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David Batson
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Mr. Batson thinks the most important fundamental that ought to be considered when analyzing liquid assets is the necessary multidecadal trade-off in outperformance between stocks and commodities. This is a natural part of the business cycle that allows supplies of raw materials to be increased... More
  • Only Buy Gold Through $2000 Per Ounce 3 comments
    Jul 10, 2013 9:34 AM | about stocks: GLD

    I want to make this explicit.

    For the last decade, I have been saying without reservation "Sell Stocks and Buy Gold." I detail most of the reasons in my last article here on Seeking Alpha.

    But the recommendation only lasts through the $2000 per ounce level. The reason goes to investor psychology much more than any driving fundamental. I believe that gold will go much higher than $2000 per ounce but absolute volatility will increase dramatically.

    In the last decade, there have been two corrections of approximately 35% in the price of the metal of kings--the one in 2008 and the current setback. In 2008, no one cared. It was just another asset coming down in the crash of that year. No one owned it except crackpot "Gold Bugs" and people who make jewelry for a living.

    This correction has been much different. It is still the asset that nobody owns but pretty much everyone has an opinion on, nonetheless. Those opinions are mostly bearish according to every major poll out there. In fact, people are more bearish on gold than at any other time in the last 15 years (there was slightly more expressed bearishness on gold in 1998).

    And the price is only down 35%. So strange.

    It probably has to do with the headline number, I think. At its deepest low, gold has been down almost 800 dollars from its highs! That is a big, headline number particularly for the Baby Boomers that remember when gold was about $800 just before it crashed after their parents bought it in 1979.

    Can you imagine the panic when gold reaches through $3000 per ounce--let us say it gets to $3300--and experiences a 1/3 correction from there? That would be, you guessed it, over ONE THOUSAND DOLLARS! Just like when the DOW crossed through 10,000 in 1999, those big round numbers get the attention. It will happen again.

    Now, this is definitely comes from a personal sense about the markets, but it is my recommendation and my reputation. After $2000 per ounce, I will no longer be recommending purchasing gold unless you have a way to hedge your exposure. Most people have no idea how to do this. Fortunately, as a Commodities Trading Adviser (CTA) I will be offering a program for hedging exposure to gold through physical holdings as well as tracking funds like SPDR Gold Shares (NYSEARCA:GLD). Stay tuned.

    David Batson



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I own physical gold.

    Stocks: GLD
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Comments (3)
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  • bd4uandu
    , contributor
    Comments (2074) | Send Message
    Any thoughts on other PM's? It's written that silver might have more upside potential.
    Nice shades keep them please.
    10 Jul 2013, 10:42 AM Reply Like
  • David Batson
    , contributor
    Comments (20) | Send Message
    Author’s reply » Silver is about twice as volatile as gold. It can rise with higher relative strength in short bursts, but it tends to come down about twice as fast on a percentage basis during corrections. Over time the gains and losses tend to balance out.


    I usually prefer to be short of gold and long of silver for that reason.
    1 Dec 2013, 05:16 PM Reply Like
  • David Batson
    , contributor
    Comments (20) | Send Message
    Author’s reply » Oops.


    "I usually prefer to be LONG of gold and SHORT of silver for that reason."


    This also refers to my futures trading, not my physical metal purchases. I think you can buy silver here for the long term.
    11 Dec 2013, 01:54 PM Reply Like
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