The End of Gold

Ask your barber about gold. He or she will tell you it's a good investment.

He or she will explain to you that the dollar is terribly weak because the Federal Reserve is printing huge amounts of money so gold is the only safe investment these days. He or she heard it on a commercial on AM radio - actually, not one commercial, but dozens. A bunch of his or her friends and relatives sent him or her emails about how gold was going to rise to $2,000 or maybe even $5,000 or even $10,000 per ounce. It was even on TV. Wow, if he or she had any money to invest he or she would sure buy gold.

But that's really the problem: he or she doesn't have any money. He or she cannot expand his or her business because his or her bank will not lend her the money - or him. His or her house may well be near foreclosure. His or her credit card company is about to drop him or bomb her with interest rates she can't pay. He will not get a car loan to replace the clunker parked behind the shop and she won't get a student loan to learn another skill when local layoffs cut demand in the barbering business.

The supply of dollars is shrinking, thus...

click to enlarge

...the price is once again rising – fast.

If people would only read a little further into their recently-dusted-off macroeconomics textbooks they'd find that while the government creates some money, the private system generally creates multiples of that amount. Well, it used to. Now what the private system does is destroy money as loans and credit lines are called in and cowardly business “leaders” throw layoff gasoline on the deflation fire. People are figuring out that the recent glut in bank reserves they see in the Fed's H.3 release is not an inflationary blast, but a probably insufficient bulwark against deflationary disaster. If Citibank (C) didn't tell you that loudly enough, I hope Bank of America (BAC) did. If you didn't hear their message, just wait for the next debacle. The American capitalist system has become a money-destroying machine.

Once deflation sets in, there will be no profits to be found – anywhere. But as I write this and gold puts in the second spike of a double or triple top, the value proposition short gold becomes really too good to ignore. If gold can break convincingly out of the anti-bubble, fine, you stop out somewhere between here and north of $1000/oz. Pick your spot, but it's not a bad loss. If gold cannot break out of the commodities anti-bubble, you are in contrarian heaven. In that scenario, gold loses a minimum of $250/oz before it gets another sustained uptrend and the fundamentals remain bearish for the foreseeable future. I think this present spike in gold will prove about as reliable as the recent spike in the euro:

They are (were) both based on the same, flawed, short dollar thesis.

In my view, going long gold is just another manifestation of the Deflation Denial syndrome. I think the smart play – maybe the only play – is to be long deflation in this environment. If you can find a better deflation play than going short gold – make it.

Disclosure: No positions

Comments

[Steven Hansen:]

i would hate to bet how all of this will turn out, but it is unlikely gold will be any lower than it is today. it is very likely, that gold will be higher - and that it begins to act like a reserve currency and not a commodity.

Jan 26 04:29 AM

[Conan the B...:]

The H: Can I assume that very "unlikely" and very "likely" are not set in stone since you use those words so very precisely"

What scenario would cause you to change your mind?

Say a move by Gold back to $750?
The USD moving up another 20%?
A move by the US Markets to DOW 6,000 and S&P $600?

Or would Oil below $30 do it?

With 28 analysts bullish on gold and only 3 bearish, I would think some sort of caution is called for on the short term, say 2-3 months. Just an opinion.

Jan 26 04:52 AM

[huskerbob:]

Ding! I found a better deflation play. Sorry, but the fact that dollar denominated investments are imploding doesn't actually make dollars more valuable. Yes, there is a temporary demand for dollars to settle dollar denominated debts. This drives the dollar up, just as the need for cash spurred equity selling which drove the prices of even sound equities down.
When the dust settles, the dollar's problem remains. Every dollar represents a dollar of debt, and we have to service that debt, from tax revenues or just plain printing money.
What will happen to our tax base during a sustained deflationary period? If you need a clue, look at California.
And don't look now, but we have a few more retirees expecting their welfare, er, social security checks in the mail. Medicare, anyone?
The only way to save the dollar is to pay down debt. If you think that will happen, then yes! Short gold!
But if you think people will become wary of loaning our government money, you may want to go the other way.
America needs the world's savings to keep us afloat, and those savings will not be coming here for much longer.
Maybe you should go back to your barber for some sound financial advice.

