Thursday, September 3, 2009


Gold Rising From Its Slumber

Gold has just broken through $987 an ounce. I don't suppose if it breaks $1000 before Labor Day, you guys would give me my "by summer" gold call, will you? Nah, didn't think so.

Anyway here's another way the government does its best to keep you in your financial prison:
[S]ince the IRS has determined gold to be a collectible, owning physical gold would subject the investor to the special long-term capital gains tax rate of 28 percent, not the normal 5-percent or 15-percent ones. (For less than one year it is 35-percent.) Owning shares of an ETF that holds gold or silver makes you subject to the higher rates.

The nice thing about gold is that you can evade these taxes if you are willing to try, but you can't do it with ETFs.
And one other thing, if inflation becomes a more serious issue, expect special capital gains situations to increase in scope and magnitude. Everyone must pay their "fair share".
Well technically Summer is not over this year until September 22 at 5:18pm so I guess there's still hope.
Can't you get around the whole tax on gold problem by purchasing and selling through eBay? Or if I order from Kitco or apmex or wherever... when would I ever have to pay capital gains?

Here's a silly question: is it possible to have a bubble in gold prices? For instance, consider that all this hype about ending the fed and "inflation is coming" is ill-founded yet drives people to invest in gold. If inflation doesn't come and it turns out the mainstreamconomists are rockin', could we see a bust in gold prices? Or am I missing some fundamental principal in the relation to the dollar?
Jesse, I think most people would say there was a bubble in gold right before Volcker slayed the dragon. Apparently cashiers at the grocery store would strike up conversations about buying gold--a good sign it was time to sell.
Virginian Rebel, I like the way you think. Keep hope alive!
Gold is really up there right now, $991.26 as I type. ($991.70 now!)

Bob, you could make the case that it would be almost impossible to buy an ounce of gold for less than $1,000 right now (and a while ago), considering the typical premiums you have to pay.

As for gold bubbles... aren't more people asking about gold now than almost any other time in U.S. history? Maybe cashiers aren't asking (typically today they are high-school or college age and don't give a damn), but almost everyone else is, right? I'm confused as to what a gold bubble would mean... if it burst would the losses gold-owners sustain be pretty little relative to the purchasing power of the dollar?

I'm beginning to wonder if there is a gold bubble, and if that would matter at all. Though, it's not as if people are taking out loans with swinging interest rates to buy hundreds of thousands of dollars of gold.
If you adjusted for inflation gold would have to be around $2500/oz. to equal the 80's high of $850. For gold to be at a high we would have to conclude the dollar is at a low. Does anyone think the dollar will gain in purchasing power to bring gold down. The demand for gold is just starting to ramp up. We haven't even hit the tip of the iceberg.

Regardless, gold is about preserving wealth and the price is not that relevant. An ounce of gold has consistently bought just about the same amount of goods and services for its 5000 year history. As long as people want worthless pieces of paper for real money I'm buying.
Jesse, I'm a neophyte as far as gold is concerned, but some of the gold bugs claim that the present price of gold is artificially low due to government and central banks and other varmints interfering in the market. Just google GATA. No idea about the veracity, but it doesn't sound far-fetched to me. Back in the day, Gordon Brown (then Chancellor) sold a whole bunch of gold. Not only that, but he announced beforehand that he was going to sell it. Of course, that would not affect the price at all.
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