Maximus

Don't Kick Yourself Later for Not Buying Gold and Silver Now

CLH,

I empathize with you and definitely see your point. But I think the inflation issue is a medium-term one. If it doesn't show up in 1-2 years and deflation is pronounced then people might sell in a hurry.

Right now, people are buying gold out of fear (and greed) and this could continue for some time.

In the short run, I agree with the bugs although the one thing that could precipitate an immediate gold price decline is Central Bank selling in concert with other large banks shorting.

I'm an American that lives in Spain and people are getting really worried about the banking system and the euro. I plan on getting my savings out of euros and into bullion very soon.

I don't think Spain is solvent and I don't think the euro is sustainable. And I certainly don't want to hold pesetas.




On Feb 17 03:05 PM CLH wrote:

> CLH back. Sold gold in March of 2008 and rode it down with DZZ until
> Fall. As the double top forms I will ride it down again. Gold is
> now topping again. No inflation and dollar still strong so gold
> makes no sense.

12 Reasons to Short Gold

The contarian in me says gold will stay at its current level either way. Sell gold calls and puts...

Headwinds for Gold?

I like this article and agree that monetary tightening would be bearish for gold.

Apart from the ECB's stance duly noted on Thursday by the press, I have also read that Brazil and several other emerging markets will begin tightening.

A recent article in The Economist noted that emerging markets with dollar pegs will have a hard time tightening however if the US does not. They are averse to allowing exchange rates to rise since this might exacerbate inflation in the short run (from higher capital inflows). The Economist argued that so long as emerging markets failed to raise interest rates or depeg and allow exchange rates to appreciate, they would experience double digit inflation and commodity prices would remain high.

If this is true, does not the case for gold rests less with the European Union's monetary policy and more with the dollar and other currencies pegged to the dollar? As long as real interest rates are negative in the US and emerging markets then gold will go higher.

The key to commodity prices and when to sell seems to be real interest rate levels in the US and emerging markets.

Incidentally, I wouldn't mind being in euros either if the EU lifts rates. However, the ECB is going to have hard time acting alone. The ECB is in a bind: it needs a coordinated policy with other central banks to raise rates and fight inflation, but it also does not want to exacerbate economic conditions in some of its weaker countries, notably Spain, Portugal and Italy. There is already social unrest in Spain with several strikes by fishermen and truckers scheduled this week to protest the high price of oil. Higher interest rates will exacerbate the average Spanish household's ability to meet its monthly mortgage payment.