Gold crash: What could trigger the inevitable

May 30, 2011

Before you sell that last piece of jewelry, keep in mind that the gold price will not go up indefinitely. There are number of reasons why it might crash.

If you’re overweighted in gold or commodities, the warning is the same: A stronger dollar, strengthening U.S. economy or rising interest rates could derail the epic yellow metal mania. Who knows? Congress could even reach an agreement to clear up its balance sheet and pay down its debt.

What are the chances of any of this happening? It’s beyond the limits of my minuscule, clouded crystal ball, which is about the size of a pinhead. Nevertheless, you should prepare your portfolio for any number of eventualities, which can be easily accomplished with exchange-traded funds.

Gold is troublesome in my book because it really isn’t an investment. It’s a reserve currency of sorts that’s heavily traded by institutional investors. It doesn’t pay any dividends or interest and is bought in times of widespread fear.

The savviest traders buy gold as a hedge against the dollar. In the past few years, it’s also been a bulwark against the Euro as well, which has been bruised by sovereign debt woes in Greece, Ireland and Portugal.

Is the Euro financial fizzle over? I don’t think so, but it’s still not a reason to load up on gold.

The clearest threat to gold’s reign as the reserve currency of nervous Nellies is a possible rebound of the dollar. Given the congressional wrangling over the debt limit, budget and growing inflation, betting on the buck is like trying to figure out whether a racehorse will finish. They often pull up lame.

What’s interesting is the relationship between gold, mining stocks, the dollar and the S&P 500 Industrial Index, the broad basket of the largest U.S. companies.

When the dollar shows signs of reviving, gold drops. Shares in ETFs like SPDR Gold Shares will reflect that decline. The fund holds bullion and tracks spot prices fairly closely.

If you wanted to hold gold mining shares that reflect earnings from precious metals companies, it’s like a leveraged play on the price of gold. In one monthly period (from April 23 to May 23), the price of the Market Vectors Etf Gold Miners Trust fell about 10 times as much as the SPDR fund. Market Vectors reflects an index of gold mining companies. Similar funds showed the same kind of decline.

During the period I chose — in which the dollar showed a minor rebound — the Powershares DB US Dollar Index Bullish Fund was up almost three percent. The fund basically makes money when the dollar gains against other currencies.

By now, you can see a pretty simple pattern. Gold and the dollar generally move inversely to one another. It gets more complicated when you add stocks in the mix, which are based on expected earnings. They are often hurt by predictions of higher inflation or lower economic growth, both of which are uncertain now.

In a speculative portfolio, you can go long on worldwide stocks through a fund like the Vanguard Total World Stock Index ETF, own gold through the SPDR fund and go either way on the dollar. Powershares has a bearish version of its dollar index fund. And, last but not least, you can also bet against gold through the Proshares Ultrashort Gold ETF.

That brings up a key question that most individual investors struggle with when they start worrying: What should I be most concerned about?

Stick to your long-term goals. Only professional traders who have the discipline to make quick trades will get out and make a profit. If you try to time or short any vehicle, you’ll be stuck holding the bag.

If you need income, forget about the rest of the world and find the safest investments at the lowest possible cost. Your second goal would be to protect yourself against loss of purchasing power through a fund like the Vanguard Inflation-protected securities fund.

Still stuck on the need to own gold? What about the imminent collapse of the American and European economies?

Before you pawn your wedding ring, keep in mind that in real times of crisis the metal won’t replace food or water. As Voltaire reminded us in Candide, it would be better to tend to our gardens.

42 comments

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Posted by ChooseGold.Net » Gold crash: What could trigger the inevitable – Reuters Blogs (blog) | Report as abusive

well I wouldn’t sell all my gold just because someone wrote in Reuters about gold going bust.
The way I see it, US and EUR are going down together while their economies act like a rubberband, with EU up on US on one day and then US topping the EU the other day. In my opinion there’s at least another 6 months (up to a year max) of gold price climb potential left, before the markets collapse.

I do agree with the last paragraphs though, it is high time to tend to our gardens, as we are going to need them very soon. But I’d also advise you to hold on to some of your gold as when the economy starts to mend itself again in 3-5 years, they will still need some kind of a currency : )

Posted by badmantings | Report as abusive

No, gold won’t replace food and water in times of crisis, but it will buy a ton of them when the dollar becomes worthless.

