Any "Gold Bugs" here have an opinion about this article on Mining Shares?

[KoKo]

Abandon the Gold Standard?

By W.D. Crotty
December 31, 2003

With gold at an eight-year high, is there value in the mines?

Last year, the world's largest operator, Newmont Mines (NYSE: NEM), extracted gold for $265 an ounce and sold it for $366. The result was third-quarter net income of $0.28 a share. Annualize that forward and the stock trades at almost 44 times earnings.

(SNIP)
Still, before putting too much stock in gold, consider the point Mathew Emmert made earlier this year. "A dollar invested in gold about 200 years ago would be worth about, well, a dollar today (adjusted for inflation)." That's not a good thing.

Two other factors do not work in gold's long-term favor. First, almost all the gold ever mined is unused (it just sits in vaults or is passed down as jewelry from generation to generation). Second, as the price increases, previously uneconomical reserves will be mined and swell supply.

Perhaps ironically, given its reputation as a store of value, gold is a highly speculative investment at today's prices.
(More)
http://www.fool.com/news/mft/2003/mft03123103.htm?source=eptyholnk303100&logvisit=y&npu=y&bounce=y&bounce2=y

[LisaM]

1. Doesn't Bush Sr. have an interest in some gold mines?

I remember reading something in the Greg Palast book - he (G.H.W. Bush) sold off American shares at pennies (or less) on the dollar to a Canadian goldmining company, Barrick (sp), then promptly joined their board.

If so, I have no hopes for the dollar rebounding against the gold standard for now.

[leftyandproud]

5. my opinion...

if you want to get involved in precious metals, buy this physical stuff...nice pretty, guaranteed U.S. government gold and silver eagles (I prefer the beautiful SILVER ones) for value and looks. Start off with a small collection of these and if you have some play money you don't mind risking, do some research on mining stocks (which tend to fluctuate 100%-300% more than the spot price of the metals..) more risk, more reward...but remember, you are still just trading PAPER. Real silver is rare. It is finite. It is REAL MONEY.

Good luck.

[54anickel]

8. Yes, thank you leftyand proud. What I was trying to say in my post

further down, but didn't do a very good job of coming right to the point. Much more risk in stock, of any kind really, than having something real and tangible.

In stock you can make a killing, or be left with a worthless piece of paper. With the physical, you at least have something tangible and real. It's value my fluctuate, but it will always be there and worth something. Inflation is a sure thing, like death and taxes. It may not rise in value right away, but it's a pretty sure bet it will, look at everything else you buy. Any one able to find penny candy amymore?

[EstimatedProphet]

2. That's kind of the point...

"Still, before putting too much stock in gold, consider the point Mathew Emmert made earlier this year. "A dollar invested in gold about 200 years ago would be worth about, well, a dollar today (adjusted for inflation)." That's not a good thing."

The true value of gold comes into play because its value doesn't fluctuate, but that the dollar fluctuates around it. It's a hedge against inflation and the falling dollar. It's not for making a killing like the stock market, it's for keeping what money you have stable.

[Art_from_Ark]

7. The article is wrong about the value of the gold dollar

According to the inflation calculator,

"What cost $1 in 1800 would cost $10.16 in 2002.

Also, if you were to buy exactly the same products in 2002 and 1800,
they would cost you $1 and $0.10 respectively. "

http://www.westegg.com/inflation/infl.cgi

In other words, one dollar was worth ten times as much 200 years ago.

However, a dollar's worth of gold in 1800 was .05411 troy ounce. Today, @ $420/ounce, that amount of gold would be worth $22.73, or nearly 23 times its 1800 value.

[junker]

3. there i was having a nice day and you had to bring up newmont

before investing in any gold shares, go get a free 2 week trial at lemetropolecafe.com and go lurk the chat area. Learn something and educate yourself as to the bullcrapola being put out.

For instance. Lets take the dollar as they compared a 200 year investment in gold...let's take the dollar and their own damn figures and only 90 years to discover that if you invested in a buck in 1913 when it had just come out, and it was still worth a buck, then today, adjusted for inflation, you would have less than 7 cents. So get real.

Gold don't lose value. And when the paper currency is reverting to its real value which is as paper, then gold is worth a whole lotta bucks.

