Gold is nearing $2,000 per ounce. Will it ever hit $3,000? There are at least two schools of thought on it.
Conventional thinking. Gold is more than just a commodity. It is a “rare” and valuable commodity. Gold isn’t money. Gold is better than money. The full faith and credit of many of the world’s nations is implicitly back by the gold they have in their own “Fort Knox.” The economies of the world are going to hell in a hand basket. All anyone knows how to do, especially the United States, is to print and borrow more money.
What the US does is particularly important because the dollar is still the de facto world’s reserve currency. Yes, there are nations and other entities that are starting to move to other forms on currency while the Obama administration and the Federal Reserve complete their search and destroy mission of wiping out the dollar. But despite the best efforts of Bernanke, Obama and Geithner (the Three Stooges), the dollar has not been reduced to toilet paper, yet.
So we have the spectacle of the world’s reserve currency being undermined right before our very eyes while the economy that is supposed to helped by this dollar devaluation refuses to budge off of “empty.” Under these circumstances gold can go no where but up. No wonder governments, institutions and individuals are pouring money into gold, silver and other commodities. Paper dollars are approaching the value of parakeet cage newspaper.
Unconventional thinking. Gold is a commodity like any other. It is always possible to have too much of any commodity. The gold market is vastly over sold. Thee are too many people who have absolutely no idea what they are doing getting into gold. There is in fact a gold bubble. If Three Stooges succeed in their task the dollar will collapse. However, people will still need to buy things. They may use or sell their gold to get things they need. When all that gold goes on sale something will be revealed, even to those who swore on their ancestors graves that gold will always go up. It will be revealed that gold is a commodity like any other. The bottom will fall out of the gold market and for everyone who depended on either dollars or gold, the bottom will fall out of their entire world. No one will have anything that anyone else values to buy food. It will be dogs and cats living together. Mass hysteria. The end of western civilization. The Chinese, who will still have a lot of stuff and a huge standing army, will probably take over most of the world. Islam, which is not based on gold or money will take the rest.
Okay so that last scenario ended a little apocalyptically. What with the doomsday cults around and all, it was hard to resist.
What will probably really happen is that value of all our investments will be cut in half. We have seen that before, and while it was really annoying we all survived it.
The Chinese yuan will probably come to be the world’s reserve currency and all the journalists will panic when the Chinese buy 10% of the world.
The rest of us will note: It’s only 10% and sane people don’t destroy what they own. The world just got safer.
What should you do? That depends on whom you believe and whether or not you have any extra coins in your pocket in the first place.
Some say cash is king and that you should let someone else own most of those stocks in your portfolio.
Others say that if you can put up with toilets, tenants and taxes, that rental property and it’s attendant cash flow never goes out of style.
Still others say you should invest in something that is not dependent on the stock market like life settlements.
You could go out into the woods, bury you cash in a coffee can and eat bear meat. The bears probably wouldn’t like that though.
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