Gold.

Today, if you have an ounze of gold, you can swap it for a new Pentax K5.
Two years ago, an ounze of gold wouldn't have got you even half of a new K20D. This is not because the K20D is a much better camera, but because the price of gold has risen so dramatically. In fact, the price of gold has quadrupled during the last few years. The greatest leaps coming in this last year.
Something odd is happening. Where I live, there are a great many jewellers shops. Mostly Turkish and Indian owned. Every one, now has signs in the windows saying 'Gold wanted' and 'Gold bought for instant cash'. The local Pawn brokers are all going mad for gold, too.

Why is this happening?. Are there any economists amongst our members, that can explain?
If things go on like this, it will soon be worth stripping our cameras for the gold electrical contacts, inside!

..........and guess what our former Prime Minister flogged most of the UK's gold when the price was at an all time low

It's the economy stupid.
Traditionally when the economy is dodgy people resort to gold in the (false) belief that it is a safe investment.

Once the economy is buoyant again, and interest rates go up the price of gold will sink again.

False, Gwyn!... False! What's false about it. Seems pretty flippin' real to me. The paper money in my wallet isn't worth any more than it was last year. But a lump of gold is worth very much more, and is exchangeable for anything else. Unfortunately, I get paid in money, rather than gold.

Read this and substitute pound (or Euro) for dollar in the text.

No it won't. Gold has, apart from a couple of tiny blips, always gone up in price.

http://goldinfo.net/yearly.html

All the way back from 1793

He certainly did. Just like thatcher sold off our national assets cheap.

Politicians are funded by and work for the Rich elite

OK. I read it, and I have learned that I did not spell ounce, correctly!

I find it a little worrying that people the world over, are turning their backs on paper money in favour of some shiny yellow metal.

A totally unbiased source there, Smeggy. Is it inflation adjusted? I presume the price of Jam has also increased year on year if you don't take inflation into account ;P

Rest assured that what is driving the price of gold higher is speculators (read investment institutions) in the fine global financial markets, flush with cash that Central Banks are lavishing on the aforementioned captains of finance, in an almost certainly vain attempt to fight powerful deflationary forces.

However, you have in fact manifested the modest impact this is having on the real economy by indirectly speculating that something inflationary is afoot. Alas while inflation expectations are important in the short and medium term, in the long term as Keynes astutely observed we’re all dead.

It all went wrong when we abandoned the cowrie.

Smeggy, you're a nitwit. It's people like you who create economic problems, by believing that prices will keep rising for ever.

Here are some facts for you to ponder:

1 If you adjust for inflation, you will find that gold is usually a pretty poor investment, and much worse than, say, Marks and Spencer shares.

2 Gold, unlike M&S shares, does not pay a dividend.

3 Gold, unlike M&S shares, costs money to own. You have to insure it, and you have to pay somebody quite a lot to store it safely.

4 Any fool can choose dates to support the crazy idea that gold always goes up in price. And any sensible person can choose his own dates to illustrate the reverse. If you had bought gold in 1980, your holding would have lost half its value twenty years later. And that's not counting the high cost of holding it, nor the fact that there was plenty of inflation in that period.

5 In a real meltdown, gold becomes worthless because you can't eat it. You'd be better off buying cans of corned beef, and a sawn-off shotgun.

6 Gold always goes up at times of economic uncertainty, and falls again afterwards. As it will this time.

And Mowog, the smart money has already come out of gold. Those holding it now are liable to get their fingers burned.

G

It's mad!. I mean... Gold is very pretty and it does have some industrial uses, but you can't eat it. Nor can you live in it. I could understand the price of potatoes and houses going up, in economically bad times. But gold!... Our houses are falling in value. The cash in our wallets buys no more than it did last year. Putting it in the bank will get us almost no interest. Yet lumps of shiny yellow metal is all the rage.

There is something very fishy going on here!

OK George. I'm putting my life savings into King Edwards, tomorrow!

Smeggy, to amplify your blushes, I have just spent 20 minutes adjusting gold prices since 1947 for inflation.

The REAL price of gold is now a third lower than it was in 1947. It's also lower than it was in 1973 (which was the starting date you chose to "prove" that except for slight blips! gold always goes up). In fact, the price has been higher than it is now no fewer than 15 times since 1947!

I believe that had you bought gold in 1947, the cost of keeping it would be more than it is now worth.

Gordon Brown was in fact right to sell the UK's gold, but he got the timing wrong, poor chap/damn fool. He should have sold it last year. In real terms, the price is now falling, though I don't say it will continue to do so in the short term. Nobody knows what it will do before the various crises are dealt with.

Very few people make money investing in gold. You have to correctly predict both the beginning and the end of an economic crisis, and not many people can do that unless their name is George Soros. And if the crisis is prolonged, the holding cost will outweigh your profit.

Smeggy, I have had a look at your website, and I must say that there are a number of quite serious gaps in your knowledge, of which the insidious effect of inflation on gold prices is only one. A subscription to the Economist is in order, methinks, though I suspect you would rather subscribe to UKIP.

G