Guest Post: The Rise And Fall Of US Confidence, Or Why The Fair Value Of Gold In Phase Space Is $6,000-$12,000

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Tue, 08/30/2011 - 22:15 | 1617556 russki standart
russki standart's picture

Gold will utimately balance the external debt of the US, as the fiat Federal reserve system continues to crumble. 

Tue, 08/30/2011 - 22:57 | 1617664 spiral_eyes
spiral_eyes's picture

Long term average of DJIA:AU 1:1. Price at peak of NASDAQ bubble 1:60. Price now 1:5. Now prices tend to overshoot. I will sell my gold at 1.5:1. That means at today's prices that should be something like $17,000 an ounce. Now the DJIA is still in a bubble. If we proportion the old ratio of gold to dollars from before 1971, all that fiat creation has led to a $9000:1oz/AU ratio. So the long term trend seems like we will end up at something like DJIA at 6,000, with AU at $9,000. 

Just my two cents. 

Tue, 08/30/2011 - 23:26 | 1617808 flacon
flacon's picture

Gold will soon not be measured in fine linnen (dollars), but rather in purchasing power... 

Tue, 08/30/2011 - 23:32 | 1617830 eisley79
eisley79's picture

the problem with historical analysis, is that they depend on historical events.

In 2008 Western Capitalism ceased to exist.  While it still has the facade of what once was, it no longer shares much in common with what came before.

The events that have occured, are occuring, and will occur, cannot be gauged from the past, because Capitalism has never collapsed before (since its inception).  A new system will be formed, the peoploe in control now will try to shape it in their image, while those opposed to it will attempt to move the new system back towards "freedom".

Gold and Silver have always existed as stores of values, while other systems come and go.  The end game in the current system, is DOW 0 and Gold Infinity.  Something else will replace both the dollar, and the monetary system before these asymptotes are reached.

Look at the value of Gold and Silver historically relative to the value of farm land.  That is about as universal and true a relationship that one could find.  In the new system, it is that ratio that should return to normal, and everything else relative to it as well.


Wed, 08/31/2011 - 01:31 | 1618058 Freddie
Freddie's picture


Well said. Sad but true.  It has happened for thousands of years.

Wed, 08/31/2011 - 19:49 | 1621064 Cole Younger
Cole Younger's picture

"Gold will soon not be measured in fine linnen (dollars), but rather in purchasing power"

Agree. If gold continues to climb, there will come a point that it is meaningless to price it in dollars.

Tue, 08/30/2011 - 23:32 | 1617826 eisley79
eisley79's picture

double post

Tue, 08/30/2011 - 23:54 | 1617889 essence
essence's picture

"I will sell my gold at 1.5:1. That means at today's prices that should be something like $17,000 an ounce"


Will you really sell your Gold (after it having gone up x8) and buy stocks even if HFT and a corrupt SEC are still in place? A bought off Congress and puppet president still in place?




Wed, 08/31/2011 - 00:15 | 1617928 DoChenRollingBearing
DoChenRollingBearing's picture

Why not wait until after freegold arrives, and sell it for $60,000 / oz?

Although I may chicken out some and sell a LITTLE bit for $5000 and maybe a LITTLE bit more at $17,000.  Hey, does a Bearing know the future?

But, for now, BUY while physical gold is still available!

Wed, 08/31/2011 - 07:15 | 1618243 GoldBricker
GoldBricker's picture

As an old fox once told me: "Buy all the way down and sell all the way up".

Or was it the other way around? I can never remember.

Wed, 08/31/2011 - 03:32 | 1618143 Idiocracy
Idiocracy's picture

A good time to trade your gold for the DJIA might be when the companies in the index start to do significant business in PM backed currencies.

Wed, 08/31/2011 - 03:57 | 1618154 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

exactly so many people are saying this based on the previous 2 bull markets - but what if the dollar actually collapses this time?? and gold ends up being worth about $50,000 easily in todays money??

the ends of previous bull markets were market by raised interest rates + sound fiscal policy + deficits that were a fraction of todays

for me the Dow gld ratio is certainly not my major indicator of when to sell

Wed, 08/31/2011 - 04:54 | 1618177 spiral_eyes
spiral_eyes's picture

I'll put it into farmland, industrials (companies, not stocks), productive assets, real estate, energy infrastructure, groundwater. Then wait for the next Kardsahev wave to begin. Gonzalo Lira's post-hyperinflationary recipe is something he really nails.

