What I find odd is Gold is $1644 an ounce in US markets today and only 21720 rs / 10 grams in India. Converting to Dollars Indian Gold is only $1350 per ounce as of today. 21% Arbitrage smells funny.
where did you get your indian price?
Strongly disagree with you on this point. As you yourself have said, currency has implied value for the purpose for facilitating exchange, and gold is one of the oldest known currencies around. Your assumption is that people globally will look at a piece of paper as being more generally accepted than a medium which has been around a few thousand years, I find that you will need a lot more to convince the others than it's easy to exchange.
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I see your point M22a.LOLOn the other hand, cost to mine silver is closer to the 3 year lows of $8[not an exact number].
And while gold ,GLD is upTTrending better than , silver ,SLV;
Gold ,silver dealers prefer/want & price product in US dollars, Ever considered that??
Gold is a reliable commodity in times on deflation, and inflation. However it's not a generally accepted standard, and no matter what you say. Everyone recognizes a dollar bill, and therefore a dollar bill will be an accepted standard. Especially when bank deposits disappear, free floating paper currency (that's physical) will be worth substantially more than a gold counter-part. The counter psychology is that people always hoard a dollar bill, and gold in periods of doubt, and uncertainty. Now if the economy were to hyper-deflate people would hoard their bills, just look at the great depression as a simple reference. Gold prices tanked, and the value (purchasing power) of the US Dollar reached new highs.
Gold is old, but who has the expertise to determine whether or not you honestly possess legitimate gold. and who's going to grade the value of your gold in the middle of a US default, and the chaotic events that will soon follow after. The average cashier has NO IDEA AS TO WHAT YOUR GOLD IS WORTH. So, the US dollar is king in hyper deflation, or out right default. How you perceive the dollar versus how the ignorant masses view the dollar is extremely different. You might call it a piece of paper, but to THEM it's still legitimate money, whether or not the US government sinks.
IF you don't believe me. Watch what happens every time the stock market pulls back, and the bond market rallies. The value of the USD goes up. On a much more rapid, and chaotic scale. The USD would increase in value 10-100x with the collapse of the money multiplier effect. Only a true student of economics would understand what I'm talking about. Debating it is pointless because you're not the one who grades the value of currency. In reality (the market) people determine the value of their currency, and technically speaking currency is preserved labor. Labor + Materials = Wealth. Labor = Wealth. Currency = Labor, and therefore Labor = Wealth. Therefore currency = labor, and what people accept as currency, is accepted labor. = An acceptance of the US Dollar, but would require a re-organization of the government. IF the USA declared Bankruptcy, the last thing they'd do is reissue a different type of currency, and for many reasons. That I don't want to get into.
Wow, good stuff. A rarity around here.
Anyway, gold in USD terms did go up in the Great Depression, when FDR devalued the USD from 20 to 35/ounce.
In 2008, as liquidity disappeared, gold did in fact tank. The reflation afterwards was a friendly environment for it though.
No one really knows what would happen in the event of a US default, the proximate event that would cause a death spiral this time around, but my guess is on a rapid rise in interest rates for Treasuries, which would have the effect of causing a major heart attack for the US economy and cause the dollar to shoot up, because the one thing everyone is going to want is cash, and if that's in demand, well, you know. A simple way of saying what you were saying above, I think.
Gold, in USD terms, would rapidly go down, and it might even go down in terms of other currencies as well, as it did in 2008, based on a rapid drying up of liquidity.
Afterwards will be interesting, since the US would no longer have unquestioned credit, and therefore would be unable to re-liquify as before. We could be in a permanent strong dollar/depressed economy state, well for as long as it would matter, which would be the rest of our lives, anyway.
Without reflation, gold would stay down, I think.