Jan 26 05:29 AM

[ktchnsnk:]

sometimes perception is the most reliable bet on reality. w gold, i think, more often than not.

i'm inclined to go w your opinion of what my barber would say as there's about much hair pushing out from my back, nose & ears these days as my head, and my wife does a pretty good job w what's left over... last i remember, the subject was more towards country music & local high school football than economics & it might surprise them a bit much if i showed up for a consult on the price of gold.

thanks for the tip.

Jan 26 06:26 AM

[socrateazz:]

I read your article and saw enough belief based idiotcy that I think buying gold today would be a good idea. Businesses are not laying people off because they have no guts. They are laying people off because they either do so or they fail! Businesses do not want to get rid of trained employees. They have to cut cost! where do they go? My business is short of cash. I have not been able to get a loan. Production loan has expired. My current choice. Cut cost or fold! What will I do? Guess. I may have no choice.

Jan 26 06:32 AM

[dlaw:]

Thanks for all your comments, as always.

Mr. "Socrateazz"'s suggested to me that it might be useful to explore the deflationary attitude that has taken hold in America. I will do so in a follow-up to this piece.

Clearly, there are many people who think that deflation is unlikely or unlikely to be of any duration. I would simply suggest that whether or not he believes there will be significant deflation, a wise investor would nevertheless have a deflation game plan, given the present economic circumstances. So far I have not read of a better deflation play than going short gold, although I'm sure they exist. If you think of one, make it. Oh, and then please write about it.

Thanks again.

Jan 26 07:17 AM

[Jacko69:]

Read Bernanke's 2002 speech on Deflation if you want to know what his reaction to deflation would be. There is going to be massive quantitative easing. And if the banks won't co-operate, he will get the new money directly to the people. Think big tax refunds financed with new money. Think big fiscal spending financed with new money. Lots and lots of new money. Count on it. They will do everything they can to prevent deflation setting in. They will err on the side of too much new money creation rather than too little because they would prefer a too much inflation to deflation. The Fed does have the power to devalue the dollar (ie: create inflation) because it has the legal authority to "print" infinite amounts of new money. Even if demand for money falls they will simply overwhelm the fall in demand by massively increasing the supply. The value of dollars will fall. The Fed knows it must do this because allowing deflation in a highly indebted economy is economic suicide. Either way gold is good: if money supply increase devalues the dollar, gold rises. If they loose the battle with defaltion (highly unlikely for the reasons above) then the banking system collapses in which case (if you can survive) gold is better than dollars as a store of wealth. In the event of scenario two, you also want a gun, a bike, lots of tins of beans and a farm located far away from the starving, rampaging masses.

Jan 26 07:25 AM

[User 324501:]

I actually agree with this article. no matter how much money they print, unless that money ends up in people's hands, and people think that there is nothing better to do with that money except for buy gold, there will no major upward moves.

Whoever wanted to buy gold has already gotten plenty. Why would they continue to buy at these levels?

Not to mention the profit taking that will occur.

Jan 26 07:37 AM

[DONE_SONZ:]

Fiat currencies are worthless and so is this blog.

Jan 26 07:41 AM

[Cesato:]

