We’ve had some old unwanted gold jewelry lying around for a long time. With gold at $1,237 per ounce, we figured it was time to sell it. We are a living movement up the supply curve of gold.
The local jeweler who bought the gold says we are hardly unique-but the pattern of supply has been interesting. He says there was little increase in quantity supplied until the price hit $1,000-then there was a flood. As the price has risen still further, some additional amount has been supplied, but not too much. Apparently, potential suppliers were waiting for the price to hit $,1000; thereafter, only those who hadn’t paid attention, like me, were left to enter the market. Exercise for students: Graph what this says about the shape of the supply curve!
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@Scott – there’s crisis and then post-crisis. When fiat currencies collapse there’s a short-term crisis, and then people want to start using money again and for a moderate amount of time remember not to use a fiat currency. Precious metals have a multi-thousand-year history of being accepted as a reasonable commodity basis for a currency (having most of the desirable properties of money). Backing the current level of US economic activity with gold results in a stratospheric valuation, but hybrid commodity-credit currencies are most typical. If you figure in a 4x credit ratio, it amounts to something like a $20,000/oz present-day dollar valuation. That says more about the Dollar than gold, though – a $20 target on a can of cream corn might be a better golden investment.
Buck, you are right except that you meant to say horizontal for a period of quantity in step 2.
Gold has little use value but great exchange value. It’s true that it doesn’t serve any of the basic needs like eating or security, nor any of the non basic ones like entertainment. Its has only some industrial value an some aesthetic value but it stills seems to be the ultimately refuge asset. It has proven to hold that title in periods of war and hunger where one would expect it to lose its value.
But the future can be different (or not) and the gold beauty contest can be over when someone realises that “the Emperor is wearing nothing”.
BTW: Stocks are a good inflation hedge
Bill,
You’re wrong, gold is nearly as worthless as a barrow of paper dollars in an economic collapse. How am I to asses your “gold”/lead coin?
Pistols and lots of bullets are the real currency of an economic collapse, or just bullets, if you know you’re butcher’s gun type.
Daniel,
What was your jewelry worth Retail and what did you get for it’s “Gold” value?
I’m guessing you got less then 10 Cents on the Dollar. Which is what they are offering in Pennsylvania. In other words, it’s not worth that transaction cost, of finding an honest gold dealer, because there are none.
Did I make my real point that Jewelry is worthless as an “Investment”?, unless you’re the dealer.
@Bill I think what Scott is refering to is a real crisis, the sort of crisis that a previous commenter suggested survivalists are buying gold in preparation for. In that case I suggest skip the gold, walk past the wheat, corn and sugar aisles at your local Post-Apocalypse-R-Us and head straight for the rifle department. Shopping for goods after the crisis will be much easier that way.
This phenomenon is captured in the concepts of supports & resistance in technical analysis for trading