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Gold Soars, Crude Oil Plunges
Old 08-08-2011, 01:22 PM   #1
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Gold Soars, Crude Oil Plunges

The strangest thing about the recent selloff to me is how gold is going through the roof, but crude is almost going through the floor.

Are we going to run short of gold? Not hardly, unless by this is meant the price is higher to hoarders. Can society run without crude? Obviously not. Can society run without gold? Obviously it could.

In the 18th century monarchs needed gold to fight wars. Today and for most of the prior century, governments need oil to fight wars.

Is this just one more example of mass delusion, or can someone think of a rational reason for this relative pricing?

Commodities - Gold prices, Silver prices and more from CNNMoney.com In case someone may feel that this is a scantily clad link, here are the clothes- it's today's prices for the above mentioned commodities and even a few more. I bet no one knew that.

Ha
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Old 08-08-2011, 01:27 PM   #2
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Is this just one more example of mass delusion, or can someone think of a rational reason for this relative pricing?
Do you really expect a rational explaination for irrational behavior?
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Old 08-08-2011, 03:09 PM   #3
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IMHO, the gold rally is symptomatic of a flight to safety. The lower crude prices is symptomatic of a slowing economy. Silver, which straddle the fence (precious metal but also industrial commodity) is pretty much flat today. Whether it is rational or not, I'll leave that to the experts.
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Old 08-08-2011, 03:16 PM   #4
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IMHO, the gold rally is symptomatic of a flight to safety. The lower crude prices is symptomatic of a slowing economy. Silver, which straddle the fence (precious metal but also industrial commodity) is pretty much flat today. Whether it is rational or not, I'll leave that to the experts.
+1

Most small investors are terrible at market timing, however, I feel billions of dollars flowed out of the markets today. Maybe with the recent downgrade, the term "flight to quality" is a misnomer??
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Old 08-08-2011, 03:35 PM   #5
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All this and some banks are starting to charge customers for large cash deposits. BNY Mellon to charge on $50m-plus deposits - FT.com


So much of what is going on doesn't make sense. Gold is above $1700 today and silver not moving much.
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Old 08-08-2011, 04:11 PM   #6
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I wonder how much gold can be mined for $1700...
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Old 08-08-2011, 04:23 PM   #7
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I wonder how much gold can be mined for $1700...
Or with a gun. If I was Rap star, I think I'd be leaving my bling at home in a safe.
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Old 08-08-2011, 04:34 PM   #8
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It goes without saying that gold is viewed (by some) as a universal store of value. So even if the world crashes around you, (some believe) holding gold will best preserve wealth.

Personally, I think holding boxes of Mac-N-Cheese is a better store of value than gold. At least you could eat the former.
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Old 08-08-2011, 04:45 PM   #9
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Originally Posted by REWahoo

Do you really expect a rational explaination for irrational behavior?
Being out of the mainstream of economic opinion , it seems fairly rational to me. If this is a world wide slowdown ,oil prices will suffer in the shorter term because of lower demand. With competitive currency devaluation around the world(even the Swiss!) and US and now EU engaging in rampant money printing some people like me are looking for another store of value not necessarily as an invest but as an insurance policy . Bernanke may be oiling up the printing press as we speak although I'm sure they will come up with a new name and not QE 3.
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Old 08-08-2011, 04:49 PM   #10
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Personally, I think holding boxes of Mac-N-Cheese is a better store of value than gold. At least you could eat the former.
+1
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Old 08-08-2011, 04:52 PM   #11
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Originally Posted by haha View Post
The strangest thing about the recent selloff to me is how gold is going through the roof, but crude is almost going through the floor.

Are we going to run short of gold? Not hardly, unless by this is meant the price is higher to hoarders. Can society run without crude? Obviously not. Can society run without gold? Obviously it could.
Ha
Larry Kudlow talks about going back to the Gold Standard. I honestly don't understand how money 'works' (what really makes a $ worth a $), but I also fail to see how having gold stored somewhere would change anything.

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Or with a gun. If I was Rap star, I think I'd be leaving my bling at home in a safe.
I seem to recall they needed armed guards when shipping Intel chips. A stick of high end CPUs was probably just about worth their weight in gold, and you can do stuff with a CPU.

-ERD50
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Old 08-08-2011, 04:53 PM   #12
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It goes without saying that gold is viewed (by some) as a universal store of value. So even if the world crashes around you, (some believe) holding gold will best preserve wealth.

Personally, I think holding boxes of Mac-N-Cheese is a better store of value than gold. At least you could eat the former.
I truly believe that the citizens of Argentina, Weimar Germany, Zimbabwe , India and China understand that Gold is a Store of value.If enough people believe it is a store of value then it is just like currencies. The difference is they haven't figured out how to print it.
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Old 08-08-2011, 06:25 PM   #13
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I seem to recall they needed armed guards when shipping Intel chips. A stick of high end CPUs was probably just about worth their weight in gold, and you can do stuff with a CPU.