The play with Gold still has a significant speculative component, personally I don't think that being extremely bullish nor being extremely bearish, short term, would actually pay off as investment, the proper setup is to be adaptative withint the almost 1 year long consolidation range. Now if I was to adopt a bullish instance, I would play it with the changes in the EUR/USD, the undeniable relationship between these two assets favors Gold for 2009, but people will tend to make the same mistake over and over again short term, which is buying the break of 900 only to see it come down to the 700/800 area. Exercise patient, do not rush into buying or selling in distress markets, wait for Feb 15 to see what the range was for the first 1 1/2 months of 2009 and then buy. The time to be extremely bearish has passed and a tiny bullish attitude may be coming. GOLD/(EUR/USD) ratio stands at 697 which is the highest since Gold was at USD 1.000, and suggests there is a preference for Gold, but it does not mean, in no way, that Gold will skyrocket in a month. From the demand/supply standpoint, production cost is coming down which makes B/E for producers lower and Governments are in no hurry to fill their safes with Gold, not quite yet. There is a lot more going on the Stock Markets, Bonds, Safe Havens and so forth and it is what Governments want the Gold Price to be. Also remember that Gold left a lot of traders (not investors) wondering last year why Gold did not work in their benefit, quite simple August was the time to be bearish and I said it back in August, and everyone was buying at the high 800 level following analysts recommendations, what a shame, those losing plays are not coming back to the market right now, they will eventually if they did not lose all their cash, meantime trust yourself, your market sentiment if it's proven right within the last 6 months and follow the short tem trend whether it is up or down, if Gold was to go higher, well a consistent break over USD 1.000 with a depreciating USD will make the trick. Disclosure: I don't have any market position in Gold at the moment nor do I own physical Gold.

Jan 26 07:58 AM

[prairiedog555:]

Very confusing. Both arguments for Inflation and Deflation have merits.
All I have to go on is what I see as a consumer, everything going up in price except electronics.

Jan 26 08:13 AM

[Roger Knights:]

It's not just inflation that underlies the case for gold, it's increasing systemic risk. Perception of that risk increases abroad as foreigners see our bad economic numbers. They then buy fewer US bonds, and sell less gold from their central bank holdings. (The latest quarterly report from the World Gold Council revealed this pattern of declining central bank sales.)

Also, foreign individuals will buy gold if THEIR currencies depreciate. There needn't be inflation in the US for gold to rise--buying pressure can come from anywhere. Finally, inflation need only be a threat on the horizon for it to motivate gold-buying. Thus, even in a deflationary environment, gold could rise until expectations are fulfilled. It could rise longer than shorts could stay solvent.

Speaking of which, gold has risen $10 in London this morning, to $907. The professional shorts are making themselves scarce. Maybe they know something.

Jan 26 08:17 AM

[nmelendez:]

GO, Bernanke, GO!!!!!!! Everyone in the US is gonna be a MILLIONARE!!!! Keep dropping them dollars. To heck with the world. Let's see them buy our technology unless they are willing to use dollars!!!!! I think everyone has the wrong idea. The US is not gonna rollover like some lap dog. I see what bernanke is doing and i love it. Heck give me a 20% pay raise. I wanna see what the rest of the world is gonna do if the US quits subsidizying them. WE ARE THE FOUNDERS OF CAPITALISM! As far as gold, it's a great hedge so when inflation comes i get to pay off my debt....FAST!

Jan 26 09:01 AM

[ronslim:]

My barber wouldn't touch gold with a ten foot pole, says he's selling his junk gold to cash4gold. i think the easy short is bonds. Trading gold is for fools, probably more than treasure hunts.

However I buy gold, keep, each and every month, and I don't care what the current price is dollars. The absolute safest bet on a deflation scene is long cash. Why get cute?

Jan 26 09:08 AM

[SW Richmond:]

Here's the problem: the inflation / devaluation play is obvious, but so is the deflation play. Radical dollar bugs fail to appreciate the actual size of the gold market, which is tiny compared to stocks and bonds. A small fraction of money seeking the safety of gold will cause a significant move in gold (the reverse is also true).

Two questions occupy my waking moments:
1. When will all the new money gain traction?
2. Where is the tipping point where printing translates into collapse?

