Gold plummets - Buy or Wait?

[emes]

Emes, I know we have had our disagreements, but I am curious as to what you feel about the current state of the "money multiplier" in the country?  According to the link below, it sits at 0.790.  I know this doesn't directly relate to Gold, but it does have some relevance in the discussion.

 

http://research.stlouisfed.org/fred2/series/MULT

 

So just to be clear, just because we've disagreed about something doesn't mean I have a problem with you...quite the opposite.

 

I agree, money supply is relevant, however, as far a linking it to inflation, you also have to factor in things like how often the supply of money turns over (gets spent) and how the prices of goods and services are changing. In other words, I don't think there's a direct relationship between M1 and the presence of inflation...certainly there is a relationship, but I don't think adding more money into the economy necessarily causes inflation...as evidenced by the last ~10 years of  US monetary policy.

 

This leads to a different discussion as well. What truly is the value of money in today's world?

[emes]

I don't invest in gold, silver, or gemstones. It's the principle of the matter. First, let me concede a good point: yes, some precious metals and stones are used for practical purposes. My point is: most of what we dig up is used to look good. And there's lots of it. Diamond: one of the strongest, most durable materials on Earth, and 97% of it is wrapped around fingers, just sitting there, like it's worth something. And they're everywhere. How can something be considered rare when it's literally everywhere? Same with gold, silver, rubies, topaz, whatever. None of this stuff has been rare since 1492.

I'm no expert on precious commodities, these are just my observations. To me, the luxury and status awarded to otherwise useful minerals is just another hint that humans are doing it wrong.

 

I tend to think people need to be very flexible in terms of their investments. Situations change and there can be times when all of these things make valuable investments.

 

There are people who invest in gemstones. Generally in that world they focus on rubies, sapphires, emeralds, and colored diamonds. A really interesting book that talks about this is: http://www.amazon.com/Overworld-Larry-J-Kolb/dp/1594481415/ref=la_B001JP21UM_1_1?ie=UTF8&qid=1372090945&sr=1-1

 

Some colored diamonds are extremely rare. The general diamonds that you see in women's jewelry, as mentioned, are usually not rare.

[Diabolos80]

Inflation is a result of greed, plain and simple. Why have one dollar, when you can have two that are worth half as much? #BusinessLogic

[Arctic_Builder]

If you think gold prices are dropping due to inflation fears.......you should not be investing in commodities--because that is completely wrong, and makes no sense.

 

Also--- not to be mean...but the article you cite says the complete opposite of your theory.  Reading comprehension is very important when investing.   Ebb means to recede.  Fears of inflation are lessening...as the fed  is is pulling out of qe2 bond buying....hence the drop in gold prices.

Good point! It was pretty late into the very early morning when I stumbled across this, thus the mistake - but it's right there in the Heading - "...Fears Ebb." No offense taken and I'm pretty confident in my reading comprehension regardless of the fact. I understand your point though - and it's a point well given. Investing can be (and to some degree always is) risky business. Understanding is essential to security in investments.

[Arctic_Builder]

Back to the subject - a lot of great thoughts in here. The reason I posted this is because I'm not extremely knowledgeable in investments at this point in time. I'm fairly experienced as an accountant, not an investor (thus the desire to do my Masters in Financing and get involved). This is why my original post was stated as an inquiry and not, well, a statement.

In my research there are many different ways to invest in Gold. Coins, Exchange-Trades, Stocks, etc. Has anyone had experience trading in Gold? I think the reason (for many) individuals trade in gold is the idea that they would rather have the gold than the note, but this to me isn't a logical reason for an investment.