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Is the price of gold going to bounce again because of Japans earthquake?

Updated on April 10, 2011

The latest natural disasters including the earthquake in Japan, are human tragedies of enormous proportions, and following the destruction of Christchurch in New Zealand as well as the earlier tsunami in the region, has left the whole pacific rim feeling frightened and insecure about the future.

Gold moved up a few dollars, but has not responded strongly to any great fear of the future so far. I can't help but think this is partly because of the bond market funds that have returned to Japan to support insurance claims as well as the Japanese people calling on their US funds held in bonds. Gold has risen considerably but not responded as much as many would have expected. It has climbed considerably from what looked to me like a lag in price that saw it hopping around a bit, even dropping back into the 1300's for a short time in the last few months. A longer view is still interesting as far as profit is concerned.

We have seen gold rising slowly but steadily as the world has been confronted with new wars, financial collapse in money markets, talk of nuclear annihilation and other doom and gloom that in the past would have had it skyrocketing by now, but it is a new and interesting time we live in, where lightning fast transactions control pricing, which has a leveling effect on gold prices, as some of the emotion is tempered by knowledge and volume.

Despite all the science, I'm backing the scared little guy again and reckon he is gonna push prices up and up! The scared little guy will tell you "Hell you can even use the stuff!" If we are going to Mars any time soon, we are gonna need lots of it for space projects, military projects and as a reliable contact in computer technology that is increasing in motor transport and other usage daily.

Gold is not a financial derivative, a company financial statement or abstract financial product than can be made with smoke and mirrors. Gold is real, you can melt it down and turn it into a pumpkin and paint it green, it will still carry exactly the same wealth it does in ingots.

I like to think the world is going to settle down soon and give mankind a break, but I can see that is taking a while, so in the meantime, at least keep some gold in your portfolio would be my advice, and if you really think your currency is likely to run in to trouble, a few bars of gold may be just the ticket to pay your way out of an otherwise difficult situation.


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    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      Gold has something else to underwrite it's price. Extraction costs continue to rise.

    • Jed Fisher profile image

      Jed Fisher 

      7 years ago from Oklahoma

      Winsome, I collect 1982 and earlier pennies, they have more copper. As for gold... Soros sold his, so I sold mine too. (Not real gold, but shares of the the ETF GLD)

      But anyway, the story behind non-perishable commodity prices is the "carry trade." Joe businessman runs a business that sucks so he can't get credit. No problem, he puts down 10 cents on the dollar for a letter of credit for a hard commodity such as gold or copper or oil, then takes out a 90-day cash loan against the full value of the commodity. Then he gives himself a handsome bonus for generating "revenue" for the company. What that means is, as soon as hard commodities drop more than 10% and stay down for more than three months, the commodities bubble will be over.

      Until then, it's a big money party!

    • Winsome profile image

      Winsome 

      7 years ago from Southern California by way of Texas

      The rise in gold prices continues to amaze me. I think I will turn all my money into pennies. The rate copper is going they will be worth way more than a penny, but unlike stocks, never less. =:)

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      Thank you tnvrstar, judging by the state of the world economy, I wouldn't feel too bad about that! You have some famous company it seems.

    • tnvrstar profile image

      tnvrstar 

      7 years ago from doha, qatar

      useful information.I am really bad on economics and still i get confused about the role of gold in economy.

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      That is very interesting, I have not seen that prediction, and would like to know more. Surely moderation is called for in rebuilding the world's power sources.

      If we change to thorium in reactors we will solve many problems both financial and safety related. I hope a discussion opens on thorium to replace uranium in power stations soon. It is not possible to use other renewables at the rate we consume power.

    • Hello, hello, profile image

      Hello, hello, 

      7 years ago from London, UK

      Many months ago I read a prediction of the financial world and it said that in 11 it will be a struggle, 12 it little bit better but not much after that it nosedives and 2016 it will really get better.

      Now at that time there was the (arttificial) credit crunch and hope to get out of it but no Middle East, no great rise in petrol prices and Japan. So what is really going on? I am sure the prediction is correct. Uhh would I like to know but surely will never find out.

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      Japan got hit again this morning with another aftershock and this is going to go on for up to 2 years!

      Not surprising the markets have been hit so hard.

      It is a bit hard to keep gold in your wallet like money, so we trust it to the banks.

      That is pretty strange when you think about it, as many buy gold cos they don't trust banks much!

    • agvulpes profile image

      Peter 

      7 years ago from Australia

      It looks like all the indicators are there for Gold to bounce again. Japan has been hit by more aftershocks.

      There nuclear problem is now the worst in history and not getting better any time soon.

      My personal opinion is that notes were made to stack and I could not fit gold under my mattress any way.

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      Sounds like a fair assessment Rod. There always seems to be a new problem on the horizon. One got fixed today I see. Another dictator bites the dust.

    • Rod Marsden profile image

      Rod Marsden 

      7 years ago from Wollongong, NSW, Australia

      Provided there are zip zero major disasters coming up fast I can agree with you that the world will settle down soon but I doubt if we will get more than a five year break of smooth sailing.

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      Thanks Harlan, I have a friend who is definitely in the category of scared little guy. Although he has a very small portfolio, 20% of his total investments are in gold and he has purchased more gold to use as currency if the world finances explode.

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      I agree, I don't think anyone knows if it will keep rising or not Peter, but as you also mentioned, there are still a lot of problems which would point to it rising or give it a big push.

    • Harlan Colt profile image

      Harlan Colt 

      7 years ago from the Rocky Mountains

      You said something I haven't heard before and that is - that the scared little guy will keep going up. That speaks volumes to me cause I am already hiding in my fox hole! ha ha.

      I appreciate this hub... I vote up and useful

      - Harlan

    • Peter Owen profile image

      Peter Owen 

      7 years ago from West Hempstead, NY

      Not sure if it will keep going up. But it needs to part of an investment portfolio. There are too many ominous things on the horizen for it to drop. Our own credit crisis which is coming with the States, should give it a good push.

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      I agree Don. Silver has been a great performer.

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      There is a move afoot here to buy a few of the up and coming gold stocks. Gold certainly has outperformed in the last few years. You're on the ball Paradise.

    • earnestshub profile imageAUTHOR

      earnestshub 

      7 years ago from Melbourne Australia

      It is still unclear where the currencies are going, Australia hit 1.05 against the US dollar yesterday. Thanks for the input Qwark.

    • donreed profile image

      donreed 

      7 years ago from Iowa

      I see gold staying high and I see even higher gains in silver.

    • Paradise7 profile image

      Paradise7 

      7 years ago from Upstate New York

      Yeah, I can see people bailing from FOREX and buying up gold, amongst other hot commodities. Good hub, as always, Earnest.

    • qwark profile image

      qwark 

      7 years ago

      G'mornin' Earn:

      True.

      Gold hit just about $1500 an oz. last week!

      IF (big IF) the economy begins to improve and ya bought gold at the highest price it has ever sold at, and the US dollar increases in value, the bond market gets stronger, ya'd better be especially aware of your gold investment and keep yer finger on the "sale" button.

      Hindsight is 20/20 vision. I wish I'd bought loads of it 10 -12 yrs ago when it was worth about $300.00's an oz!...but who knew?

      I don't buy it now 'cause of the price.

      "IF" it takes a loss the losses'll be too big.

      If the "dollar" keeps weakening, this old world may begin to think about a different currency to do business with.

      In fact, this may already be happening!

      These are worrisome times.

      As usual, good "hub" Earn.

      Qwark

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