Anyway, newmont hedges. go read lemet chat and learn a bit about who the good guys are before buying paper asset claims against gold mining companies (shares).

[KoKo]

6. Yeah, but I can still buy "stuff" with my 7Cents Dollar. If I go to

Walmart or JC Penny and whip out my "Gold Eagles" and say I want these jeans and this sweater and here's my money....what do you think the cashier would say to me?

[EstimatedProphet]

9. Good point

That's because the gold eagles aren't considered legal tender by the everyday person, even though it has a value printed on it. If however you did that before we went away from gold certificates in the 60's, and paper money was exchangeable directly for silver/gold mintings, the cashier wouldn't bat an eye.

[Art_from_Ark]

10. Gold certificates were discontinued in the 1930s

when gold coinage was removed from circulation. It was the silver certificates that could be redeemed in the 1960s. However, once the silver was removed from coinage in 1965, the silver certificates were exchangeable only for silver granules, and only at Federal Reserve banks. The granules were a royal pain because they had to be assayed when they were sold (unlike coins, whose purity was known by the date).

[KoKo]

12. I know, that's why I posted what I did. What good are Gold Eagles if I

need to get out of the USA quick or want to pay off my mortgage and go to "parts unknown" if Bush wins re-election?

In other words I need to go to E-Bay auctions to buy my Gold and Silver or deal with "coin dealers" and dicker with them over getting the best price?

If I was "desperate" it wouldn't be easy to unload my Gold and Silver purchases would it.

So what is the value there? With cash I can get out quick. Even if I have to pay mucho more $$$$'s due to inflation or devaluation if I have enough $$$$'s I can make a deal.

Where do I go with gold bullion bars dragging in my luggage whipped out to buy my airline ticket for those "parts unknown." And, will Gold Eagles or "Silver whatevers" buy me my Gucci when I need a new handbag?

Where is the "usable, tangible" value in an "emergency" or even for a "luxury purchase?"

Seems the Gold Bugs are hyping as voraciously as CNBC during the BUBBLE? :shrug: Just being "practical" here, and asking.

[Art_from_Ark]

19. Gold is a type of investment,

although some view it as a sort of insurance against rampant inflation. The US has been lucky so far in that even its worst inflation in modern times (in the 70s) pales in comparison to what other economies have had to endure. For example, a 20 mark gold coin in Germany (weighing roughly 1/4 ounce) would have held its purchasing power after WWI, while that same 20 marks converted into paper would have been worthless soon after the war. A similar situation existed in France, and indeed, most of the European countries that were caught up in either or both WWI and WWII.

Latin America has seen its share of runaway inflation as well. Two of the worst examples are Brazil and Argentina, which have revalued, reissued, and demonetized various currencies over the years. In some cases, the paper money that workers were paid with lost value before they were able to spend it. But if they had been able to buy gold, the gold, theoretically, would have retained its purchasing power.

So what the gold bugs are hedging is that America, which has been so far insulated from the effects of hyperinflation, might finally catch up to the rest of the world due to its fiat currency and tremendous national debt.

But gold is an investment. Like all investments, it would not be wise to bet the farm on it. And like stocks, you need to find a dealer or dealers who will and sell for the most reasonable spreads (=difference between buy and sell prices). You can't take stock certificates with you to buy stuff in a store; it's the same way with gold.

[Art_from_Ark]

11. It would be foolish to spend gold eagles for face value anyway

because the face value is far less that the actual value of the gold. For example, the gold one ounce eagle has a face value of a pitiful $50, while its gold value is $420. A quarter-ounce eagle is even worse, as it has a face value of a paltry $10 (not proportional to the other eagles), and a gold value of more than $100.

You have to sell your eagles to a dealer in order to get the value of the metal.

[54anickel]

4. Please do not confuse gold stock with physical gold.

They are for all practical purposes, in gold bug talk - which is how you started your subject- not the same thing at all.

The stock world is the world of fiat paper, created when the monetary value of gold was dismissed. The value of the dollar would instead be determined by the economic principles of productivity, GDP, capacity, output and supply and demand principals for each country of the currency's origin. The value could be somewhat controlled, but it is based on the principal of inflation.