I am convinced that one of the two will occur, and it now seems the economy will continue to slow down until one of them does occur. I don't know, and there is no way for me to know, how long this will take. The worst possible scenario is that we will endure a forced liquidation period similar to that which was experienced by hedge funds; sell everything of value you own in an effort to stay afloat, while your income source is threatened. At some point this liquidation period ends (capitulation) and then currency devaluation begins to be felt. Just as the middle class is left jobless, homeless, and assetless everything they need to survive skyrockets in price. Granted, this is a nightmare scenario, but it seems possible, so I am hedging my PM positions with hefty amounts of cash. The purpose of the cash, literally, is to defend the PM position.

Strong hands.

Jan 26 09:18 AM

[Conan the B...:]

If Gold becomes an Investment grade Asset class, it can go up in deflationary as well as inflationary times.

Scarcity vs inflation, demand and scarcity will win.

I think the Investment counselors are well on their way in accepting all commodities as having a place in porfolios.

Gold Bugs will just have to accept gold as just another investment in the not to distant future.

If Calpers can go the commodity route, anyone can.

Jan 26 09:39 AM

[Smarty_Pants:]

Inflation or deflation, debate as much as you like. I find it interesting that the article doesn't include a chart of gold itself:

stockcharts.com/h-sc/u...=$GOLD&p=D&b=5...

When I look at this chart I see gold in the early stages of an uptrend. Since the November lows gold has been making higher highs and higher lows. The 50 day moving average turned up rougly a month ago. The price is also making new highs the last few days in strong rallies.

What remains to be seen is whether / when gold breaks above the $920 level and how it acts thereafter. A strong move above the $920 level with good follow through will be a very good sign for continuing strength in gold. If that were to happen, I wouldn't want to be short gold.

Jan 26 09:47 AM

[Marcocruces:]

Bailey's call is as ignorant as that of recent comments by Kingsdale. The fact that he or she loses his or her job, can't get a loan or watch their business bomb has got nothing to do with deflation, but everything to do with sentement, fear and the domino effect of economic restraint. People are simply hanging on to their money, hording it, hiding it, but certainly not destroying it. So what loans are called in, now someone else owns the same money. An idiot would have to actually burn his cash to reduce the money supply. Bailey needs to read a book or give up economics!

Jan 26 09:54 AM

[SW Richmond:]

The deflation play is US Treasuries. How does their future look?

www.ft.com/cms/s/0/b87...

"The International Monetary Fund is caught in a stand-off between members over whether to label China’s currency as “fundamentally misaligned”, a politically explosive move that could stoke global tension over economic imbalances."

Go Treasuries!

Jan 26 10:04 AM

[5142152-337:]

I know the definition of deflation. As a shopper in my home I know that prices on EVERYDAY items are rising continuously. True, I can buy a tv at bargain prices, but how many can one buy? How many does one need?

The author is not shorting gold. Why not? If you believe that the Fed et al will not not continue to print dollars, raise rates, give more billions to banks, then you should be pounding those keyboard keys to load up on DZZ.

Then again sir, you may just want to wade in, toe by toe, into the gold tsunami that is beginning! You will be glad you did. Have a great day!

Jan 26 10:10 AM

[Smarty_Pants:]

"The deflation play is US Treasuries. How does their future look?" - SWRichmond


Long term the place to be is short the Long Bond. However, I wouldn't be surprised to see the FED or the Plunge Protection Team spring into action to create a mini rally in the long bond price.

This is the risk of simply shorting the long bond and forgetting it. The guys struggling to keep the music going have very deep pockets and can take virtually unlimited losses in the short term if it suits their needs.

Be aware and tread carefully.

Jan 26 10:13 AM

[Ian R. Camp...:]

For 35 years I ran Canada’s best known Business Valuation Consultancy. Three years ago I became intensely interested in the U.S. Consumer, world economic prospects, and the mining and oil & gas sectors. Each day I review over 100 Internet articles and summarize and comment on them on StockResearchPortalBlo.... Today this is one of them.

Everyone has heard the Joe Kennedy 'barber' story. What gold really is in my view is a monetary metal (not a commodity metal) that is a 'safe haven' hedge against bad times - whether they be inflationary or deflationary. I spent a great deal of time studying this between September and December of 2008, and posted my conclusions (and reasoning) on a series of 11 Blog Posts on stockresearchportalblo.... They are there to be read by anyone interested in doing that under the Category 'Gold as an Investment'.

