huskerbob

Eight Signs Gold Is Headed for a Correction

To clarify, I don't disagree with the idea of shorting gold - it's very volatile and there are lots of profit opportunities as it trades up and down.
I just don't think that we are anywhere near the mania stage of a bubble. There is much more bad news to come down the pipe, and the majority of people have no gold investments. Or savings, for that matter. Physical gold just isn't drawing that much money yet, even if you fudge and include GLD, as the World Gold Council does.
Most holders of physical gold will be content to sit on it for the foreseeable future, much like holders of cash and bonds.

Eight Signs Gold Is Headed for a Correction

The blind man feels the trunk of the elephant and thinks, "Ah! The elephant is long and round, like a snake!"
The huge increase in gold investment you are seeing is not reaching mania levels, but rather is building on the incredibly small amount of investment in gold.
As to your fifth bullet point, the world's largest refinery, Rand, had their gold blank inventory wiped out by a mere 5,000 oz order last year, per Bloomberg. So their production is not really off the charts.
Total dollar investment for gold skyrocketed last year to..... drum roll..... $29.9 billion dollars! Yes, that includes etfs, even though GLD is not required to hold physical gold.
So last year, we spent 6 times more on gold(world wide) than on chewing gum(in N America). People paid out almost twice as much for chocolate as for gold. Are we at mania levels yet? Not quite. People are just playing catch-up now that the long lull in investor gold demand is over.
You are recommending a portfolio to have at least 5% exposure to gold. the majority of investors are not there yet. You could compare the almost 30 billion in gold investment to the $36.6 trillion equities market. Or the $59.7 billion spent on gold jewelry.
Why do you have to be paranoid to take delivery of futures? It's just an attempt to sock money away relatively safely, and it's one of the only ways for an investor to get significant amounts of gold without a months long wait and huge markup. Are people paranoid to want a safe store of value for their money?
Are central banks paranoid? They seem to like to "hoard" gold. Why aren't they all dumping their gold at these ridiculous prices? Except England. Good move dumping that gold. I bet they're glad they exchanged it for trusty paper money! How's the pound doing anyway?

As for your idea of shorting gold, yes, you will still have plenty of opportunities to short gold as it continues a volatile rise.

The End of Gold, Part Three

Bad Dog, this quote from the great Ben Bernanke should be enlightening:
"Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. "

The End of Gold

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.