Posted by cautious123 | Report as abusive

[…] This was on Reuters’ front page. I guess Gold is going to $1800 in the next few months. (Reuters) […]

Posted by Morning Links… « Of Interest… | Report as abusive

If you thought Gold was going to crash, wouldn’t you want to go ahead and sell all you had? The beginning and the end of the article tries to convince you to keep it.

Posted by obamarules | Report as abusive

The public is shockingly short sighted about everything. No one wants to believe anything is wrong with the economy. One uptick in the Dow and everyone’s dancing in Times Square and all the sudden everything is okay. The truth is gold cannot help but to go up. The dollar is NOT getting stronger, in actuality it’s getting much weaker and it’s losing it’s position in the world economy every day. Those who don’t have food or precious metals or some other hedge against inflation is going to be very, very sorry in the long term.

Posted by ShadoWeaver | Report as abusive

I love these “gold crash” articles. I guarantee one thing… the writer never really owned much gold through this bull market. Gold is not a “bounded” asset. Think of it as having a P/E ratio just like an equity…. save for gold the “E” is global money supply. So long as that keeps risisng, gold can too.

Posted by RedBaron65 | Report as abusive

I own gold, but I’d much rather have a dividend based on something real — like earnings. I don’t discount the seriousness of global economic woes and the inability of politicians to resolve them. But I think it’s dangerous to own anything based exclusively on pessimism and fear. If gold gives you comfort, that’s one thing, yet if currencies become worthless, do you think you could pay your mortgage or grocery bills with it?

Posted by johnwasik | Report as abusive

the thesis of this article is fundamentally flawed – the US simply cannot “clear up its balance sheet and pay down its debt” there is not enough ‘money’ in the financial system to do this…

Posted by tectospinal | Report as abusive

For half a century now, I have been listening to all the nonsense spouted about investing in precious metals. And it always turns out to be a temporary spike up and then a swift dive down and then a long plateau on the bottom.

Anybody read “Silver Bears” or remember the Hunt brothers and how they blew thru a billion dollars trying to corner the market? Silver was valuable when it was needed for photography and related industrial uses. Can you spell “digital”? The only absolute use for gold, where it cannot be replaced by some other material, is for space technology. And that necessity will be obsolete when someone develops a reliable force field/shielding device.

All these gamblers are betting on convincing the suckers that there is a scarcity of whatever item they choose to play. But elementary level geology would show that silver & gold are not scarce.

For those who worship the Golden Calf, the dollar is not based on anything as ephemeral as metals. Instead, it is based on America’s military-industrial might. The common delusion that you will be able to barter your coins or trinkets for food and water is very unrealistic. A complete ignorance of history and human nature.

To quote Robert A. Heinlein, “Gold cannot get you good soldiers, but, good soldiers can always get you gold!”

Posted by rwills | Report as abusive

@ obamarules… It’s because John F. Wasik doesn’t really know what he’s talking about and therefore doesn’t have a good position to sell.

It always amazes me when the talking heads or bloggers say that Gold has no real intrinsic value and they downplay Gold. They all seem to forget that Gold is the original tried tested and true, currency. Countries, Central Banks and many regular banks hold Gold reserves or exchange Gold. The Church during the crusades stole gold, what is the prize of war? Resources, wealth of the land and their Gold.

Gold is a waiting game and throughout history since the USD left the Gold standard, gold has only risen in value. And that is the interest paid on Gold… as the fiat paper money of a country is devalued, Gold rises.

My only immediate concern of the price of Gold is the possibility of the “Arab Spring” spilling over into India (a large consumer of Gold), the chance that any country being pressured by the international markets on their debt rate dumping their Gold reserves and lastly all of the countries getting together and actually agreeing on something like debt forgiveness.

Posted by GODF1ESH | Report as abusive

I don’t know if author’s like this one try to deceive intentionally, or if they truly don’t understand how fiat currencies operate. ALL fiat money eventually becomes worthless. When this author says the dollar may strengthen…I say against what? If all you’re doing to comparing worthless currencies (based on empty promises and lies) to one another, it’s an exercise in futility. Faith is gone in all paper money. Institutional investors are going to hide in gold before the dollar plunges and if you don’t own gold or silver you’re going to get fleeced.

