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Will gold become unaffordable, if so, when? Opinions welcome.


Foster88

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Hi all, 

The recent price rise in gold has got me thinking. 🤔

Is gold going to become unaffordable for most people? If it were to rise beyond £50+ a gram that would surely make it unaffordable for a lot of people. We may be going through a small rise right now but none of us know for sure. I wonder if silver will become the go to ‘gold’ for the masses if gold reaches record highs.

This is all speculative of course but I wonder how high it will get in the next, 5, 10, 20 or even 50 years.

Opinions welcome on this. My post may seem naive but as a new comer to the world of bullion and gold it’s got me thinking.

D

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AH!  I love this topic.  I was actively trading gold in the 2000 time frame.  It was $275-ish an ounce, and the pundits were saying that an astronomical $500 per ounce was unheard of and unsustainable.  "No way gold is going double!"  So I bought more.  And more after that.  And I kept a good chunk of it.  Frankly IMO, it's all relative.  For the daily folks like ourselves, $65 gram gold seems a high price, but guess what?  The market will adapt and there will be organizations to manufacture/sell fractionated gold to keep up.  When the 1/20th ounce gold coins came out, I said -- really?  Who is going to buy those?  Turns out the 1/20th market (though still modest) is doing OK.  The 1/10th market is great -- you can't find this stuff anymore.

What about silver?  That too will increase in importance as gold (PT and the rest) become "unaffordable."  I see where a couple of the major private mints are making 1/10, 1/4 and 1/2 oz silver coins.  RCM has a series of 1.5oz silver coins.  And 5 and 10oz silver coins.  Bottomline:  the markets and individual buying patterns will adjust to the new normal.  Just as it's done for the last 2000+ years or so.  Thanks from Scotty at CoinFinders

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Price is the amount you pay for an exchange between the legal tender currency & goods in need. If gold does indeed become unaffordable to the common people, more of us will probably be working to source gold instead and indicates we are living in an inflationary environment. Prices of other goods will adjust accordingly to that environment too. Worrying for an environment you cannot influence could prove to be fruitless. When the herd mentality comes,  possibly join in or fall out because it is difficult to go against with until it’s own demise comes. 

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For this reason (price likely going up and staying up at some point), I'm going to keep buying gold, as well as silver; as much as my budget will reasonably allow.  I will keep buying it until it's just not affordable to me.  As mentioned, the fractionals are what keep most of us in the gold market.  Just buy what you can reasonably afford, stash it away, and leave it there.

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Hasn't gold always been unaffordable for most people?  Isn't this part of what drives the desire for gold?  Whilst the increase in the price of gold has been a major talking point on this Forum, I would guess that most people have been unaffected by this recent development.

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As Scotty said above. If gold goes through the roof,  this is where fractionals will come into their own. If gold increases by 1000% as our resident financial guru has suggested, then anyone with an oz gold coin worth £10k, will struggle to sell it to anyone but a dealer or refiner, and will no doubt get shafted on the price offered. People with full sovs, worth £2.5k, will also struggle to shift them. Those with £1.5k half sovs will just about sell them privately to another collector. the 1/10th's at £1k again will do ok.

But, the main trade will be in 1/20'ths and 1/40ths. And they will become the sovs and half sovs of their day.

Of course inflation could render these prices affordable,  

Now I don't think gold will ever rise that much in my lifetime, but the point about fractionals is vaild whatever the price increases to.   

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To me it’s all about the % potential it could rise in the future and the inflation hedge it provides. If it went “Zimbabwe style” hyperinflation then 1oz of gold at £10,000 would look very very cheap /a pittance when the Govt are printing 100,000,000,000,000 £ notes. Even if you have 1oz of golf (in any format) you’ll be richer than most of your fellow citizens. It would also give you the potential to repay any fixed interest debts very quickly. One reason I’m on a 10 year fixed rate mortgage (just in case Comrade Corbyn gets in and does a Venezuela on the UK).

Decus et tutamen (an ornament and a safeguard)

YouTube - https://www.youtube.com/channel/UC5OjxoCIsDbMgx7MM_l4CmA

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Platinum was at some point more expensive then gold at one stage. What gold does for me is act as a savings mechanism. Also recently I have been watching videos on what gold and silver can do for you when things go wrong in the economy and what seems to be stated is that those with PMs have better protection and wealth during a time of crisis. 

