Gold Is Not The Ultimate Bubble Yet


I like this.



Gold Is Not The Ultimate Bubble Yet

Feb. 6 2011 – 2:05 pm | 1,310 views | 0 recommendations | 0 comments

It had to happen sooner or later. Gold prices have stalled the past four months,, going sideways from $1375 to $1425 to $1350. No reason to panic. Trees don’t grow to the skies.

– Some ecstatic investors took their profits from the 2010 run-up that began at  $1060 and ran up a sweet return of 27%. Then again, the early birds who anticipated gold as “the ultimate bubble” as George Soros called it,  could very well have built positions at $850 an ounce in 2008, when Soros did.

Wise students of the gold market held back in the face of a strengthening dollar. Rule No. 1 about gold is that it  moves in the opposite direction of the dollar 70% of the time. So, when the dollar rallies, gold will ease- and when the dollar is being pounded down– gold skyrockets. Thems the dynamics, according to Prof. Frank Holmes, CEO of US Global Resources,   a luster after the precious metal.

Other commodities, more required for putting food on the table. heating homes and  building infrastructure have been  the hot markets to play these past 4 months.  Copper, which is in short supply is up over 20% and sugar, rice and other agricultural have been acting as if a  bubble might be forming. Let’s hope not.

The speculators in silver also must be disappointed, for silver prices have fallen 11-12%– double the 5-6% fall in gold prices.

The gold story is recognized now as a way to hedge against the expected devaluation of the dollar, which is coming sooner or later. That suggests the shine on it is not a novelty– and the public has not been panicked into loading up on it.

Aunt Sadie  is not the risk taker of a Soros or a John Paulson– or any of the other hard driving hedge funds speculating with borrowed money on gold. And they can afford  to be a lot more patient.

The ULTIMATE GOLD BUBBLE will occur when and if  confidence in the dollar plummets due to an inability of dealing with the nation’s debt load or  there is a sudden horrific spike in inflation, ie oil prices double to $200 a barrel– or some insane terrorist act frightens the holders of paper money into hoarding gold.

A more reasonable ultimate bubble  would be the decision to create a new global currency, which would have a serious weighting in gold. Think gold as a monetary reserve. It’s happening but gradually, not  as a  sudden panic.

Tags: , ,

Post a Comment

Your email is never published nor shared. Required fields are marked *


Subscribe without commenting