The gold-bug world is where the belief is held that this should never have been allowed. The value of gold would be forever intrinsic. I believe junker could expound on this better than I.

It is a very deep and divided subject. You need to come to understand the basics and history of currencies and understand both positions.

[KoKo]

13. Collecting as opposed to buying in case the US Dollar Collapses is a

worthy discussion, however. In these desperate times we have so many young DU'ers who have seen a very different financial period than older DU'ers, like myself.

There's so much GOLD HYPE, I worry that it's the next "new thing" being pushed like stock were before the "Bubble."

I've seem some posts asking what kind of gold to buy and should one buy mining stocks, coins, bullion.

I'm only pointing out that we need to beware of hype no matter where it's coming from, even on DU where one "might" assume we all have the same interests in common, but that when it comes to investing, all of this is as much "heresay" as even consulting "professionals" who are hyping and pushing whatever they are told by their Corporations and Investment Banks to do. Given the CNBC/Bloomberg/Print and Internet Financial resources writing articles to both Bulls & Bears and knowing the whole system is still flawed with accounting fraud, and people DESPERATE to KEEP their JOBS.

I think we ought to be as "buyer beware" of folks posting on DU as we would be of any "Whore Media. DU at least gives a forum for arguments and is an outlet for good discussion. It's just I'm a naturally suspicious person. :shrug:

[54anickel]

14. Got it. Yes there is much hype everywhere these days. Worthy of

discussion. I think I misunderstood the intent of your post. Lots of the hype plays on FUD. The idea being gold is a store of value in case of a crisis.

As for the original question, I do not know much about Newmont, but Placer Dome and Barricks are both very much into hedging, causing them much grief with the rise of POG. Barricks has been working on reducing it hedges, but still quite a bit on the books. "Investing" (which is simply speculation) in gold mines has been and will be risky. You really need to know what you're doing (as you should with any "investment").

Another scheme is gold security funds where you get a piece of paper stating you own some physical gold locked away in a vault somewhere. In the case of some crisis, I can't imagine it would be very easy to get your hands on "your" gold. These new schemes are open-ended versus the closed-ended fund that has been around for a long time from CEF in Canada. The first of these new funds, offered by WGC rolled out late last year in London with many more to be coming soon around the world. Personally, I do not like them as they have opened the world of gold ownership to the suit types of the stock market. We know how tainted and scandalous that has become.

Leftyandproud's post does the best at explaining the virtues of physical gold ownership above.

Only advice I can give regarding the hype is to do your own research. There's plenty of info out there, much of it hype from the "gold bugs", but also much news. Be discerning in your research. Try to find mainstream news that backss up or negates the hype.

Personally, I think anyone looking to buy gold to make a killing on the mark up is taking a big chance on the hype. If you're buying gold for it's beauty, it's history as a store of value in hard times, as a collectible item and you have the disposable income to buy it, go ahead.

[KoKo]

15. Many Thanks, 54anickel, I think I wasn't clear in my post what a sceptic I

am....in that I love to read every "financial post" on DU...but also understand that there are REAL RISKS. I was trying to point out to "younger DU'ers" that "caution might be the better part of valor" in this hyped market.

BUT! I also know that "Day Traders" are making a FORTUNE in this really "undecided market." I think DU does have a small "hive" of Day Traders, so I understand that they are very much a "with it crowd."

Still, there are others on DU that our DU "Day Traders" might feel bad about leading off into big $$$$$'s losses,so they do post caution signals. Just as our "conservative oldies" might not be so comfortable, putting a "damper" on our ebullient Day Trader youngies...when life is good if one is willing to be "savy and hip" and take chances.

It's all a matter of "age and perspective and risk taking quotient."

It's always wise to be cautious, imho...though...but CAUTION doesn't always make $$$$$$$$$$$$$$'s.

LOL's :-)'s

[KoKo]

16. BTW, I posted to you mainly on hype on Gold Mining Stocks but even with

buying "coins" or real bullion...not the paper certificates for it...I still say....that's great if one want's to look at Gold Eagles, or Kugerands....whatever..and see beauty. Coins are very interesting historically.

