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I am a software engineer for hire. It has been my trade since my first gig ca. 1985, and as a full-time employee and as a consultant during and since my C.S. degree. This profession requires continuous and independent learning to keep up with the fresh college graduates. I am a financial... More
  • What Do The Anti-Gold Folks Feel When Watching Gold Go Up? 1 comment
    Feb 22, 2012 3:31 PM | about stocks: CEF, GTU, GLD, IAU, SLV

    When watching gold go up like it has the past few days (from about $1720 to over $1780 as I write this), what do those who are anti-gold feel and think?

    When someone has watched gold go 7x (from $250 to over $1750) in a little over a decade, and perhaps written comments or even articles about how bad and useless gold is, what goes thru their head when they see it go up 5% over 3 days?

    Do they feel happy? Probably not. Sad or regretful? I doubt it.

    Perhaps they feel amazement that the suckers still keep buying gold. Suckers like China, Russia, India, Brazil and more individuals than I can count.

    Perhaps they have been in denial for over a decade, and continue to deny that gold will go higher. Perhaps someday they'll be correct. Will it be before or after another major currency failure? I have no idea. But probably gold will have a significant drop.

    Perhaps the anti-gold and many gold buyers alike are confusing gold with an investment, when it is really savings and insurance, an alternative currency, or a speculative trade. Whatever the reason, gold is in demand.

    When individuals and institutions can buy gold thru any broker via the 50 year old Central Fund of Canada (NYSEMKT:CEF) or its newer sibling the Gold Trust (NYSEMKT:GTU), and the last few years new buying options have been added in the form of ETFs such as (NYSEARCA:GLD) and (NYSEARCA:IAU) and others, the demand for gold is obvious. It is possible that this demand will evaporate even more suddenly than it has built, and the price of gold will collapse.

    Gold has collapsed in price before. And I'm certain it will do it again. But will it collapse from $1750 to $250? Or will it collapse from $10,000 to $5000, or what?

    One reassurance I can offer, gold has never gone to zero. And unless you have the misfortune to buy at a very short duration peak, gold has not lost over 50% in the history I can find. Furthermore, gold has thousands of years of preserving buying power so savings in gold could and likely will be of value to your grandchildren, unlike savings in German Papiermarks, Brazilian Plano Reales or U.S. Dollars. While past performance does not guarantee future results, it is the best we've got.

    I find it ludicrous that people would argue not to buy gold based on their certainty that the gold price will collapse. How do they know what it will collapse from or to? I wonder if they buy insurance on their home or car? What is the value of auto or homeowners insurance should you desire to sell it? Mine is worth nothing. I buy insurance just in case I need it, and I buy it again and again even tho for the past 25 years it has always expired worthless every year. But if I do happen to need it, I expect my insurance will be worth something.

    Gold is insurance. If you need it, it will be worth something. If you do not need it, gold is savings because it will be worth something.

    Does anyone have any contender for the track record for preserving the value of savings that gold has established? You won't find such a contender in the U.S. stock market or dollar, or in any currency in common use anywhere in the world today.

    If you are justifiably concerned about buying at the peak, do not buy all at once. One approach would be to buy a little bit now, and dollar cost average in the future by buying a set dollar amount every month until you decide you have enough. If it makes you feel any better, for those future purchases you can buy less or even none if the price went up more than 5% in the prior month. With that strategy you would have missed the 1980 peak.

    The average price was $307.50 in 1979 and $612.56 in 1980, but the actual 1980 high of $850 was very high and very short, thus boosting the average well over what you would have paid most of the year. The average price was $459.64 in 1981, and the lowest average I can find since then was $272.22 in 2001. The average in 2011 was $1600.

    Gold is savings and insurance. If you need savings and insurance my suggestion would be to buy a little bit now and buy more with dollar cost averaging every month until you have enough. A little bit at a time is, remember, the way that one accumulates savings.

    Past performance does not guarantee future results, you might lose all the money you put into gold, this article is suggestions to think about and not financial advice or recommendations.

    d989b6dda327c44cbd7c8711c35ed2be cc29e6d4af07f812a882c929e63b29be

    Disclosure: I am long CEF.

    Additional disclosure: I currently hold CEF, and trade between CEF, IAU and SLV as it makes sense.

    Stocks: CEF, GTU, GLD, IAU, SLV
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  • winningtrader
    , contributor
    Comments (2459) | Send Message
    You keep awake at night
    Not knowing what the FED will do
    To your hard earned savings
    You hope the FED is on your side
    But secretly worry they may be on the other side
    Buy some gold and have sweet dreams
    23 Feb 2012, 04:26 AM Reply Like
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