Sunday, October 12, 2008

The Economy

Brick Oven takes no pleasure in being proven right on investment advice, which is holding for now. But one thing that has not made sense to me has been the relatively low price of gold. Gold spot had hit ~$1050 several months back and is now at $850, despite the fact that there are shortages in coins.

My theory is that the price of gold is being held in check by margin calls at hedge funds. See the dive taken on Friday afternoon above. There was no open reason for it, and the fall in price was probably the result of some leveraged entity raising cash to cover an obligation by selling the only thing that people are buying-gold. Probably in the form of bars, which would explain the drop in the price of the metal, at the same time us proles are paying $150 over spot at eBay.

Brick Oven again endorses investing in metals. Buffalos are better than American Eagles because they are not alloyed with stiffeners, meaning that they could be more easily cut into pieces for commerce in the SHTF scenario.

Or better yet, place a stake with some crackpot pursuing a new energy technology. He might not ready to call any cars, but that stock is up.

1 comment:

George said...

I still think that the villain here is the Treasury, which, every time spot gold rises over $20, issues another few billion in 30-day T-Bills at almost zero interest to directly compete with the gold.

The Treasury's intent here is to contrast the volatility in the gold market with the relative "stability" of the T-bills.

Gold is the best emergency money, and ammunition is the best form of small change. My guess is that when the S.H.T.F., ten rounds of .308 or .223 will buy you a loaf of bread.

I note that you've already considered it, but it bears repeating that you need to be careful and NOT get stuck with only 1-oz coins or bars of gold. How are you going to take your change? The idea of chopping up a coin MIGHT have merit, but some who would trade in gold might be leery of taking pieces of a coin that they couldn't identify because it WAS offered in little bits.

The solution is to get the little "gram bars" or heavy gold chain from which links can be cut and weighed out.

And buy ammo, even if you aren't going to buy the gun to shoot it.

Ammo will be like gold.