Posted by Aodhan | Report as abusive

Gold will boom or bust. Time will tell. But holding cash never bust, unless the U.S. is conquered by Russia. I bet that will never happen. Gold generates no interest income and may become rotten bronze after 10 years. Just remember what happened to gold during Ronald Reagan’s era. History will repeat itself.

Posted by leungsite | Report as abusive

Obvious speculative bubble is obvious. It doesn’t mean that gold is worthless, any more than having a house to live in is worthless.

It means that the belief that owning gold will protect you from a future recession/depression or period of inflation… is a manufactured belief that is being espoused in order to drive a speculative market that is well aware of the process.

When the time is right, as always, all but the lucky and real pro’s are going to be holding an empty bag.

Posted by moneywon | Report as abusive

[…] should the above-mentioned investors be frightened by articles published by Reuters, entitled, “Gold crash: What could trigger the inevitable”?  That’s the title of a piece […]

Posted by A Gold crash coming? | Beacon Equity: Penny Stocks, Stock Alerts | Report as abusive

IMO, a very simplistic article that ignores many of the factors that affect gold price, and seems naive even on the factors the author does mention. What magic wand does the author know of that will resolve US and EU sovereign debt problems? Despite all of the rhetoric, what credible plan is there to balance the US budget or break our addiction to spending money we don’t have? I would suggest the author review the US total debt projections for the next decade and a chart of gold price versus total US debt for the last ten years. The “EU financial fizzle” has been and continues to be an on-going exercise in denial and at best temporary measures that have failed to truly resolve the underlying problems, and those problems have indeed caused many investors to buy gold and support prices. Despite the US Government’s frequent statements of their committment to a “strong dollar policy”, their actions seem to indicate the opposite, which obviously fits neatly into their plans to increase US exports and arguably other government goals. Actions speak louder than words, and often much more truthfully.
Just my opinion, but articles like this full of “might”, “could” and the like instead of objective analysis based on real facts are basically worthless as a guide to investing in anything. I do agree with the author that investors should prepare for different eventualities, since no one can see the future with absolute precision.

Posted by FlBob | Report as abusive

[…] Gold crash: Prep for the inevitable […]

Posted by News, Views and Reviews: Sid Harth » My Sister Eileen: Sid Harth | Report as abusive

[…] Is gold going to crash? Who cares, let’s just talk about the possible scenarios since it’s so fun to do. [Reuters] […]

Posted by Stocks Gain, Investors Take Profits | equities.com | Report as abusive

Selling Gold and Silver at a time when our politicians don’t know what to do next is foolish.

Europe has a declining population and ultimately cannot support a strong Euro due to their socialized economies and aging population. There isn’t enough tax revenue to go around. The USD is backed by trillions in debt and facing a pending challenge from the IMF SDR – and it looks like China is going to be joining a long with USD, Pound, Euro and Yen.

The IMF is going to be printing the SDR and is committed to having billions in circulation shortly.

People like Soros and others will likely buy larger and larger quantities of the SDR shortly. They will make a killing off a transition like this.

Gold and Silver helps preserve the wealth of common individuals and the wealthy alike.

Posted by EconomistGuy | Report as abusive

[…] should the above-mentioned investors be frightened by articles published by Reuters, entitled, “Gold crash: What could trigger the inevitable”?  That’s the title of a piece […]

Posted by A Gold crash coming? | Penny Explorer | Report as abusive

It is interesting that few commentators on this article seem to grasp the fact that the deficit and accumulated deficits, known as the debt, cannot be paid down. The debt is too big. It can only be devalued, a fact that the debt holders do not want to see.

Posted by waitingtoretire | Report as abusive

Congress could even reach an agreement to clear up its balance sheet and pay down its debt…hahha – do they find somewhere 14 trillion $ in their pocket???

Posted by jerry91 | Report as abusive

US 2011 deficit is 11 %. if you would take it out of the economy, the that 1,8 % growth would be -9,2 %. Economy has been in hidden deep recession for years. I don’t have gold but it seems much saver than dollars…

Posted by FBreughel1 | Report as abusive

OK… “WHEN” will the US $ start appreciating for real?