Jan 26 10:22 AM

[huangjin:]

If the U.S. financial system was sound, your argument would be spot on. But even if the banking system is not effectively insolvent, as Mr. Roubini said, the potential losses are still huge. Investors want to hold money, which is dollars and... gold.

Maybe people are talking about gold, but I know very few people who are out buying coins and bullion. It still gets a laugh when I tell my friends (relatively educated on investments versus the general population) to buy gold.

To answer your question, EVERYTHING is a better deflation bet than gold. If gold falls, everything will be falling too. Maybe gold will fall more, but you'll make money shorting most anything. However, gold hasn't fallen for several months now. I would rather make a high probability, small gain bet on deflation in financial assets, rather than a low probability, high return bet on gold joining the other commodities with 50% losses.

Jan 26 10:43 AM

[ShockOnT:]

Value is relative. Gold has no substantive industrial value and the jewelry market is not sufficient to support the price. Historically gold has been a store of value and appears to be returning as such (monetizing). Value retention in the dollar has a supply/demand component and a confidence component. Right now there is a the supply/demand component is positive due to the great unwinding. Confidence, however, is another story. After the deflation the US will be left with a smaller real GDP and ballooning national debt/govt deficits. With less ability to service trillions in debt via tax revenues, one would have to conclude that confidence in the dollar will wane. When the "great unwind" is over the remaining support mechanism for the dollar will be removed and real assets will appreciate versus the dollar.

Do you think that the national debt is going to increase exponentially or decrease? This really isn't that hard to figure out.

So short gold, and borrow money to do it too. Your faith in paper and ignorance of history will benefit some of us...that is, unless the USA outright defaults on its debt...then you will be right.

Jan 26 11:01 AM

[Apple:]

the royal bank of scotland has just been cooked. Bank of america is the walking dead. what ever the FED is selling, i don't want it. thanks, but no thanks. 10%+ in gold production shares and a few kilo of gold as insurance can't hurt. ask an icelander what he would prefer? the remaining i-bankers are preparing to run roadshows for gold mining ipos in the 1st and 2nd quarters so there will be the added fuel of them ramping up interest.

Jan 26 11:33 AM

[SW Richmond:]

This should be obvious to anyone who is paying attention, and it is precisely why I believe the Fed will print until a) inflation or b) currency crisis.

Ergo, the future of the USDX is either a) down, or b) down. Will someone please explain this to Shedlock, the deflationists, and the radical dollar bugs?


On Jan 26 11:01 AM ShockOnT wrote:

> (monetizing). Value retention in the dollar has a supply/demand
> component and a confidence component. Right now there is a the supply/demand
> component is positive due to the great unwinding. Confidence, however,
> is another story. After the deflation the US will be left with a
> smaller real GDP and ballooning national debt/govt deficits. With
> less ability to service trillions in debt via tax revenues, one would
> have to conclude that confidence in the dollar will wane. When the
> "great unwind" is over the remaining support mechanism for the dollar
> will be removed and real assets will appreciate versus the dollar.
>

Jan 26 11:44 AM

[scotty1560:]

For me inflation is caused in two or three primary ways.
Supply and demand...commodities like food should always go higher.
Taxation...governments want to always spend taxpayer's money so
they directly or indirectly create an inflation in cost of living.

The third cause is where I think why I see more deflation in upcoming years.
Leverage...if a bank is lending at 30 to 1 reserves than they are creating a massive inflation. But right now that's not in the cards. Tighter leverage and
regulations should rule for a long period of time.

So items like real estate, yachts, luxury items, credit cards and lines of
credit...all things that I see continuing to retract for a few more years.
Contraction should mean lower earnings and lower P/E ratios.

