On 7 Mar 2001, at 9:19, David Hillary wrote:
> why oh why do 'goldbugs' seemingly always seem to predict a large rise
> in the price of gold in the medium term?
For sure there is almost always one goldbug somewhere that is
suggesting much higher prices ahead. I agree with you on that.
But, in the same way, you will always find equity bulls and new-
era economists that are there to suggest that stock prices will be
higher in the years to come.
But if you take these individuals one by one, you will find that they
change their opinions from time to time. Like many goldugs, I've
been bearish in the past on occasion.
> The price of gold in terms of US dollars has been enaything but stable
> in the last few decades.
Of course you are right. However its supply has been at a constant
2% or so per year. A charracteristic that is enviable for a medium
of exchange.
So the question is why, since 1970, have gold exchange rates been
so unstable and volatile. It is like a pendulum, once you put it in motion,
you must wait many cycles before it stabilize.The movement was
initiated in 1971 when the USD went off the gold standard. Until
gold is again the standard, there will continue to be controlling forces
that will prevent the true equilibrium level to be reached.
Thanks to gold high divisibility as a unit of account and a fantastic
network that allows immediate transfer of the smallest fraction of a
gold bar, gold can again regain its role as the standard of money.
> USD in the $10 trillion US economy, makes the price of USD stable in
> terms of goods and services, at least in the short term.
You said it, In the short term. True for now. But gold stability is
notable in the long term. I can still buy a small bungalow with
10,000 grams like I could in 1950.
The USD economy is a US$10 trillion economy... Well I think it is
more than that.. but anyway.. I agree with you... the gold economy
looks small at 1 trillion USD. But that is no big deal... all we need
is gold at $3000 USD and we have parity. <g>
Such an exchange rate with the USD most certainly make sense
when you compare gold current rate with the price of a few other
resources that you can find on the planet. In terms of rarity, gold
should be at least USD$1000 when compared to a basket of other
metals.
It is a matter of time. Gold will impose its discipline
Claude
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