….or u just hope it will?

and is the appreciation will be just a fraction of the massive devaluation we r seeing now?

Posted by robb1 | Report as abusive

Ahh the buzzword of the year: fiat currency

How many of you knew what fiat currency even meant before the global financial crisis – I’d put the over/under at 18 months.

It is amusing to me that the gold bulls/bugs all cite the same reasoning for buying gold: “We’ve been using gold as currency for thousands of years, even the USD was backed by gold! Paper money is worthless!”

While this may be true, we are living in a new world, a new paradigm. Gold and silver are worth no more than their industrial applications call for. Is the gold/silver trade a good way to make money in an time when the USD is being devalued? Absolutely.

This is not the days of crusades of pillage and plunder and this is not the day of exploration and conquistadors. Those of you expecting to pay for your neccessities by shaving a bit of gold off of the gold bars you have stored in the basement safe are going to be sorely disappointed.

Gold is a trade. The USD will remain the world reserve currency. Our creditors (namely China) are not happy about the fact that we are devaluing our debts to them, but there is nothing they can do – it’s a bilateral relationship and the Chinese economy would fall flat long before the US if American consummerism ceases (dont worry, it won’t). We are decreasing the value of the dollar intentionally to make our debt more manageable, increase exports, deter imports and to improve our manufacturing sector to create jobs. It is the correct move and the same move made by the Chinese when they devalued their currency by some 67% percent in a day – they’ve been eating our lunch ever since.

Gold/silver is a trade. You would be better served by putting your money into income (dividend) paying securities that are located and denominated in the currency of resource rich economies (as mentioned in the article: Canada, Australia, Brazil), taking up gardening to hedge against rising food costs caused by globalization and population growth and to position yourself, personally, to be marketable in the new world economy.

The new global economy is finding its equilibrium and as it does it is setting up for one of the greatest eras of prosperity the world has ever seen. There will be winners and losers, but those of you betting against the United States need to step back and read the big picture. Americans will have to make some concessions, but Armageddon is not imminent.

To all gold bugs and arm-chair economists who so eagerly comment on every gold article that surfaces on the net: please save your talk of fiat currency, gold and guns for Family Radio.

Posted by jaham | Report as abusive

“Before you sell that last piece of jewelry, keep in mind that the gold price will not go up indefinitely.”
“Before you pawn your wedding ring, keep in mind that in real times of crisis the metal won’t replace food or water.”
Are these sentences supposed to make any sense? If you ‘sell or pawn your last piece of jewellery’, why would you still have to worry whether you can ‘eat your gold’ or whatnot? Should that not be something gold buyers should ponder rather than sellers?
As an aside to some of the commentators: apocalypse is not required to make the gold price go up. The fundamental requirements for a rising gold price have been in place for over a decade now and they remain firmly in place.

Posted by eusebius | Report as abusive

When Zimbabwe’s currency collapsed they had a backup called the US Dollar. Given the extant political gridlock, the most likely scenario is the US Dollar will soon collapse as well. While I have no idea what they are going to do in Zimbabwe (besides shooting people in the street), I can tell you what the US government will likely do. After sufficient civil unrest, they are going to roll out a “new” 100% gold backed certificate US Dollar – and an ounce of gold will be worth a lot more then in terms of green paper than it is now. Note this time is NOT different – this time is the same. Review history the fiat to gold back to fiat has happened time and again and again. Governments never learn because it is always in their interest to cheat and lie to buy votes.

Posted by Truth_Teller | Report as abusive

Let’s face it. These kind of articles provide a stimulus for those poor buggers who want to outsmart the system and somehow make money out of it. Make no mistake, the game is rigged! Unless you are a multimillionaire and you can afford to tuck away a few pounds of gold bars in a safety deposit box,you have no chance. Expert articles are simply there to mislead the public and bully them into buying silver for example. Those who bought a lot when it was $40 thought that they had outsmarted the system, but a few weeks later it plunged 17%. So when you need money what are you going to do? Pay you Electricity bill with gold coins? If you have money, the crisis can actually make you richer, if you don’t that participating in a casino game will make you richer.