Government stimulus is a short term (6-9 month) boost only...then back to
more deflation. Our economy is leveraged based...cash buyers do not create
inflation. Without leverage our economy will continue to adjust to much lower
cash buyer based levels. I'm not a gold bug but might be proven wrong..
consider it an asset and subject to leverage like any asset.

Jan 26 11:57 AM

[Zorrip:]

It looks to me like the gold price is being setup for a fall to fleece the longs. Price manipulation rules the gold market; it's just too small. So yes, short it, because its going to drop a couple hundred dollars in the next week or two, maybe sooner. Or it could go up to $1000/oz then fall. Either way shorting it now is not a bad idea. Not to mention the deflationary argument which, to me, is a long term guide. No, these bailouts are not for the people, never will be. So there is no inflationary argument to speak of--no money, no inflation. The people will get token help in their pockets, that's all. The banks are destroying money relentlessly and ruthlessly. Nothing could be more deflationary.

Jan 26 12:52 PM

[auto44:]

When I was a teenager, a new chevy was $1500 Gold was $32 a candy bar.$.05 the purchasing power of the dollar rarely goes up. That is why we invest. Trying to maintain or increase the purchasing power of our savings. At any given time some asetts lose purchasing power relative to the dollar and some gain. Today's uncertain times indicate to me that it is prudent to have about 10% of savings in gold and a large segment in cash with an eye towards value investing when and as markets begin to stabilise and become more rational. Normally market swings are due to the two emotions of fear and greed. Today's market is in the condition it is because of a lack of trust. People find that they can't trust politicians,bankers,ra... agencies, ceo's cfo's,analyst, and etc. but they can usually trust an oz. of gold to be an oz. of gold. You can make all the graphs and tables you want but until trust is restored, don't expect any economic miracales.

Jan 26 01:49 PM

[WoW Playa:]

In Massively Multiplayer Online Role-Playing Games, the value of gold/ game currency almost always goes down. One's dollar or euro almost always gains more spending power for more game currency as each game progresses.

now if only the real world had the same kind of deflation taking place.... that would be wonderful!

Jan 26 05:04 PM

[patio:]

my "play" has been to stay in CD's the past 18 months. Not sexy, but safe, and I think my puny 3% was better than losing 40-50% in some asset like stocks. Plus, I agree with you totally, we're in deflation and will remain so. So my 3% ( and return OF capital ) has actually more buying power.
Shorting gold? I like your logic, but too many gold bugs will keep it up IMHO, at least for a while.



On Jan 26 07:17 AM dlaw wrote:

> Thanks for all your comments, as always.
>
> Mr. "Socrateazz"'s suggested to me that it might be useful to explore
> the deflationary attitude that has taken hold in America. I will
> do so in a follow-up to this piece.
>
> Clearly, there are many people who think that deflation is unlikely
> or unlikely to be of any duration. I would simply suggest that whether
> or not he believes there will be significant deflation, a wise investor
> would nevertheless have a deflation game plan, given the present
> economic circumstances. So far I have not read of a better deflation
> play than going short gold, although I'm sure they exist. If you
> think of one, make it. Oh, and then please write about it.
>
> Thanks again.

Jan 26 05:21 PM

[Mayascribe:]

Think the Brits are buying gold hand over fist with how the almighty pound is doing against pretty much every currency in the wolrd?

You betcha. Therein lies the rub. It does not matter, or maybe rather, it matters less and less how strong the dollar is, when it comes to keeping the price of gold down.

If the price of gold bullion is going to go down, then why is the US mint making hard to obtain coins? Or, how about Comex not meeting its orders. Or, GLD (the Canadian Spider Fund) that is buying tonnes of bullion? Or, the South African mint slowing down Kuggerand sales? And then there's China, hoarding all the gold it can mine.

I see bullion bouncing around, but trending higher to the end of the year. Then watch out!

Jan 26 07:12 PM

[Bruce Pile:]

Gold's monetary value seems more levered to banking and currency chaos and uncertainty problems in general and not to just one of those problems - inflation. Over the first few years of the Depression, gold stocks produced very good earnings and stock performance and not because of inflation.

