> > Some say it will continue up because of global currency inflation;
> > others say it will go down because it's a commodity.
> > I'm betting on up.
> Yea, I'm thinking the same. Just not sure how to obtain and evaluate
> what I am buying yet.
What do you think would be a reasonable price for gold? (Or, how much do you expect the value of a dollar to decline?)
The U.S. gold reserves are 8,133 tonnes of gold, which is about $230 billion at market prices. That's 1/40th of the national debt. If you're expecting a period of hyper-inflation (driven by what?) I think you have to take into account the fact that if the dollar loses enough value relative to gold, the U.S. government will be able to clear the national debt simply by selling off all of Fort Knox. Is the U.S. economy *so weak* that, relatively soon, the government is going to be reduced to getting that stash of gold out from under the mattresses to satisfy its debts?
That just doesn't seem like a likely scenario to me. It seems more reasonable that gold is going to be a really volatile investment for a long time, because it's not really an "investment", it's really a kind of bet on another form of governmental policy. Buying gold is essentially saying that we believe that governmental actors won't depress the price of gold as a matter of monetary policy -- essentially, because it's nice to give the citizens a physical store of value, much like it's nice to offer bonds even when you run a surplus so that risk-averse investors have someplace to park their money.
The problem is, unlike the central banks (who have relatively transparent policy-setting processes, as these things go), nobody is actually making any promises or setting any policies as to what governmental treasuries intend to do with all the gold they're sitting on. Since the U.S. alone could supply all of current gold demand for two and half years out of its reserves alone, and other major gold-hoarding governments have similarly out-sized reserves relative to demand, any one government can take action that will significantly affect the markets. And I, at least, don't understand the mechanisms that stop them from doing this; to some extent, I chalk it up to economic superstition as much as any sort of rational economic planning.
And from the responses to this thread on the list, from people whose economic acumen I respect greatly, it doesn't seem like anyone here has a really good handle on it either.
With that given, I think that "investing" in gold is more like playing the lotto than most other investing; unless you have a good insight into what's really going on in the heads of the market players, in which case I encourage you to make a killing!
-- "The more I practice, the luckier I get." -- Ben Hogan