Tue, 08/30/2011 - 22:55 | 1617699 russki standart
russki standart's picture

Who Carez what  the Yahoo and Bloomberg hack scribblers have to say? Unlike the 1970´s, when gold demand was primarily driven by the US, the rest of the world is gladly buying up AU whilst boobius americanus is relying on the Dow to reflate and restore their 401k´s. Only problem is that the resulting pensions streams will pay out on dollars that will buy much less. 

Tue, 08/30/2011 - 23:51 | 1617886 Spitzer
Spitzer's picture

why dont these retards ever talk about how many times  US treasuries could buy the DOW ?

The fed has a trillion, china has 3 and japan has a trillion. Thats 4 trillion, double the value of all the gold in the world

Wed, 08/31/2011 - 00:17 | 1617929 DoChenRollingBearing
DoChenRollingBearing's picture

+ $1830 and a green Spitzer.

Wed, 08/31/2011 - 07:19 | 1618249 GoldBricker
GoldBricker's picture

True, but it's like robbing a bank with a toy gun. Once you really have to use it, the game is up.

It's a literal paper dragon (or, these days, an electronic computer-game dragon). Once the average man groks the fact that paper trillions are bidding for their physical stuff, he'll clamp on tightly and use fiat only for daily necessities.

Wed, 08/31/2011 - 10:00 | 1618629 dropdeadfed
dropdeadfed's picture

This is already happening. +1

Wed, 08/31/2011 - 11:11 | 1618918 I Got Worms
I Got Worms's picture

+1 for that metaphor!

Wed, 08/31/2011 - 12:25 | 1619191 OutLookingIn
OutLookingIn's picture

A small point, however, valid none the less.

Simile: Figure of speach that dirrectly compares two things using "like" or "as".

Metaphor: A direct comparison of two different things without using the words like or as.

I suppose this would be a direct comparison between the level of education attained and the 'grade' that was awarded to such attainment! In other words, how the great American educational system has failed.

Wed, 08/31/2011 - 00:26 | 1617946 zerohedgeJUNKIE
zerohedgeJUNKIE's picture

sell gold nahh!!! we rather stick to the tradition.

Wed, 08/31/2011 - 10:21 | 1618711 Bullionaire
Bullionaire's picture

Negative JPM:SILVER watch - unless TPTB hit silver for $5 today, enjoy Day 30.


Suck on THAT, Blythe.



Wed, 08/31/2011 - 02:39 | 1618113 Snidley Whipsnae
Snidley Whipsnae's picture

"Americans Choose Gold As Best Long Term Investment"

This Gallup Poll, conducted Aug 25, this year, speaks for itself. In addition to the questions asked by the poll there should have been one more, worded in this manner: 'Do you own any gold?'... How many of those polled actually own gold? How many like the 'idea' of owning gold?

Interesting survey results; breakdown by age, party preference, sex, etc...


Tue, 08/30/2011 - 22:16 | 1617568 Yamaha
Yamaha's picture

Looks like a graph of my hormones.......

Tue, 08/30/2011 - 22:16 | 1617569 SeventhCereal
SeventhCereal's picture

It is inevitable that gold will go up over time, the question is are you liquid enough to survive the indefinite pullbacks from the manipulating banksters and their cronies in government?

Tue, 08/30/2011 - 22:58 | 1617717 seek
seek's picture

Hold physical, don't buy on margin, bought with savings and not operating funds would pretty much guarantee sufficient liquidity for nearly a lifetime. The bigger issue is if it's a long stretch of manipulation, being around to enjoy the profits.

That said, one look at the 5-year chart shows they've lost control of the market in the longer term, their manipuations seem to be fixated on OpEx days now.

Oh, BTW, powers that be, thanks for being so predictable on the OpEx plunges. I held my latest purchase off until the OpEx pullback last week, and as a result  purchase was up by several K before it was delivered today. Keep up the good work!

