WoV Challenge -- Predict the price of gold on Jan 1, 2013.

Now not that the price of Gold is not going to affect all of us,
but how about another Wizard Challenge on the price of
gasoline over the same timeframe ?

I think I'll go with $ 3.89 for regular unleaded. And any
national average you pick is ok by me.

Quote: JohnnyQ

Now not that the price of Gold is not going to affect all of us,
but how about another Wizard Challenge on the price of
gasoline over the same timeframe ?

I think I'll go with $ 3.89 for regular unleaded. And any
national average you pick is ok by me.

I'd be down with that. I do this with my friend. We try to predict the price. We use the forward-month contract price of RBOB on the NYMEX -- this is the closest thing you will get to actual gas.

Quote: teddys

I'd be down with that. I do this with my friend. We try to predict the price. We use the forward-month contract price of RBOB on the NYMEX -- this is the closest thing you will get to actual gas.

So your guess is what ?

I propose that the winner gets a ride in a H2 limo
with the Wiz and all the models in his reviews !

Quote: JohnnyQ

how about another Wizard Challenge on the price of
gasoline over the same timeframe ?

Much harder. That gold will bust at *some* time is almost - almost - a given, just treacherous to predict when. [We will find out if someone predicted no bust, but upward, pretty soon for the challenge; I didnt, but that could win]. Oil? It sure has a way of shooting up when the economy starts rolling. I can't imagine that the economy won't be better over this timeframe, but it could still be an anemic upswing. Natural gas oversupply is a wild card. If the Wizard will do it, could be interesting!

Agreed Odious, I think not this year. 2013 has a good chance especially late, due to presumed increase (slooooooow) interest rates. I'm in through Kitco, and the spot prices there and basic charting are worth it. Tradition has it that the London Closing spot price is the price of the day. I think that should be used as a standard reference. If not already known, the NatGas folks are already tightening supply driving the market upwards. JMH dwt

Quote: odiousgambit

Much harder. That gold will bust at *some* time is almost - almost - a given, just treacherous to predict when.

Logically, doesn't everything have to bust sooner or later? When I was a teacher, we used to give students a problem where the Indians would invest the $24 (go Dutch Guilders) that they received on May 24, 1626 for Manhattan island. Even at a modest interest rate, the investment would be worth than the Assessed value of the land of Manhattan Island (not including buildings).

Exponential growth is never sustainable over the long term. It's just that the phrase "long term" has to be determined, and hence the difficulty with all endeavors.

So the price of gold must "correct" at some point.

Quote: pacomartin

Logically, doesn't everything have to bust sooner or later? When I was a teacher, we used to give students a problem where the Indians would invest the $24 (go Dutch Guilders) that they received on May 24, 1626 for Manhattan island. Even at a modest interest rate, the investment would be worth than the Assessed value of the land of Manhattan Island (not including buildings).

They received $24 [speciously converted from Guilders] worth of goods. Pretty hard to invest those, let alone find a person willing to give them interest on their money. Good hypothetical, though.

Quote: teddys

Good hypothetical, though.

At 8% for 400 years you have over $500 trillion dollars, which is more than the GDP of the entire world.

Another factor that is cited is the number of people who make it on the Fortune 500 and then fall off it never to return. In theory the rate of increase (and sometimes decrease) to stay on the list is similar to many bank account interest rates. Of course, great wealth is not liquid, and is not in a bank account. It is surprisingly difficult to maintain for many people.

Thomas Malthus roughly 200 years ago decided that population growth was exponential, and he reasoned that the world's resources could only grow linearly. He concluded that behavior wasn't going to change, and sex wouldn't vanish, so the inevitable result could only be demographic catastrophe (pestilence, war, famine, and death). Of course he couldn't predict widespread birth control, or the fact that the world's food supply would grow exponentially for a while. Final outcome is yet to be determined, as we may have a Malthusian catastrophe yet.

Personally, I think gold will continue to remain high, but at some point leveling off. I think the "concept" of the value of gold is too ingrained in the human psyche.

I was reading that Zukerberg who at age 27 is the 52nd richest man on the planet is going to make a big leap in his standing when Facebook has their IPO. When you look at evidence like that, how can you say a "concept" is inherently unstable and people will ultimately wake up and realize that the item is of no value.

Quote: pacomartin

At 8% for 400 years you have over $500 trillion dollars, which is more than the GDP of the entire world.

While I suspect that you have access to the data, I have no idea where to look, but my impression is that 8% annual interest would be immensely higher than what was available for any sort of "guaranteed" investment over most of those 400 years. I suspect that the 0.05% interest rate that Bank of America is currently paying on my checking account (or the 0.40% they are currently offering on a $100,000-balance money market account) is more representative of what banks paid for much of that period. That's if they paid interest at all -- having your money reasonably safe in a bank vault may have been the best deal you could have hoped for that didn't involve much risk of the principal. I think that late 20th century was the only time you could get anything close to 8% return on a secure investment.

Of course, if you are willing to gamble....

Quote: Doc

While I suspect that you have access to the data, I have no idea where to look, but my impression is that 8% annual interest would be immensely higher than what was available for any sort of "guaranteed" investment over most of those 400 years.

Of course 8% is not realistic since no single person has even 0.1% of the world's GDP. The point of what I was saying is that no investment can grow exponentially for prolonged periods of time. All exponential growth must either bust or come to a serious slowdown.

But gold does not have to go back down to $500 an ounce. It could level off and stay at it's price for decades.

A guy told me once that Social Security was a "1+2+4+8 problem". For a man in retirement you needed 2 people working, and to support those 2 people in retirement you needed 4 people working, and so forth. So we had to keep immigration high to support social security. He seemed totally oblivious to the fact that he was talking about a unchecked exponential growth, and was fundamentally unsupportable.