From the beginning of time gold has been embroiled in myths, superstition, folklore and fairy tales about gods, goddesses, wizards and heroes. The myths are endless.
To the Inca people gold was the sweat of the sun. The Egyptians thought a blaze of gold was a symbol of the sun god Ra.; Jason’s epic quest for the Golden Fleece…The Israelites praying to the golden calf…Golden apples turn up in Greek myths and gold apples appear in Wagner’s opera Das Rheingold… Sailors and pirates wore gold hoop earrings for good luck. One can spend a lifetime reading about the ways gold has influenced each generation.
Today the myths have become far more sophisticated and clever people buy into them hook, line and sinker.
Fear is the reason speculators are driven into buying gold as a safe haven from apocalyptic disasters. This is fed by a constant stream of expert opinions,with TV anchors and other media reporting the expert opinions as true facts. Most experts today believe in the myths of gold and predict it will continue to be a safe haven in these uncertain times. Perhaps they can keep the gold price rising, however, every financial instrument has to have a solid foundation to make it stable and secure. Gold cannot be valued beyond the real supply demand industrial/jewelry usage, other than the amount of fear driven speculative trades that causes it to rise.
A few of the many myths of gold.
– Gold is a currency … Gold is NOT a currency nor will it ever be. Gold coins are not legal tender and you cannot go into a supermarket and buy groceries with gold dust.
The ease of trading gold with ETF’s such as GLD is one of the main reasons it has performed so well in recent years.
Gold has been in two other bubbles since it went off the gold standard in 1971. How long the latest bubble will last is anyone’s guess.
Some of the things to look at are;
If gold does not perform well over a given period of time and stops going up, then the holders may feel they are not getting any dividends or interest and look elsewhere for a better return.
The lower and middle end of the gold jewelry market is not doing much business and is in the doldrums. The upper end of the jewelery market is not effected as the rich will always buy whatever they want no matter the price, but that is only a small section of the jewelery market. Perhaps this is a sign similar to the housing market, when the first time buyers were unable to afford the cost of a home. Without a lower end market, prices could not keep going up and the housing bubble popped.
Gold stocks have not performed as well as the metal itself, as most mining companies have hedged their selling prices and sold the metal on future contracts. If they thought the metal was going to continue to go up, why sell so soon? Could they believe the metal may go down at some stage in the future and a bird in the hand, is worth two in the bush?
In life, there is a time to sow and a time to reap. For sure 2002 was a great time to buy gold and put it way for the past nine years. What happens now the seeds have been sown and the yield has bloomed into a very handsome 500%. I guess it all depends on who wants to sow more seeds in an overgrown field.