If gold's price implodes then what goes up?
"Ok, I think what you're really asking is ""how can I benefit from a collapse in the price of gold?""  :-) And that's easy. (The hard part's making that kind of call with money on the line...) The ETF GLD is entirely physical gold sitting in a bank vault. In New York, I believe. You could simply sell it short.  Alternatively, you could buy a put option on it. Even more risky, you could sell a (naked) call option on it. i.e. you receive the option premium up front, and if it expires worthless you keep the money. Of course, if gold goes up, you're on the hook. (Don't do this.)   (the ""Don't do this"" was added by Chris W. Rea. I agree that selling naked options is best avoided, but I'm not going to tell you what to do. What I should have done was make clear that your potential losses are unlimited when selling naked calls. For example, if you sold a single GLD naked call, and gold went to shoot to $1,000,000/oz, you'd be on the hook for around $10,000,000. An unrealistic example, perhaps, but one that's worth pondering to grasp the risk you'd be exposing yourself to with selling naked calls. -- Patches) Alternative ETFs that work the same, holding physical gold, are IAU and SGOL. With those the gold is stored in London and Switzerland, respectively, if I remember right.  Gold peaked around $1900 and is now back down to the $1500s. So, is the run over, and it's all downhill from here? Or is it a simple retracement, gathering strength to push past $2000? I have no idea.  And I make no recommendations." "It's not clear that anything needs to go up if gold goes down. In a bubble, asset prices can just collapse, without some other asset increasing to compensate. Economies are not a zero-sum game. On the other hand, gold may fall when people decide they don't need to hoard some store of value that, to their minds, never changes. It could very well indicate that there is more confidence in the broader economy.  I am not a gold bug, so I don't much see the point in ""investing"" in something that is non-productive and also inedible, but to each his own." "Nothing necessarily has to ""benefit."" Right now, what primarily drives demand for gold is its perceived use as a hedge against the inflation of fiat currency. I.e. when inflation strikes, the price of gold goes up rapidly. Thus, for a given currency, gold decreasing in price is almost always a signal that the currency is increasing in value. However, it may be that at some point in time people everywhere just decide that gold is no longer worth using as an inflation hedge, and thus the price collapses simply because demand collapsed. No corresponding ""benefit""." It seems that you're interested in an asset which you can hold that would go up when the gold price went down. It seems like a good place to start would be an index fund, which invests in the general stock market. When the gold market falls, this would mainly affect gold mining companies. These do not make up a sizable portion of any index fund, which is invested broadly in the market. Unfortunately, in order to act on this, you would also have to believe that the stock market was a good investment.   To test this theory, I looked at an ETF index fund which tracks the S&P 500, and compared it to an ETF which invests in gold.  I found that the daily price movements of the stock market were positively correlated with the price of gold. This result was statistically significant.  The weekly price movements of the stock market were also correlated with the price of gold. This result was also statistically significant.  When the holding period was stretched to one month, there was still a positive relationship between the stock market's price moves and the price of gold. This result was not statistically significant.  When the holding period was stretched to one year, there was a negative relationship between the price changes in the stock market and the price of gold.  This result was not statistically significant, either.
let's define inflation as an increase in m1 relative to the goods and services in the dollar economy. twist doesn't change m1 because it is sterilized.  it does make tsys attractive since it supports their prices.  that means de-risking flows are to the u.s.  that means dollar goes up.  that means gold goes down. From Wikipedia: Investment has different meanings in finance and economics. In Finance   investment is putting money into something with the expectation of   gain, that upon thorough analysis, has a high degree of security for   the principal amount, as well as security of return, within an   expected period of time. In contrast putting money into something with   an expectation of gain without thorough analysis, without security of   principal, and without security of return is speculation or gambling. The second part of the question can be addressed by analyzing the change in gold price vs inflation year by year over the long term. As Chuck mentioned, there are periods in which it didn't exceed inflation. More important, over any sufficiently long length of time the US stock market will outperform. Those who bought at the '87 peak aren't doing too bad, yet those who bought in the last gold bubble haven't kept up with inflation. $850 put into gold at the '80 top would inflate today to $2220 per the inflation calculator. You can find with a bit of charting some periods where gold outpaced inflation, and some where it missed. Back to the definition of investment. I think gold fits speculation far better than it does investment. I've heard the word used in ways I'd disagree with, spend what you will on the shoes, but no, they aren't an investment, I tell my wife. The treadmill purchase may improve my health, and people may use the word colloquially, but it's not an investment. "Suppose you have a bar of gold and are hungry. I buy the gold from you for cash, which you then use to buy food, clothes and generally support yourself.  Would it be fair to say that I paid for your food, clothes etc? I don't think so - I think *you* paid for them, in gold. I facilitated the exchange of gold into money, and without me or someone like me around to provide liquidity for your gold, you'd still be hungry. But fundamentally, it was the gold that was valuable.  Now, suppose there is a lack of liquidity in gold - there's a shortage of gold buyers. I take advantage of this distortion to offer to buy your gold for half its free market value. You don't want to accept this deal, but since your only alternative is starvation, you accept.  