But..aside from the beauty and collectible value where one has time to look and savor and appreciate all that.....where is it all when one has to "cash out" if the "sky is falling" which our friendly poster "junker" is always predicting.

If I can't hide it in my skirt or pants cuff and use it to pay off a "boatman" to get me out of the US if Bush is re-elected....they what good is it to me to use in "trade?" I still can wipe out my "fiat dollars" inflated or worthless as they may be..to get a ticket outta here. At least it's light and transportable and if I give enough of the worthless paper, someone can still use it to easily buy something.

So, if one is looking for "DISASTER" then "pretty coins in folders with "mint stamps" aren't going to do me much good, then.

But, if I want to leave something to kids or grandkids, who have an interest in collecting and I, or they have time to trade them on E-Bay or through reputable dealers, then that's great!

That's all I was trying to say..

[54anickel]

17. Disaster scenario - Is that the "hype" part of rising POG you refer to?

I'd rather not get into that discussion, that's Junkers territory. There are some real economic reasons for the rising POG that have to do with past policies, production costs, supply & demand, etc. Somewhere in between those factors and the "hype" is the need for discerning research, short of a "disaster" is where the true value can be speculated.

This being the economic forum, I think a discussion of monetary value in a bad situation is acceptable.

In a true disaster/crisis where everyone is pretty desperate, anything that anyone considers valuable becomes good for trade. It sort of becomes a barter system. I've got something that you want/need, you've got something that I want/need so we trade and hang on to our "official" currency for use when barter is not an option. It's when you have something I need, but I don't have anything that you need where the idea of something of "monetary" value comes into play, and there is usually some general consensus of what that universal something is, be it peacock feathers, trading beads, metal coins, or pieces of paper.

Gold and silver have that ancient idea of universal value behind them so they would probably be more easily accepted than say peacock feathers or a wheelbarrow of fiat money (think back to the breadlines in Europe).

Of course you wouldn't want to have to try and swim with a pocketful of precious metal. ;-)

Recent example of consensus would be Iraq. Saddam replaced the Iraq Dinar with the Saddam dollar (he could print these out by the gazillions). The Kurds refused to turn in their Dinar and use the Saddam dollar, they continued to use the Dinar. Long story short, when the Bremer and all got them on the US dollar for payment, the rate of exchange for the Dinar was much higher than the Saddam dollar.

Another example, here in the US, there's a small group of rebellious type that have been using what's called a Liberty Dollar (along side of the official US fiat dollar). It's their way of protesting the implementation of the Federal Reserve. They are a group that has reached a consensus of what is valuable to them to have a "monetary" use.

[KoKo]

21. Yes....thanks....you've taken the argument back to the "speculative" but

"forward thinking" segment of the US Stock/Commodities/Trader's Market and have put an interesting argument out there for our younger DU'ers to think about..given their age, and many years left of "earning power."

So, what you say is good and interesting if one has a "long term outlook and reasonable perspective about how much the Repugs/Bush/Fed/whatever will do to get the Republican "Supply Side/Downsizing of Government until it fits into a "bathtub" point of view of the far right like Grover Norquist..and the Libertarians.

Not being in sympathy with any of the above philosophies, but being close enough to worry about my "oldie years" I naturally have more immediate concerns than the 20 to 30 "somethings" here on DU.

I'm more concerned about "Liquidity" than "30 years out" and if I get upset about Bush and his "leanings" and decide I need to get "outta here" then I want something to "GET ME OUT..FAST!" as opposed to something I have to wait to sell for an indeterminent time period.

My concerns may be more "short term" than many other DU'ers needs for their individual lifestyle is what I'm getting to. :shrug:

[jmcgowanjm]

18. I love gold as a proxy for the CRB

Go to mrci.com, or your own chart site.
Compare gold. It's not a perfect match,
but it's damn close.

PDG hedges, HMY doesn't. I don't see much difference
in the action of these two stocks, but I still own them both.

[KoKo]

20. Illiquid as opposed to "Liquid" Assests. Now that's the Question? When

one is "desperate" and needs "cash quick" where does one go? Will my "Gold Bullion, Mining Stock "Certificats," "jewelry, or collectibles" allow me to get where I need to go quickly?

