubt political in nature and by word. Stating "I hate/don't want this to be about politics...blahblah)", doesn't cut it. Yet they remain. Timing?

OK I can buy that. I posted in the thread concerning the AMT dancer, as follows "I saw better in Kabul". OK. I can see that and accept that.

However, at some point, it is obvious to me, and I am not the only person with the opinion, that the moderator is VERY selective in moderating.

 

Sorry I got off topic. I'm not saying anyone should or shouldn't buy gold. I'm just fascinated by economic equilibrium and the ripple effects that occur as equilibrium is disturbed. My theory is that a country's fiat currency is ultimately backed by their military.

If true, then any disruption in confidence in our military commitments should be reflected in the Dollar Index and PM prices. I'm just laying the theory out there with current PM prices. If we begin to see PM prices expectantly rise, then it helps to get the prediction on paper before the event. Making predictions after the fact is rather pointless.

 

Dollars are pretty much zero-interest bonds...the value of which is equal to our GDP divided by the number of outstanding bonds (Dollars). As the government prints money, they reach into your pocket (virtually) and take whatever they want. This doesn't so much affect people with investible capital. As inflation expands the economy, investment returns improve to attract capital...keeping pace with inflation.

It's the person that lives paycheck-to-paycheck who gets kicked in the teeth...but that's not how Liberals frame it. No...they say, "We're borrowing and spending to make your life better! It's the Rich who will pay the price."...hogwash! This is 21st century slavery...by our own government!

"What the government, via the Treasury and the Federal Reserve, really did in 1971 was coerce you to accept something (Federal Reserve notes) that used to be redeemable for gold and/or silver but now aren’t redeemable at all."

https://seekingalpha.com/article/145722-what-really-backs-the-u-s-dollar

 

are there no work farms?

 

None. You know that. All your food comes from Replicators.

 

It’s their grandkids that they are neutering. But they don’t care because this world is all about them. Person doesn’t need to be on this site very long at all to see how short sighted and self serving these people are. Makes me want to wretch.

 

I read somewhere that an American baby born today is born $78,000 in debt. Taxation without representation!

 

We need more emojis.

 

China has been trying for some time to replace the Dollar as the World's reserve currency. One proposal is to replace the Dollar with a basket of currencies of the strongest economies. Our Afghanistan withdrawal has shaken NATO to its core. Parliament issued a condemnation of President Joe Biden. They're pissed! A basket of currencies helps NATO economies while causing the U.S. a great deal of pain. I hope we can patch things up.

"The world's need for dollars has allowed the United States government to borrow at lower costs, giving the United States an advantage in excess of $100 billion per year."

https://en.wikipedia.org/wiki/Reserve_currency

 

you must be really mad about trump surrendering to the taliban last year and agreeing to leave.

 

Lol...you can't troll any better than that?

 

Did I lie?

 

This is a very unfair question to ask you, because it assumes you read to learn.
Have you read Orwell? I will wait.
Hint: The Road To Wigan Pier (not 1984, which is probably your speed).

I would rather you have at least a modicum of understanding of what you act like you are but will never be.

Visit after reading my suggestion. You might just have a fair shot at being articulate. After reading, pay it forward by lending it to JoeNation, and that other JoeNation soldier that posted the other day (he needs a chain for the lightbulb, btw), because if they don't read it, there is zero chance they will ever know anything or understand anything.

KNOW THY ENEMY AND KNOW YOURSELF...SUN TZU.

You are welcome.