Comments by "" (@tensevo) on "Jake Tran"
channel.
-
7
-
5
-
@kingkoi6542 You are half right. People buy Gold because they think that it is a hedge against inflation, when inflation has been less than 2% over the last year, Gold price has gone up, despite the Gold supply increasing by 2%, so everyone has already priced into Gold it's fully diluted supply, and now it is simply a fully speculative market. In fact it has always been fully speculative since Gold produces no cash flows. What I am saying is, the market does not work in the simplistic way you are describing. Every future supply and demand is priced in to today's price, so the only reason why Gold price would go up, is if more people became fearful and instead of buying a new Audi R8, they instead start to buy lumps of Gold. Furthermore, we have no idea how much Gold supply there is as that information is not public.
4
-
@kingkoi6542 Yes, precisely, the Gold market is built upon paper receipts, so the spot Gold price today, is inflated due to fractional ownership. You might say, well I own physical Gold so I am alright! But, the entire Gold market price is built on paper Gold, so your physical is worth whatever the paper market price is, no more. Furthermore, physical Gold has a "cost to carry" which includes security costs and trading physical will cost more due to the friction of verification process.
You can then say, well it's still a hedge against inflation, but if everybody knows it's a hedge, it's already priced in, and you will do no better than cash. The Gold price goes up due to perceived scarcity relative to fiat money supply, which is disconnected from actual inflation. The Gold price is not correlated with inflation - it is speculative.
3
-
3
-
@kingkoi6542 My point precisely, Gold is a hedge against the expansion of money supply. CPI is true inflation and it is maintained between 1-3% by central banks as too low we have stagnation and zero economic activity (stale mate), whilst, too high, we have hyper-inflation. Why 2%? well that is the number most economists agree on by consensus, and it just happens to be the annual Gold supply inflation. My point again, Gold is not a hedge against inflation, since inflation targets the same number as Gold inflation. If Gold price goes up and down, that is market dynamics of perceived supply and demand, nothing to do with inflation, even though ppl say that is why they are buying, the price bakes all that future supply and demand into today's price.
With regard, to BOE not buying back Gold, well, let's just say, the British pound and the US dollar, which are both loosely pegged, are the only fiat currencies that have withstood the test of time, precisely because they have strict controls that target 2% inflation (the same as the Gold supply increase due to mining activity).
In countries with dictator control and no central bank, they tend towards hoarding commodities and currency devaluation, resulting in hyper-inflation, whilst the unelected heads of state, keep the Gold for themselves, since ownership is 10/10ths of the law. This leaves the statesmen super-rich at the expense of the poor-populace. I know I would rather live in England than Venezuela, why? because, England broadly speaking, understands finance better and does not exploit the citizens except for the 2% "stealth tax" which is inflation, used to pay for key workers and public goods, through issuance of debt in the form of gilts. GBP has value. However, that's not the point. The point is, what people decide money is. I have never seen anyone go to supermarket and buy anything with Gold. Think about why? Gold is a bad currency, that's why. It is too easy to counterfeit and nobody knows how to verify the Gold you have is real. So trade stops. Gold is a bubble too. Remember that.
2
-
2
-
1
-
@kingkoi6542 Gold has gone up because it is a bearer asset, with some degree of scarcity, so it will go up, in fact if you had held anything it would have gone up by a similar amount relatively due to the expansion of the money supply. We almost agree, but the thing I am not making clear is that it's not about Gold per se, and it's not about hedging inflation per se, it's about owning anything physical. A hedge against inflation would linearly with inflation, but Gold simply fluctates with an upward trend, due to money supply increase or pereived scarcity or fear taking hold of the markets. It's not a hedge because it will probably go up with inflation but that is not guaranteed.
CPI, consumer price, is the inflation we are talking about though since that is the one that we mean when we say inflation.
Going "off the gold standard" was about stimulating the economy, technological development, getting ppl into paid work and paying key workers and funding public works. None of that was happening on the "gold standard" because there was a stale mate situation where the gold holders were afraid to spend because they would not part with their precious metals due to it's perceived value. You can own all the Gold in the world and it's not going to help you in a crisis, which is when it is supposed to help you.
The reason Gold and Silver are not accepted as money, is that they are really bad currencies with a lot of friction in transaction and trust issues. Not to mention the cost to carry and secure. Gold will go up and down in value but you may just find it's not due to inflation. Remember, if something "should" be worth more tomorrow, then I will price that in today. If we know Gold is going to go up in value, why don't we just buy all the Gold today? Because the future price of Gold is baked into today's price, which is why the market price fluctuates, not even to mention the vaults of Gold happy to sell to you at any price, why? Because they own the supply of Gold.
1
-
1
-
1
-
1