I keep asking and asking and asking....but I don't really hear any replies except: "E-Bay has good Gold Coins Auctions" and "Go to E-Bay if you need fast redeption for your "collectibles....art, kitch, DVD's, imported stuff you bought from China, plus Grandma's old couch and Hummel Figurines collections."

So.....I say.....BAH HUMBUG....and I don't know the right thing to do going forward with the HUGE BFEE "Manipulated Market," but I do feel that we are all "whistling in the Dark on this one." So, I feel that trashing "Doomsayers" and "Hypers" is what I need to do....having been on this planet for a long while with some perspective...:-(

[Art_from_Ark]

22. There have been answers

First of all, you do NOT sell bullion gold on ebay, you sell it to a dealer (note: you should avoid pawn brokers). You have to find a dealer or dealers (preferably high volume dealers in your area) that you feel comfortable working with. With bullion gold, the dealer should have listed buy and sell prices. As long as you have not damaged your bullion coins, you should be able to get the dealer's buy price for them. Dickering over price is for collector coins-- that is, those coins that are worth significantly more than their metal value.

But you can't just dive headlong into gold-- you have to do your homework. This entails not only talking to dealers, but also reading publications such as Coin World, Numismatic News, and Coinage magazine that can give you an idea of what has been happening in the bullion market, without making you feel pressured into buying anything. You should be knowledgeable of the market before making any purchases.

I also think you are confusing personal emergencies with national emergencies. The gold market does not respond to the former. If you feel personally threatened by the current political situation, but few others do, especially outside the country, then the market won't respond to that danger that you perceive. If you're caught in a personal pinch, you may have to sell if the market is down, the same as with stocks or any other investment. Thus, one should not bet the farm on gold, or anything else.

People who invest in gold are often looking at the big picture of fiscal mismanagement on a national scale. It's true that there have been doomsayers for years, and I have tended to shrug them off in the past. However, things are different today, as American financial policy is being handled by people who seem to have little concern for the consequences of their reckless actions. The dollar is falling, not only in terms of gold and silver, but also against the yen, the pound, the euro, the Canadian dollar, the Australian dollar. As far as I know, this is an unprecedented decline. Thus, some people are seeking stores of wealth in media besides dollars. That may include other currencies and/or precious metals.

[jmcgowanjm]

23. re:note: you should avoid pawn brokers

I disagree. Gold/jewelry is bought for scrap
at pawn brokers. These guys/gals are essentially
the black market(grey market) for precious
metals items.

I haven't bought physical gold yet but I can tell
you I will approach the local pawn brokers first.

These guys are street. When the SHTF these folks will
be among the first in their communities to realize it.

Unless you can afford to go to Blanchard's in New
Orleans, or better yet, just take delivery on the
smallest gold futures contract (Chicago,NY) and go
pick it up at the location offered.

On second thought, call Blanchard's or your local
and see how close they can come to COMEX price.

[Art_from_Ark]

24. I was referring mostly to bullion coins

Pawn brokers are notorious for paying below market value for bullion coins, because many if not most of their customers don't really know what they have. You yourself called them a type of black market. Can you really expect to get full price from "black market" dealers? I've dealt with pawn brokers before and would never consider it again unless it was a very last resort. What's more, if you buy from a pawn broker, there's a chance you might get some bad stuff. For example, one of my friendly local pawn brokers in Arkansas was caught dealing in fake US gold pieces (no, I didn't buy any from him). It's almost always better to go to as a knowledgeable customer/investor to a legitimate high volume dealer because their spreads (difference between buy and sell prices) are usually the narrowest due to their ready markets.

[54anickel]

25. Is there a lot of counterfeiting in gold bullion coins?

That's been a tough area for me to research.

[Art_from_Ark]

26. Some of the older gold coins that are now "bullion"

such as English sovereigns, exist as counterfeits. The ironic thing about the sovereign counterfeits is that many of them contain the proper amount of gold! Apparently, sovereigns were (still are?) a common trade coin in parts of the Middle East (British Gulf War I pilots, in fact, were given a "survival pack" that contained sovereigns). Some people who had gold in other forms that weren't as widely accepted decided to create their own sovereigns.

