What happens when gold prices go down? Do we know where all the gold is?

Surely when the gold bubble bursts (not sure when, but it will) what will happen? Well for people who like to learn from history please remember that it went up 25 times in the 1970s! It started from an artificially held price of US $ 35 to US $ 850…

this bull run has started from US $ 250 – so 25 times is 6250. L O L

MORAL: LEARN FROM HISTORY, DO NOT CUT N PASTE.

Of course this time it could be different (the verb is COULD) – we have no clue what could happen.

Let us look at China. There is clearly some unrest – so your middle class could buy all the gold to hoard ‘value’ instead of shares and bank deposits. No clue whether it will happen.

Indian buying could come down – rising interest rates and inflation will reduce appetite for gold. No clue.

there is one site which carries a scary story…but remember this is not an authentic site like a BBC, Reuters or bloomberg…It is your call on whether to believe it..

Worst is the gold story doing the rounds in the IMF – broken by the European Union Times…scary. Of course if it happens GS will say ‘According to our experts 35% of the security held by banks is actually brass…’ What will happen to the world gold prices? Well no clue. But please read on:

http://www.eutimes.net/2011/05/russia-says-imf-chief-jailed-for-discovering-all-us-gold-is-gone/

I HAVE HEARD FROM A VERY AUTHENTIC SOURCE THAT THIS IS JUST A SCARE MONGERING SITE – SO READ IT WITH A PINCH OF SALT…do not take it seriously for heavens sake..

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  1. Hi Subra,

    In my view there are two scenario.

    At some point of time in future if Government around the world agree on using Gold as asset reference point (which was used in past is various form) for current fiat currency then Gold may not come down (with reference to currency) after required revaluation.

    If Government around the world continue to accumulate debt in irresponsible manner then it is possible that Gold can go hyperbolic some time in future and then correct sharply.

  2. Subra,

    The tale of Kahn getting trapped in a sex sleaze with a horrible looking black American was otherwise also not very convincing but if the story woven by EU Times has any element of truth —–

    —- then the American Economy is up broke and there is deep trouble ahead.

    Journalist instincts tell me that the story does appear credible.

  3. ravinder bulls eye

    it is not an authentic site..it is funded by some scare mongers that is what I also heard from authentic sources..so I put a disclaimer and said read it with a pinch of salt. However as a person dealing with risk it was a good learning that such so called authentic looking sites do exist…so let it be there with a caveat…and of course the comments will tell people to be careful

  4. Subra,
    My wife has been buying gold via monthly SIP for the last thirty years (in physical gold). We speak all the time about spreading your risks. The same logic should apply here. Gold should be an integral part of your investment portfolio same as property.
    I have seen this blog repeatedly run down the two investments. Risk coverage comes by having all types of assets in your portfolio. Stock based assets give high returns but carry high risk too.

    USA is today the world’s largest debtor. It is a given thing that US standard of living may not rise as compared with rest of the world in future. There is a good possibility of default on loans. I will not rule out that the Chinese are already twisting their arms behind closed doors, to get firm guarantee on loans.

    If my personal balance sheet is as red as the US govt, there will be no possibility of getting a fresh loan or a guarantor. Unless I have gold as a mortgage.

    It is most likely that the site is a hoax. However, we should not discount gold as an asset.

    Regards

  5. Vithal this is the site that I have mentioned in my post! it is a fake site – or a rumor / scare mongering site… 🙂

    read all the comments..

  6. Dear Subra sir,

    I did not read your post completely. I just copied the link from the browser and pasted it here. Sorry sir.

  7. i agree with rajeev. value investors ,by and large,fail to understand gold and always try to disparage it.starting with buffet

  8. I agree with Rajeev and Subra both..

    If you accumlate slowly-2 any thing.. gold, shares, plots/flats… in long run.. all will give you good return in long run.

    It always best to invest money rather keeping it idle in bank FDs which eats up with inflation.

  9. All the countries put so many restrictions on owning gold. If governments are so confident about the performance of paper currencies why don’t they allow gold/silver/copper to compete. Why do they thrust only one type of currency on the people?

  10. They found 98 kg gold in the personal chamber of Satya Sai Baba.
    These Baba’s accumulate gold like crazy.
    Remaining gold must be with Ramdev Baba??

  11. @rajeev. even dead babas accumulate gold. shirdi has so much gold that the maharashtra sarkar has got its lascivious (spelling?) on it.

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