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50 years ago and $35 gold


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#1 Rogerdodger

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Posted 15 August 2021 - 10:19 PM

Fifty years ago this Sunday, the gold market was completely transformed in only a matter of minutes after then-president Richard Nixon decoupled the U.S. dollar from the precious metal.

 

Back then, I was a dishwasher and at $0.90 an hour, I could have bought an ounce of gold every week.

I invested instead in Jimmy Hendrix 8 track tapes.

 

A few years later I was making gold jewelry and fussing about paying $425 an ounce for gold casting grain.

I guess I should have kept the casting grain for today.

Gold still remains relevant 50 years after Nixon ended Bretton Woods Agreement

Before Nixon's announcement, the 1944 Bretton Woods Agreement allowed central banks and foreign governments to redeem their U.S. dollar treasuries for gold.
While not an official gold standard, the Bretton Woods Agreement made the U.S. dollar the world's reserve currency, and gold was pegged to the U.S. dollar at $35 an ounce.
However, in the starting in the mid-1965, because of rising inflation, nations worldwide were quickly redeeming their U.S. dollars for gold. When the Bretton Woods agreement was signed, the U.S. controlled about two-thirds of the world's gold supply.
"The U.S. had 20,000 tones of gold, and it fell to 8,000 tonnes. The U.S. gold reserves were going down way too fast, so Nixon had to step in and do something," said George Milling-Stanley, chief gold strategist at State Street Global Advisors, in a recent interview with Kitco News.

 "In the last 50 years from 1971 to date on a compound annual growth rate basis, gold has given you a capital appreciation of close to 8% a year," he said. "Which is not too shabby for something that doesn't pay a coupon like a bond or doesn't pay a dividend like a stock."
In more recent history, Milling-Stanley said in the last 20 years, gold has seen its value increase seven-fold, solidifying its role as an essential global asset.



#2 kinga200

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Posted 16 August 2021 - 12:25 AM

Stagflation

Excuse me while I kiss the sky...I mean the ground.

#3 kinga200

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Posted 16 August 2021 - 12:26 AM

Roger mom luvs ur stuff.

#4 Douglas

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Posted 16 August 2021 - 12:53 AM

Rodgerdodger, I believe that gold is in a bubble just like stocks, real estate, etc.  A premium is being paid today based on projections of future inflation due to the Looney Tunes FED/Treasury money printing.  One once of gold today will purchase much more than in 1971.  In 1971 one $35 ounce of gold would buy 184 McDonalds 19 cent hamburgers.  Today an ounce of gold will buy 1052 McDonalds $1.69 hamburgers (a ratio of 5.7).  Even in terms of other metals, gold is expensive.  In 1971 one ounce of gold would buy about 78 pounds of 45 cent per pound copper.  Today one ounce of gold will buy 405 pounds of $4.39 per pound copper (a ratio of 5.2).  

 

By my crude calculations above, the gold price premium is currently north of 80%. On a current inflation adjusted basis only it should sell for around $350/ounce, about ten times what you could have bought it for with your dish washing salary.  Those paying this big gold premium are betting that the funny money printing will ultimately trickle down into inflation justifying the premium.  Unless the FED/Treasury changes course and pricks these bubbles, that's probably a good bet, but it is a bet never the less with a lot of the future potential gains due to inflation already baked into the price.

 

Regards,

Douglas



#5 pdx5

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Posted 16 August 2021 - 10:48 AM

Good post, Douglas, worth reading.


"Money cannot consistently be made trading every day or every week during the year." ~ Jesse Livermore Trading Rule

#6 Rogerdodger

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Posted 16 August 2021 - 11:05 AM

the gold price premium is currently north of 80%

 

Douglas, like I asked earlier. what is the PE of gold...or bitcoin,,,or the US Dollar?

None have earnings, only buzz about the unknown such as inflation and the dollar's standing in the world.

 

PS: When I sold jewelry, the markup was at least 100% of cost!

So I would visit the pawn shops and buy "scrap" jewelry at a very small premium.

My wife still wears a ring that I made with a brilliant 1 carat diamond pawn shop diamond that I got for $100!

Pawn shops often view stones as sand.

 

PS: Thanks kinga200. Let her know that I am a real looker too!


Edited by Rogerdodger, 16 August 2021 - 11:08 AM.


#7 Rogerdodger

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Posted 16 August 2021 - 11:42 AM

From T Theory Thoughts.

https://ttheorygroup.science.blog/
 

"I have been known to be a gold bear, but the truth is I am more of a miner bear. In my mind, miners are dumber than rocks, or at least much less valuable. Looking at the chart below, GDX was at 31 in 2007 when Gold was about $600 per ounce. Unlike oil, which is mined and then utilized, practically all the gold ever mined is still in existence. There’s about 45,000 tons of gold that have been mined over the last 15 years, considering the Gold Council’s estimate that 2500-3500 tons are mined each year. How does adding more of an existing commodity raise the price of that commodity? Mining companies seem to always shoot themselves in the foot when it comes to mergers, hedging, or adding to their capital expenses.

Even with Friday’s move higher on GDX, the discount grew in Sprott, and fell only slightly in the CEF.

We are close to a buy.

For a Trade.

After all, we have completed Terry Laundry’s 20 year bull market in gold, until the next one starts.