Tue, 08/30/2011 - 22:59 | 1617726 aminorex
aminorex's picture

I find it hard to understand what you could possibly mean by reading your words.  A human being is neither liquid nor illiquid.  I can make sense of it if I substitute "sufficiently capitalized" for "liquid enough".

Tue, 08/30/2011 - 23:03 | 1617739 Au_Ag_CuPbCu
Au_Ag_CuPbCu's picture

Got physical?

Tue, 08/30/2011 - 22:19 | 1617581 delacroix
delacroix's picture

what happens, if it is discovered, that there is no gold in fort knox. none, zero.

Tue, 08/30/2011 - 22:21 | 1617586 alien-IQ
alien-IQ's picture

discovered? perhaps you mean confirmed?

Tue, 08/30/2011 - 22:25 | 1617596 Terminus C
Terminus C's picture

Bad shit... Really bad shit.

Tue, 08/30/2011 - 22:39 | 1617648 Doña K
Doña K's picture

Gold price to the moon and heads will fall off

Wed, 08/31/2011 - 00:33 | 1617959 zerohedgeJUNKIE
zerohedgeJUNKIE's picture

Fort Knox should be audited by the congress to verify and confirmed. If it happens that indeed there's no gold. Heads will roll via Guillotine.

Wed, 08/31/2011 - 01:58 | 1618075 Al Gorerhythm
Al Gorerhythm's picture

Past and present serving congress critters and senators should be rounded up and like German menfolk around Dachau after the liberation, paraded through the vault, if it is shown to be empty. There should be no mystery left for anyone involved, as to the anger that will be displayed towards them on Explanation Day.

Wed, 08/31/2011 - 00:57 | 1618005 ActionFive
ActionFive's picture

At a manipulated 1800/oz with a debt of +14trillion, that gold might pay the bills for a few days at these prices.

I guess if nobody cares now, why then?


Wed, 08/31/2011 - 01:02 | 1618008 StormShadow
StormShadow's picture

The real question is this: of the gold that may or may not be there, how much is still ours and not liened to another party (or 100 parties as the case may be, and prob is)

Doh! Now that's something a war might start over, eh?

Tue, 08/30/2011 - 22:20 | 1617582 alien-IQ
alien-IQ's picture

Gold at $6000 would put the cost of a loaf of bread at...$25? (theoretically)

I feel a drinking binge coming on....

Tue, 08/30/2011 - 22:27 | 1617601 Terminus C
Terminus C's picture

Better do it soon because a shot will soon be $75.

Tue, 08/30/2011 - 22:31 | 1617616 InconvenientCou...
InconvenientCounterParty's picture

fine spirits might be a better investment than gold. Just something to think about.

Tue, 08/30/2011 - 22:40 | 1617654 Doña K
Doña K's picture

bottles brake

Tue, 08/30/2011 - 23:04 | 1617744 Clampit
Clampit's picture

As do people ... for those looking to diversify.

Tue, 08/30/2011 - 23:23 | 1617796 Freddie
Freddie's picture

You can eat broken bottles and they don't pay a dividend. ;-)

Wed, 08/31/2011 - 09:25 | 1618536 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

You turn that into Street Entertainment and sure as hell it WILL pay a dividend.

Tue, 08/30/2011 - 22:57 | 1617709 russki standart
russki standart's picture

They already are..... cost of Macallan 18 yr old has increased from $89 to $129 in the last 3 years, a higher return than any USD deposit.

Wed, 08/31/2011 - 04:00 | 1618156 theMAXILOPEZpsycho
theMAXILOPEZpsycho's picture

buy and hold - there's no capital gains tax on perishable items

Wed, 08/31/2011 - 07:19 | 1618252 passwordis
passwordis's picture

There's no capital gains tax on secretly held PMs either!

Wed, 08/31/2011 - 08:15 | 1618333 DosZap
DosZap's picture


Not until YOU SELL.

Wed, 08/31/2011 - 08:56 | 1618436 passwordis
passwordis's picture

You're kidding, right? I'm talking about holding physical.

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