-ERD50
AFAIK there are still the occasional armed robbers, burglary of CPUs. Plus a big business in counterfeiting chips.

However, they are no longer worth their weight in gold. (To me an even more amazing statistic was one chip that was more profitable than printing dollars i.e. it costs Uncle Sam about $.015 to print a dollar bill, this chips margins were higher) Now days, the average selling price for a CPU has dropped, the weight has increased from rough 1/2 oz to 3/4 oz (although this varies a lot the notebook CPU can be under 1/4 oz and some can be several ounces). Overall $300-$500 oz is a reasonable range. Now that gold is over $1700 oz mining gold is a better business.
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Old 08-08-2011, 06:30 PM   #14
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Now that gold is over $1700 oz mining gold is a better business.
However, gold prices could drop like a "rock" at anytime.
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Old 08-08-2011, 06:38 PM   #15
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However, gold prices could drop like a "rock" at anytime.
Sure, but a CPU chip is constantly dropping in price due to technology progress.

The price of gold itself will fluctuate, but that physical gold will be worth whatever the going rate of gold is.

The (now old) physical CPU sure as heck won't be worth the going rate for a CPU.
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Old 08-08-2011, 06:52 PM   #16
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Sure, but a CPU chip is constantly dropping in price due to technology progress.

The (now old) physical CPU sure as heck won't be worth the going rate for a CPU.
Agreed - the price of the CPU continues to drop. Also, it's tough to compete with Intel in the CPU market for PC. The market for embedded CPUs and micro-controllers is also rough and not very lucrative. Users expect more features and performance but less price.
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Old 08-08-2011, 06:57 PM   #17
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I hate I did not jump on the gold bandwagon a couple of years ago, but can't make myself buy now even though some 'experts' have a $2,500/oz target 6 months from now. But I do like oil stocks for the long term and will probably add a bit over the next few days. Of course I know nothing about nothing so I will be happy if I can just maintain what I have.
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Old 08-08-2011, 07:04 PM   #18
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The strangest thing about the recent selloff to me is how gold is going through the roof, but crude is almost going through the floor.

Are we going to run short of gold? Not hardly, unless by this is meant the price is higher to hoarders. Can society run without crude? Obviously not. Can society run without gold? Obviously it could.

In the 18th century monarchs needed gold to fight wars. Today and for most of the prior century, governments need oil to fight wars.

Is this just one more example of mass delusion, or can someone think of a rational reason for this relative pricing?

Commodities - Gold prices, Silver prices and more from CNNMoney.com In case someone may feel that this is a scantily clad link, here are the clothes- it's today's prices for the above mentioned commodities and even a few more. I bet no one knew that.

Ha
I was thinking EXACTLY the same thing on the drive home! We haven't invaded any countries lately to insure dependable gold supplies! Oil is what runs the economy, gold is just bling. I hope like hell a huge (I mean HUGE) gold vein is found and the damn stuff falls to $35/ounce again.

In the fight for our lives in WWII I don't recall bombing "gold mines", but we sure did go after their oil supplies. Gold is for pimps and whores, which pretty much describes Wall Street types.
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Old 08-08-2011, 07:52 PM   #19
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I hate I did not jump on the gold bandwagon a couple of years ago, but can't make myself buy now even though some 'experts' have a $2,500/oz target 6 months from now. But I do like oil stocks for the long term and will probably add a bit over the next few days. Of course I know nothing about nothing so I will be happy if I can just maintain what I have.
Back to HaHa's original point, while I understand the rational for oil decline and gold soaring. It still seems counter-intuitive.

The idea behind gold is it is an alternative currency, which can't be manipulated/debased by governments ok I get this. However, it seems to me that oil is also something that can't be easily manipulated by governments. Now a slowing economy will decrease the amount of oil consumed, but doesn't it also decrease the amount of jewelry bought, gold watches sold, and even industrial uses for gold.
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Old 08-08-2011, 08:34 PM   #20
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Back to HaHa's original point, while I understand the rational for oil decline and gold soaring. It still seems counter-intuitive.

The idea behind gold is it is an alternative currency, which can't be manipulated/debased by governments ok I get this. However, it seems to me that oil is also something that can't be easily manipulated by governments. Now a slowing economy will decrease the amount of oil consumed, but doesn't it also decrease the amount of jewelry bought, gold watches sold, and even industrial uses for gold.
Gold doesn't actually have all that many industrial uses. Besides if Armageddon does come, the lead in my .45 will take your gold anyway.
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