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Originally Posted by boost
How can I dispel the claim that precious metals are in someway different from other investments?
Because NO investments are immune to the whole pricing dynamic; things like supply/demand ratio, inflation, speculation
The only realistic and meaningful ways the price of gold can go up are 1) changes in supply/demand i.e. somebody loses a portion of gold at the bottom of the sea and the markets reflect the supply loss or somebody finds a big ass mine and harvests more gold and the markets reflect the supply increase, 2) holding its value standard against monetary inflation, this is a slow process and currently very tiny given we're doing disinflation, or 3) financial speculation i.e. market wagering, this accounts for virtually all short term movement and any huge spikes outside of the aforementioned rare supply/demand crunches/surpluses
Breaking them down further
Supply/demand: this isn't changing in a meaningful way. It is, however, changing in a fake, bubbly way, just like housing did. That shit crashed and ALL the gains were lost if you weren't savvy and knew how to exploit the bubble. Artificial demand is being pumped up, but it's not for any solid economic reasons. Compare the housing of the last few years and oil of the last decade. Housing increases were bubbled fake demand based on marketing, fraud, and cascading econ effects; oil, however, has seen dramatic real demand increases in places like China and India actually using the product for real necessities. Once the housing demand started dropping, it plummeted because that's how bubbles work, but oil can't do that because demand won't drop because the demand is based in necessity
inflation: this is long, long term shit. It's also a "crummy" investment because if you're a smart investor, its ROI is too low for you. Gold prices of recent do not reflect inflation one bit, but only over the decades and decades will you see inflation reflection. Even then, you probably get a much better ROI with a good government bond or interest bearing account. Inflation is the only real "good" investment in gold, but it's only better than holding cash under your mattress
financial speculation: this is what's going on now. If you don't hear about a huge crunch or surplus of supply or retail activity, yet you're seeing dramatic shifts in pricing, it's because of speculation, either in inadvertent bubble form or manufactured Wall Street form, or a little of both.
Here's the rule of thumb: if something is a "good investment" and people are buying it for that purpose, it's bubbling. No ifs ands or buts. Good actual investments are for when people aren't focusing on the investment purpose. If, for example, a whole bunch of new wealthy Victorian-esque people suddenly came into society, their personal desires for gold would boost up the price in a non-bubbly way, but that ain't happening.
Something else to keep in mind is that investment is quickly becoming a thing of the past. It will never go away by any stretch, but the big big big thing is speculation. The banks have a choice between investing in housing and making millions, or artificially pushing housing trends then speculating on trends and reaping billions. The former is good for society, the latter is good for banksters, and the latter is becoming the primary mover of markets. The amount of "value" in derivatives alone is dwarfing the entire US GDP
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