Posted by renceD | Report as abusive

I don’t know what planet this guy is living on. Doesn’t it tell you something when practically every central bank is accumulating gold as fast as they can? Doesn’t it tell you something when a major university puts it’s entire endowment fund into gold?

This guy doesn’t even bring anything new, creative and complicated to the argument. He harps on ETFs. Yeah, that’s smart. More derivatives. Be sure to invest in the GLD or SLV. Because, JPM is at the helm and they know what they are doing.

I would like to ask this guy a question; To what does he attribute the 25-30% cash premium paid on futures contracts to forgo physical delivery?

Don’t hold your breath.

Posted by kjdavi | Report as abusive

Gold is essential worthless. If it were to all crumble all the gold in the world will not buy one radish or potato from the man who has it and needs it for himself and his family. You can’t eat gold or dollars or Euros and he who was smart and kept food won’t sell for money.

Posted by Sonnyjc9 | Report as abusive

[…] Advances Against DollarSan Francisco ChronicleGold lower as safe-haven buying dries upMarketWatchGold crash: What could trigger the inevitableReuters (blog)Economic Times -Bloombergall 50 news […]

Posted by ChooseGold.Net » Fiat Currency or Gold?, Eurozone – The Market Oracle | Report as abusive

From a speculator’s perspective, gold is just like any other boom in the past. Good while it is going up but historically, it does run reciprocally to the general standing of economic health. Take a look at an accurate historical chart of gold prices (not one from a gold investment site). Believe it or not, the inflation adjusted gold price during the early 80s deep recession was above $2100. After that it tanked and dropped to about $100.

As far as my opinion regarding the “true” value of gold is concerned, it is an arbitrary yellow metal. I would contend that actual livable commodities and the general good faith and credit of us as a people will far outlast the usefulness of gold. It is silly if you think about it. Gold would have never become so highly prized as it is now if the advent of paper money and the global fiat system were possible several millennia ago. It has origins as a form of currency. Nothing more.

Posted by heck0456 | Report as abusive

Gold is a bet that politicians are greedy and dishonest. If they are, its price will increase.

As to ETF shares, why not by the Russian Tsar’s Gold Railroad bonds? Paper is paper is paper.

Gold is a mechanism for preservation of value. Remember that in 1932, an ounce of gold was $20.00. And there was such a treasury coin. How much is an ounce of gold today?

Posted by txgadfly | Report as abusive

Interesting. Not one comment, nor the author of the article, made any mention of the massive increase in liquidity caused by QEI and QEII. You see, that printing of “money” cannot, in economic terms, lead to anything but a devaluation of the currency being printed. It is axiomatic, and proven by example after example after example. Rome, Weimar Germany, Yugoslavia, Zimbabwe, Argentina, etc., etc., etc.

The liquidity caused by the Fed has been funneled directly into commodities. That makes sense. Everyone who gets their hands on those fresh new greenbacks knows, if they’re paying attention, that those greenbacks are devalued every time a new one is printed.

Those above who argue for investing into solid equities with real P/E ratios are correct. But the gold “bugs” also have it right. (Oh, and gardens are never a bad idea.)

Wasik truly has written a very superficial article here, likely to mislead a lot of people. If you cannot see the inverse relationship between real currencies (those limited in supply and thus of calculable value) and fiat currencies (those which can be augmented ad nauseam via printing presses), then you do not have the tools to wend your way through the coming economic perturbations. There are opportunities before those with their eyes open. Selling off your real currencies only makes sense if you are getting real, predictable and long-term value for your money.

Stop speculating, and start producing. For yourself.

Posted by BowMtnSpirit | Report as abusive

This article is not well thought out and is internally conflicting. The author starts by telling people to think carefully before selling that “last piece of gold jewelry” as if it is a bad idea to do so. It ends with the same advice to be careful about pawning gold jewelry. But, in the main body, it argues that gold is going to collapse.

In fact, the article ignores reality. Gold is up in terms of dollars, euros, pounds and so on, not because it is fantastically popular or is in some type of “bubble”. It is up solely because there are more of the aforesaid currencies floating around. More currency vs. about the same amount of gold means the gold is worth more when priced in those currencies. It has risen by approximately the same rate as the U.S. monetary base, since 2008, or by about 2.5 times.

