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1. 

   Pranesh Sharma February 1, 2012, 9:44 am

   We cannot predict gold prices by citing one factor alone. Also, there is hindsight bias in predicting gold prices to be going up in the next decade also. 

   https://lewrockwell.com/orig13/katusa1.1.1.html 

   The above blog gives more specific reasons on why Gold and Oil prices will go up in future.

2. 

   Tejas Patel February 1, 2012, 11:07 am

   In case if you are interested in seeing the rise in prices since 1925, below is a graphic. A friend on Facebook shared this with me a while back.

   

3. 

   Deepak Shenoy February 4, 2012, 6:15 pm

   Before 1971 the price of gold to the USD was fixed, so all fluctuations were about the INR-USD rate. We were a much more controlled economy and went through two huge devaluations, one in 1956 and in the 60s (after the China and Pakistan wars, we had no money)

   Also till the 2000s gold import was controlled so you always saw Indian prices higher than equivalent gold products bought abroad. Earlier if you went to dubai, you bought gold jewellery and wore allof it, because stuff that you wore would not be charged import duty 🙂 Even then people would try to smuggle in gold in shoes and strange pockets and all that, and get caught (most got away though)

4. 

   Srikrishnan Ganesan February 4, 2012, 8:45 pm

   what I don’t see here is analysis on what is the biggest driver for demand for gold that is causing the price increase?

   a) People and countries wanting more gold as Fallback currency or people’s “savings” taking the form of gold

   b) Jewelry

   c) Electronics, Medicine, etc

   If its just (a) or (a) and (b), I fail to see the intrinsic value in gold, and would never be able to convince myself to buy into gold for the long term. Other than reasons linked to history (Gold standard, countries keeping reserves of gold, currencies backed by gold), is there anything else driving the demand for or value of gold? 

   Perhaps my bias against jewelry is clouding my thoughts! Just want to burst a gold bubble!

   Actually, to me, this could just be the longest running twisted Multi-Level-Marketing fraud gone viral. Just questioning the worthiness of the underlying item you buy (gold in this case) – the worth of which seems to be derived from increasing demand from those wanting better returns or safe returns.

   One may say its like buying a different currency. Valid point. But ahhh…

5. 

   Deepak Shenoy February 6, 2012, 4:43 am

   There are two things that help it as a currency – first, supply is limited (only 2500 odd tons are added to supply each year, and total gold ever mined is 170,000 tons)

   Second, there are not as many industrial uses of gold (as compared to silver), so it has very little non-investment related demand.

   So it can be used as a currency because the 1-2% addition each year is very small, and doesn’t “debase” much. Currencies on the other hand are debased regularly – take India, we are printing about 15-20% more of our currency each year! That means, in four years, we have double the number of rupees than we started off with, and that money chases approximately the same goods, so guess what, your Rs. 200 dish at the restaurant becomes Rs. 400. (There’s a lag, but you know what I mean)

   Gold on the other hand increases by about 1.5% a year, and since much of it is hoarded, there’s not enough “velocity” and that keeps prices relatively high. The rush to gold is also a rush to safety – if, for instance, Greece decides to default and move out of the Euro, Greek bank account holders will see their entire wealth wiped out (or most of it). They can choose to a) put money in other countries like Germany, but in case Greece defaults, Germany may freeze such money or b) buy and own gold whose value er. (They are doing both, as were people in Zimbabwe during the hyperinflation there and so on)

   There’s nothing special about Gold. People use Real Estate like Gold, to park their money, in India and China recently and in Japan in the mid-80s. The belief is that no matter what happens the money in a piece of land is safe (tell that to People in Japan now 🙂 )

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