My Understanding of 'Shining Dawn', called Gold.

With the ever watchful eyes , I have been following the yellow currency and its history from a long time...Right from the days of checking gold prices through SMS alerts during my classes to the days of waiting impatiently for Gold Reserves Value Data of every country... and then rushing back to my blackboard to analyze how would it behave...

Gold as in likewise with all trade-able assets, are more dependent on what your neighbour does rather then what it should do...

Consumer Prices and Gold have a been showing an amazing correlation off late... The international currency standard status has bestowed some properties other than the chemical ones on the yellow money. Or has it, really ?

In 2000, there was a crash in dot.coms. The whole magic of the tech bubble suddenly disappeared. And guess what? Gold went up.
In 2001, the War on Terror(or some say it was a pseudo war created to boost an dwindling economy, flourishing on debt[lets keep this for another time]) began. And guess what? Gold went up again.
And again in 2002. And 2003. And 2004.
By 2005, the world economy was in the throes of a massive financial bubble. Everything was going up. Gold went up too.
In 2006, the US had a major housing bubble on its hands. Gold went up.
In 2007, the housing bubble started to lose air. Gold went up.
In 2008, Wall Street stared into the abyss. Lehman Bros. went broke. The feds took over housing finance, auto-making, insurance, commercial lending...and gold went up.
In 2009, the feds went all out to try to engineer a recovery. The Fed ballooned its balance sheet by $1.2 trillion. The federal budget went into deficit by nearly one and a half trillion. Still, gold went up.

And what's this? The recession officially ended more than a year ago. Housing and unemployment are still limping. De-leveraging is still underway (David Rosenberg calls it a "depression")...and go figure. Gold is still going up.

Gold goes up with consumer prices. That's the most common notion... however if we stretch the periodicity chart on 5 year horizon. We find for nearly two decades - from 1980 to 1999 - gold went down while consumer and asset prices rose.

Now, consumer prices are stable. Yet gold hits new records.

All views on gold are with an exception.They say Gold has its own wacky behaviour. There's no line of thought on the subject that doesn't have a curve in it. Today, some bulls are loading up on gold because they see a recovery coming. Others are buying it because they don't. Recovery, they believe, will boost consumer appetites, resulting in higher inflation levels and a higher price for gold. The absence of recovery, say others, will cause the Fed to undertake more money printing.

Those who are supposed to sit on the fences are among the most aggressive buyers. Gold for them is a " safe haven bet " proposition. If the economy improves, gold rises naturally. If it doesn't improve, the Fed actions will force it up.

And if you come to believe that US days in financial supremacy are numbered, then the Chinese will take over. Gold makes up only 1.7% of China's foreign exchange reserves. China is supposed to be targeting a 10% figure. If so, then it would have to buy every ounce the world produces for two and a half years or more. Now given the kind of skewed relations it is building up, relying on its own production , (China is the world's largest producer) it would take nearly 20 years of steady accumulation to reach the 10% level.

The metal sitting pretty on the 79th place in the periodic table has many uses for the common humans. People make spoons, forks and bathroom faucets out of it. It's occasionally used as roofing, or even as a murder weapon;(history) a king had molten gold poured down his throat after being captured by his enemies. And Lenin said he would line the public latrines with it. But the best use ever found for it was as money - as a reliable measure of wealth.

My grandparents are on another set of people who do not let me forget the sway Gold has in our lives. They can't stop talking about how cheap they had brought gold at the time of their marriage and how undervalued it was even in the time of my parents marriage. But unaware of one amazing fact, The inflation meter sppeaks otherwise. The price of gold will have to almost double from today's level to reach its inflation-adjusted high of 1980.

But this is what makes gold very different from other money. Mr. Robert Mugabe should know, that, the trick is not in holding a trillion dollar note from Zimbabwe, he can hold onto that paper until hell freezes; its value will never return. Gold, on the other hand, will never go away.

Over the centuries, mankind has often experimented with alternatives to gold. Driven by larceny or desperation, base metal and paper were tried on many occasions. Paper was particularly promising. You could put as many zeros on a piece of paper as you wanted, creating an infinite supply of "money". People realized that money gotten at no expense was only gotten rid of at great cost. Given the ability to create "money" at will, a central banker will sooner or later create too much.

But one generation learns. The next forgets.

But Gold Stays on .... I trick which i have learnt is never trust Gold ... but at times of desperation... this metal can be of great value...