In my thinking gold will not be unaffordable because I will be using it as a means of savings and I won't mind purchasing gold at any price within reason and circumstances. 

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18 hours ago, Zhorro said:

Hasn't gold always been unaffordable for most people?  Isn't this part of what drives the desire for gold?  Whilst the increase in the price of gold has been a major talking point on this Forum, I would guess that most people have been unaffected by this recent development.

I think you’re right. I saw a piechart showing how less people invest in gold bullion than buy gold jewellery. We’re part of a niche, elite market. One reputable dealer bemoans about his unsold stock of bullion coins but what magnificent bullion! There’s no ignoring the fact that 22k or 24k gold bullion is expensive in any time period.

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Price is relevant to the "here and now" (we require liquid funds to add to our stacks), but mostly irrelevant to when it comes time to sell.  Why?  Once we (the royal "we") 🙂 decide to sell, we are no longer motivated to accumulate.  We will sell because we need the money...want to take that bucket list trip...buy a car for a child...blow it on a new girlfriend who fancy's older men...perhaps leave the cash in our will.  18-24kt jewelry will also be a good vehicle for holding modest amounts of gold should the price get too high.

If one goes through the buying power of one ounce of gold over the years, it's a very impressive study.  In 1910's to the 1920's, an average US wage was $20 a week -- paid with a $20 gold piece (0.9675 troy oz, 30.0926 grams).  It would pay your monthly rent in an average-to-slightly-nicer apartment; or it would pay for a nice business suit.  What does a 1 ounce gold coin (spot $1400) buy today?  Well, $1400 will pay for a very nice apartment unless you live on the coasts.  A nice business suit costs about $1000-1200 depending on the tailor.  Add a couple hundred dollars for shirts, ties, clean undies, etc.  And for the average worker, $1400 a week is not a bad salary (~$70,000 per year).

In Roman times the exchange rate for gold-to-silver was 12 to 1.   And guess what was an average pay for a Roman soldier (before inflation took hold during the last few hundred years)?  Yep -- 1-to-2 ounces of gold per month.  Deriving the numbers from 2000 years ago can get dicey as each emperor had differing financial paradigms, but the data over time is very consistent.   Thanks from Scotty at CoinFinders

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When I was a teen in the mid 1970's my dad thought I was nuts for paying $45 to $90 for a ounce of gold In the mid 2000's I quit buying gold when it went over $500 a ounce. Now I was going to stop buying at $1325 a ounce. Time changes your perspective on what is a fair price for gold. The real problem is as prices increase gold and silver will become hard to find.

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21 hours ago, blindguy said:

When I was a teen in the mid 1970's my dad thought I was nuts for paying $45 to $90 for a ounce of gold In the mid 2000's I quit buying gold when it went over $500 a ounce. Now I was going to stop buying at $1325 a ounce. Time changes your perspective on what is a fair price for gold. The real problem is as prices increase gold and silver will become hard to find.

Yep -- it all is truly relative.  Gold also doesn't follow the classic supply/demand curves.  Why?  There are (IMO) 4 "demand lines:"  1) Normal manufacturing and commercial use of gold;  2) Jewelry demand (some is seasonal, some is price dependent);  3) Purchase for only investment/stacking;  4) Outside events and influences that will drive up/down the price of gold, irrespective to supplies on hand, market forces, etc.

With the latest run up with gold prices, silver prices did not follow the same percentage run.  Gold:Silver ratio is now 92 to 1.  Yipes!  That's the highest I've ever seen it.  A couple studies will tell you that a "normal" modern ratio is 50 to 1 (ish).  Gold/silver's natural ratio in the Earth's crust over the last 2000 years has been in the 17.5 range.  If nothing else, the 92 to 1 tells me silver is a screaming deal right now.  UNTIL/UNLESS the price of gold really tanks.  There's something about the $16+ per ounce level that seems to stop further gains.  Scotty

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Bear in mind that people are happy to buy gold jewelry at prices that are many multiples of the value of the gold that it contains. If someone is willing to pay £600 for a necklace that contains only £100 of gold, it won't matter much if the gold price doubles up. Jewelry is a much bigger market than coins and bars.

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