Very few people actually own gold. The ones who do are usually very wealthy and won’t be inclined to sell just because the central bankers increase interest rates, so long as they continue to print money at the same time they are raising rates. Moreover, it is the amount of currencies that is the issue. The more currency is available to buy the same amount of gold, the higher gold will go. Unless the central bankers reduce the supply of currency, which is an almost zero probability event, the price of gold will be stable or will rise, subject to short term flucuations based upon active market manipulation by JP Morgan Chase and HSBC.

Posted by ttolstoy | Report as abusive

Actually, I just took the trouble to check my facts. I am a bit incorrect on one assertion. The monetary base of the U.S. has risen by 2.5 times since 2008, but gold has taken since 2006 to achieve that rise. Gold is actually under-priced because the increase in the amount of currency printed exceeds the increase in the price of gold, over the same period. It is the dollar, euro, and pound that are in a bubble.

Posted by ttolstoy | Report as abusive

Well my bet that gold will reach 2100 by last quarter of 2012. My reason huge trade and investment happening paper gold in India & China. Another reason being Dollars with American Govt & People is less than Dollar abroad with Countries (China, India, Japan, Mid East…), so US going ahead cant alone decide what to do with Dollar. US Treasure cant hike interest rate even if the recession is over as theres plentiful of dollars for offtake as most the Sovereign Funds are invested in Treasury Bonds. Finally companies like Goldman Sachs can make profits only from commodities for couple of years to come. Gold wont crash so easily, stay invested with gold….

Posted by AshokPats | Report as abusive

Peak oil will cause inflation of the money supply by the Fed as they desperately try to stimulate the faltering economy that an oil shortage will begin to force to contract. That will push gold and inflation way up in the second half of this decade. Bill near Slidell LA.

Posted by Discovery451 | Report as abusive

MONEY

Money is essential to life and freedom.

Gold has been money since the dawn of time.

In the absence of gold, many commodities have substituted, cowry shells, cattle, bird of paradise plumage, slaves, salt, , cigarettes, but none of them have lasted.

In the face of our imperative need for money, bankers had no difficulty in persuading us that printed-paper would serve the role of gold (and their own purposes better) and it worked well until, like salt, oversupply collapsed the value.

Like all previous substitutes its days are now numbered.

A return to gold is the obvious solution, too obvious for bankers and politicians who are unable to contemplate losing their powers of manipulation over the people.

Posted by blowforhome | Report as abusive

At my humble opinion – The crash is inevitable.
The Democratic world was attacked longtime ago in 1984 in
two principal directions :
The First : Complete lose of Labour habits of the citizens.
The Second : The need for everyone to live like the wealthy people do – at the expences of somebody else.
It’s a real Mindcrime attack against Democracy.Now the time of harvest has come !

Posted by AGFA | Report as abusive

More than any other asset that I know, gold arouses an intense emotional response from people. I love the guys here who tell us that they have been looking at markets for decades and they have seen it all before… Pure rubbish. For what its worth…so have I…. and having decades experience doesn’t give you any right to make announcements about what gold is or is not as if it was a fact. Gold is effectively a pseudo currency. Fact. For the last 10 years, gold has made a new high each and every year. Fact. A bit like the Yen actually. Do people believe the Yen is some absurd asset that will soon collapse? Well, maybe….thanks to its debt problems the Yen is in a fix. Gold, on the other hand, has no underlying liability against it. Fact. In fact, it is one of the rare currencies that have no liabilities against it. Fact.

Posted by RedBaron65 | Report as abusive

Mr Wasik, like many, unfortunately does not understand ‘INVESTMENT 101′ which is DIVERSIFICATION.

GoldNomics is the most watched video in the world in 2011 (http://www.youtube.com/watch?v=-HaqwFJj 4ZY ) and shows how gold has retained value throughout history and will be an important hedge and safe haven asset for investors and savers in the coming months and years.

DIVERSIFY and have an allocation to gold.

Posted by Goldcore | Report as abusive

I think the old saying goes..”as good as gold”.