The biggest thing I don't like about gold is that its a crowded trade in the crowded end of the canoe - a bad, bad place to be in the investment world. When your barber says buy, you should usually sell. The Horizons BetaPro Adviser Sentiment Survey just released had this to say, "Advisers have been consistently bullish on gold bullion for the last eight quarters, with two-thirds of the advisers continuing this positive outlook." The last eight quarters? That's two years, and gold has gone way up over that time. But I still dislike any high profile investment. If it's the subject of any poll, it's too high profile for me.

Jan 26 08:45 PM

[Keer-eh-Khar:]

Short Gold? LMAO!

I rather short David Bailey. What a fool!

seekingalpha.com/artic...

Jan 26 10:10 PM

[Phil Anthropy:]

As mentioned in other comments, gold prices appear to some to be manipulated heavily. I have heard of a bank carry trade, where banks lease each other gold, the lessee pays 1% for the lease, sells the gold to drive the price down, uses the received funds to buy a gold future, and invests the rest in U.S. treasuries or insured bonds. At the end of the day, the lessor receives the 1% on what should actually be in-house gold reserves. The lessee gets a few percent, and the price of gold is driven down. Regardless of whether this is true or not (and I do not accuse anyone of wrongdoing), gold price fluctuations, mysteriously, do not correspond to market conditions that would be anticipated to drive the prices up or down.

Interest rates are also manipulated (some say), such as treasuries being bought by the billions with Chinese and Saudi recycled dollars, to keep rates low. Some believe that there is very little actual honesty in the markets at this point, if indeed there ever was,

The battle between inflation and deflation has been joined, but there is not yet a predictable outcome. It looks to me as though deflation will win out, because the destruction of money and credit resulting from unwinding the astounding amount of leverage used by large international interests seems too much to overcome. We can invest billions of dollars, but when credit (money) is destroyed, its multiplier effect is also destroyed. I do not believe it is possible to inflate enough trillions of dollars into the U.S. economy to overcome the destruction of credit and its multiplier.

In terms of gold, some believe gold prices will be manipulated to fall in order to make the dollar -- a fiat currency worth nothing but the ink and paper used to print it -- a safe haven. In the long run, many believe that gold will emerge victorious, when the dollar becomes hyperinflated. One thing is clear: so far, the track record of gold is better than the track record of the dollar as a store of value.

Jan 27 12:53 AM

[Conan the B...:]

I bought more DZZ on Monday after I saw all of the Weekend's Buy Gold blitz on CNN, Bloomberg, CNBC, talk shows, Breakouts, etc.

Gold anticipates, what has gold not anticipated at this point in time? Gold enthusiasts have already priced in Hyperinflation and USD decimation.

IMO

Jan 27 02:03 PM

[CLH:]

I agree with the author. Gold has been going up for 8 years and is over priced. The dollar is no longer weakening and trillions of dollars have disappeared as debt is eliminated. Deflation. Same as Japan and US in the 1930s.

I just bought some DZZ.

Jan 28 03:01 PM

[Ocotillo:]

Marc Faber had the smartest comment I have read about gold and other "hard assets"......(from Barrons a couple weeks ago)....

"Some say the dollar will collapse this year, but collapse against what? The euro? The Russian ruble? These currencies are even weaker. In the very long run, each citizen must become his own central bank. Every responsible citizen must hold some physical gold, platinum and silver -- physically, not through derivatives".

Jan 31 10:39 AM

[NYCDart25:]

Though I do think that we will see a correction in both Gold and the Dollar, both of these are far to susceptible to manipulation and in the case if gold, to commodity issues. Every piece of electronics you buy has something gold in it for example.

I want a pure financial play that recognizes the dollar issue. That is why I am short long term treasuries...RYJUX NOT TBT, constant leverage trap is too frightening for a long term hold.

Jan 31 06:03 PM