As for later issues, I recenly ran across a counterfeit 1/10 onza Mexican "gold piece" at a coin show in Tokyo. It was easily distinguishable from a real coin because its surfaces looked like the coin had been cast instead of struck. I don't know if the Mexican Mint even made gold onzas (it did make silver onzas for a while).

I haven't heard of counterfeits of other bullion coins, although it's reasonable to assume that some exist.

[54anickel]

27. Thanks much. Nice to get an idea of what to look out for.

[jmcgowanjm]

28. I agree, pawns are last resort

I like the Blanchard's approach, w/ a Comex
price list in hand.

And NO has some great food!

BTW, IMHO black market is simply the going world price.

Ex.I'm sure you could get all the gas you want in Iraq
for say $3/gal.

or all the gold you want for say $420/oz.

[Art_from_Ark]

29. It's interesting that you mention Blanchard's

The late founder of the company, James Blanchard, was instrumental in getting all forms of gold ownership re-legalized in the US. He was also a founder of the Industry Council of Tangible Assets, which has done a lot to help investors and collectors.

[jmcgowanjm]

30. Yes, mention support for Blanchard in lawsuit, get 10%discount

No, not really.

You don’t tell the world how great hedging is one
day and then do a complete about face the next day
without a compelling reason.

If you have an update on this, Art_ from_ Ark, I'd
appreciate it.

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=19545040

[54anickel]

31. Sorry to step in here, but I've been trying to follow this as well. I've

found the following updates, but it's been tough to uncover a lot.

http://www.prophet.net/quotes/stocknews.jsp?symbol=ABX&article=343r6476


http://www.goldismoney.info/forums/showthread.php?t=4742
As a consequence of this ruling, this case is now ready to move into the discovery phase. Trial has been set for April 10th, 2004. But here's the important part of this case that in my view is not yet widely understood.

Blanchard has requested an injunction against the defendants. This means that if Blanchard wins the case, the defendants will be forced to cover their short position. I don't know Morgan's position - whether long or short - in gold because it is not disclosed in its financial statements. But according to Barrick's latest financial report, it is short 16 million ounces. If Blanchard prevails - and there is still a long road ahead - it will be interesting to see how the gold market would respond to the buying triggered by the injunction.

[jmcgowanjm]

36. thanx,54anickel for info and KoKo01 for the post

look at a CRB chart from 99-02
then at gold from 99-02.

find the charts at mrci.com

JPM is also a shareholder of the Federal Reserve.
The Reserve is not part of the USGovernment.

[KoKo]

32. Dupe message, removed

[KoKo]

33. Thanks to all of you and especially "Art" for the good information and

links. I was hoping to get a discussion started by posting this article because I thought there might be some coin collecters and others who are pretty knowledgable about this. The coin information shows that much reading needs to be done before immediately going out and purchasing.

There's so much hype that I keep thinking some of our very young DU'ers might go out and just start buying anything because of what they read. That's why I went at it from the "Hype" angle. Also differenciating mining shares, bullion, coins and other collectibles.

It's a new area of investing for many of us and doing research now ahead of what some folks in the financial blogging community think will be a stampede for anything gold or silver, is probably wise. Just so we don't get caught up a frenzy and end up in a bust, or vice versa.

[54anickel]

34. Thanks for starting the discussion. I've learned much as well from

all of the posts. Art_from_Ark along with others have given valuable insight.

[Art_from_Ark]

35. Glad to be of service

I bought my first gold coin in 1969 (a little Mexican coin that I bought from a coin magazine that I still have) and have been involved with gold, mostly as a collector, since that time. When I sold my meager collection to help pay for my tuition (and it was so meager, it barely covered one semester), I dropped out for a few years, but regained an interest once I was working at a real job. During that time, I have seen a lot of hype, and a few promotions that were bordering on the illegal, if not outright illegal (like one promotion that was selling gold eagles for double market value, and using overvalued pricelists of coins that were of a different condition to justify the 100% markup).

So, one does have to be knowledgeable-- and vigilant-- in this area. I thank you for your position of looking out for the best interests of would-be investors. Having smart investors who are not risking their financial well-being is definitely the best way to go.

[KoKo]

37. Kick for old times "gold" sake, here!

:-)'s