Posted by garron77 | Report as abusive

[…] Reuters (blog) […]

Posted by SPDR Gold Trust Looms Large on Fears of Economic Instability – Bloomberg | Report as abusive

In 2006, after reading Alex Roslin I put all my savings into Gold (not MUCH, OK). It has trebled in value and is still a good insurance (we need a lot of insurance). Even if it crashes to its original value, purchasing power will still be there. In India gold was useful because of non availability of cash. But now with smart cards for farmers, cash available cause of printing, inflation is becoming a killer and gold’s price is recognising this. But availability of items like mobiles, TVs fridges and cars on CREDIT, have made gold buying a lot lesser. As the country develops, no GOLD is reqd except vast sums of credit, that can be written off. To expect gold to provide rationality and sensibility at ruinous times is downright silly. There should be law and order, only then Gold has value. But Give me salary in GOLD anyday. It will be fun to spend it. Gold is fashionable as jewelery else it is a sacred metal. It has no other use and the fact that it has value shows the irrationality of human beings. I feel gold’s end will come only when Americans go crazy and start stocking up on the metal imagining its fictional monetary properties. Till that time, everybody please BUY GOLD.

Posted by kpvidya1999 | Report as abusive

[…] essay published on Reuters warns bullion investors and in sold valuables buyers that zero goes adult forever, so beware of a […]

Posted by When Will the Gold Market Crash? | Gold and Silver Prices | Gold News | Silver News | Buy or Sell Precious Metals | Report as abusive

Apologies GoldNomics – Cash or Gold Bullion? (http://www.youtube.com/watch?v=-HaqwFJj 4ZY )is the most watched video on gold in the world in 2011.

Hope you watch it Mr Wasik and would appreciate feedback.

Posted by Goldcore | Report as abusive

[…] (Reuters) — Gold crash: What could trigger the inevitable (Comments are more astute than column) http://blogs.reuters.com/reuters-wealth/ 2011/05/30/gold-crash-what-could-trigger -the-inevitable/#com… […]

Posted by COMEX Registered Silver Bullion Inventories Fall Sharp 38.5% in Two Weeks – Risk of COMEX Silver Default Remains « InvestmentWatch | Report as abusive

Interesting that a chart provided at the Vanguard inflation-protected securities fund site linked and recommended by Mr. Wasik in the article shows $10,000 invested in 2001 having an aprroximate value of $18,962 on 5/31/2011. A $10,000 investment in gold on 1/2/2001 at an approximate price of $271/oz, 36.9 ounces, would have had a value of approximately $56,450 on 5/31/11.
Seems to me gold did a pretty good job of protecting “purchasing power” over those years, and once you look past the hype and rhetoric I see little change to the big picture reasons for that performance.

Posted by FlBob | Report as abusive

Some comments say you can’t use gold an silver in trade. But Utah just passed a law that you can.

Posted by Plantersville | Report as abusive

I personally know quite a few people who are buying gold and silver as protection from a coming economic collapse. They are not stupid. They know they can not EAT the metals, thus they have at least a full year’s supply of canned or dried goods, and a water source. The gold and silver coins will be very beneficial if and when a new barter economy takes hold.

Gold is ridiculously high right now, and it has lost value in the past. Don’t expect that to mean it ALWAYS has to deflate in value though.

Let me put this in perspective. Our annual U.S. budget deficit is something like $1.5 trillion. The total accumulated debt is about $15 trillion. Unfunded entitlements the Boomers will be expecting might total another $70,000,000,000,000.

If you spent one million dollars a day, every single day, you could spend for over 2,700 years, and STILL not reach one trillion dollars. Of course that means if you started spending a million dollars a day on the day Christ was born, and spent a million every single day since then until the present date, you could still spend for over 700 more years before reaching one trillion dollars.

The debt will NOT be paid down. It will continue to soar. Our industrial base is largely wiped out, we don’t produce things of value in industries that employ people. The Boomers will all start to retire. Scoff all you want, there are reasons gold is pushing two grand.

Posted by Willgrw | Report as abusive

When people fall head over heels in love with an investment and they convince themselves that it can do no wrong….it’s usually a good time to get the heck out.

History has a strong tendency to repeat itself.

Posted by KJEB | Report as abusive