I say this is wrong, not because of socialism, but because of capitalism. The efficiency of capitalism arises from the price system of value. Goods and services command a fair market price, and buyers and sellers have access to both liquidity and good information about the relative value of things. When distortions are allowed to interfere with free market pricing - as inevitably happens under lassiez-faire capitalism - this efficiency is lost. Good government regulation is necessary to keep markets free and efficient, and this is good for everyone.  So what does this have to do with David Siegel?  First, nothing in my example above changes when you substitute ""labor"" for ""gold."" If I am hungry but I have a skill, and I sell you some of my labor for cash, then use the cash to buy food, *you did not give me the food*. You did not ""pay for my food,"" you did not ""make it possible for me to get food,"" or anything of the sort. *I paid for it myself*, by trading labor for cash in exactly the same way that you could trade gold for cash.  Second, the price system of value allows you to earn a ""normal profit,"" which means sufficient profit for resources to remain within an industry. But ""excess profit"" harms market efficiency and thus the price system. This is pure capitalist theory, straight from Adam Smith; it is nothing to do with socialism or communism. It is quite clear that David Siegel is taking excess profit. This is no different from the sort of profiteering I described when there's only one gold dealer in town. It is parasitic behavior according to *capitalist* theory.  And finally, David Siegel is the guy who invented high-pressure selling of timeshares by inviting familes to a ""free"" vacation, trapping them in a room, and basically holding them hostage until they sign on the dotted line. His business is near-criminal. You can argue that drug kingpins also create thousands of jobs - that doesn't make them good people, or their actions beneficial to society. I already thought David Siegel was a parasite on society before I ever heard of his opinion on Obama. And quite frankly, I'm shocked and appalled that people are actually defending him." "There are gold index funds. I'm not sure what you mean by ""real gold"". If you mean you want to buy physical gold, you don't need to. The gold index funds will track the price of gold and will keep you from filling your basement up with gold bars. Gold index funds will buy gold and then issue shares for the gold they hold. You can then buy and sell these just like you would buy and sell any share. GLD and IAU are the ticker symbols of some of these funds. I think it is also worth pointing out that historically gold has a been a poor investment." Gold is money. If fiat money fails, only physical assets will count. Gold has been an historic store of wealth. Silver is also historically a good thing to possess when governmental systems fail. Don't buy paper gold, it is based on illusion. No one knows what will happen this time, but fiat money will likely fail again, as it has many times. Good luck to you for at least trying to prepare, you are an inspiriation. Regarding investing in gold vs. stocks, I don't think I could say it better than Warren Buffett: You could take all the gold that's   ever been mined, and it would fill a   cube 67 feet in each direction. For   what that's worth at current gold   prices, you could buy all -- not some   -- all of the farmland in the United States. Plus, you could buy 10 Exxon   Mobils, plus have $1 trillion of   walking-around money. Or you could   have a big cube of metal. Which would   you take? Which is going to produce   more value? "I can describe the method for determining a price floor, which may help. It starts with looking at the cost of mining. There's a ridiculously small amount of gold in the best ore, so it's measured in tonnes of ore to produce a given ounce of gold. Mines will only operate at a loss for so long, so for any mine which focuses on gold, when the price of gold is below that price for long enough, the mine will cease operation. Since not all mines have the same cost, the supply will not appear as a step function, it will reduce slowly as mines close.  ""Gold Drops Below Cash Cost, Approaches Marginal Production Costs"" offers a marginal cost of production just over $1100. This is not a floor price, as the market can act irrationally at times. It's just a number to consider.  On the demand side, the industrial use (I am thinking gold plating in electronics manufacturing) will serve to provide demand almost regardless of price. When a $100 microprocessor uses say 10 cents worth of gold (at $300/oz) $1500 gold increases the final chip price by 1/2%. The industry is still trying to move away from Gold where they can, but that's a long process.  As far as a ceiling goes, I highly recommend the book Extraordinary Popular Delusions & the Madness of Crowds which offers insight on a number of mania that have occurred not just in the past few decades, but over the centuries. At $1500/oz, the value of all the gold in the world is about US$7.5trillion (That's 12 zeros). Given that a portion of it is in jewelry and not available as an investment, it's safe to say that the entire world can only easily bid on about 1/3 of this (as the gold council cites 31% of gold going towards investments each year vs 57% jewelry and 11% industrial) or US$2.5T or so. With total world wealth at US$125T it would take a bit more hysteria to push gold from its current 2% of that value (funny how that number lined up perfectly) to much higher.  Note: I provided a number of links, as it's too easy to just throw numbers around. See the links and provide more current data if you're so inclined. Data isn't real time." Always a good time to buy gold. Think less in terms of commodities, more in terms of true money that can not be inflated out of existence. Buy it as cheap as you can, hold it for as long as possible. The historical graphs never lie and it proves time and time again its a good store of value. I would never think of it in terms of a speculative bet though. If it does reward you, its because the global currency system is broken. I think its broken, it may reward you. But never expect it to reward you. In the short term (2-3 years), the gold price can be manipulated. In the long term (10 years) less so.