Douglas

4 Comments

    • Seven Reasons To Avoid Gold - And Why You Should Ignore Them [view article]
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      That doesn't convince me of anything except that inflation was pretty bad in 1979. And also that anyone who bought in 1980 (and didn't immediately flip it) was some lucky momentum trader's greater fool.       Aug 08 11:45 AM
    • Seven Reasons To Avoid Gold - And Why You Should Ignore Them [view article]
      Financial Markets Becoming More Stable
      In this section you concede that financial markets are becoming more stable. Gold only has value when there is a chance of the financial system collapsing (requiring expensive government bailouts). If the chances of financial meltdown are decreasing, then there is less and less impetus to hold gold.

      Falling Crude Oil Prices
      As you stated, when oil comes down, it is cheaper to get it out of the ground - thus there will be more supply of physical gold, pressuring the price down.
      And your example is a mixture of two unrelated and uncorrelated events - one of which would increase the price of gold (no more oil) and one which would severely depress the price (central banks selling gold). So yes, if both of those events, one being totally independent of oil, transpired then gold would go down while oil went up. That doesn't mean that they aren't positively correlated in non-hypothetical situations.


      Waning Appeal as an "Inflation Hedge"
      The fact that gold might not actually protect from inflation, but rather protects from powerful governments does not change anything. Some people have bought it as an inflation hedge, and in a recession this inflation risk is diminished - thus gold is demanded less.

      A Stronger Dollar
      Yes, almost all major currencies are fiat and their interrelationships do not fully dictate the price of gold. But all other things being equal if the dollar gained against the euro, the price of gold in dollars would go down and the price of gold in euros would go up.

      Reduced Demand from India
      Here you concede that actual demand for PHYSICAL gold is decreased (because of the high price and lower economic growth). Again, all other things being equal this is negative for the price - you just say "Oh well! Investment demand will make up for it." There has to be compelling reasons for people to demand an investment vehicle [cough: returns]. Depending on other people's investment demand to increase the price of your investment is the greater fool theory.


      A Weak Economy is Improving
      The great depression was one of the biggest deflationary periods in American history. If you think gold could make gains in a protracted recession (in which demand for almost all commodities would fall) you are mistaken.

      The Fed Will Raise Interest Rates
      The fed won't raise interest rates if we are in a recession. And a recession will not prop up commodity prices.
      Oh, and if you were first in line to sell gold when the fed magically raised interest rates to 6, I'll be the first in line to buy - at about $250 an ounce. An I assure you that in magical situation no one would want to cut me in line.


      A Golden Opportunity
      You're right - home prices don't only go in one direction, but gold prices go both ways too. But unlike commodities, home and equity prices have increased in real terms since the 70's. I bet there were a lot of articles like yours back then...

      They don't take God's money at the grocery store either.

      Disclosure: Long DZZ at time of writing.       Aug 07 10:08 PM
    • Why I'm Re-Establishing My Gold Position [view article]
      Re: IMF Sales
      With 176 votes for and none against (9 no-votes), the gold sale is clearly a priority in the IMF. So they will be leaning on US congress to approve. Also, any congressman with an ounce of education in economics will want to move this through asap in order to get some relief from soaring commodity cost to Americans (well, some might want to wait until elections this fall, but that's another can of worms.)
      Point is, even if the IMF sale doesn't crash gold on its own, you could be sure that gold won't be going up...       May 07 01:24 PM
    • POT: Great Moments in Live Financial TV [view article]
      Thanks to both Paul and DSX Lover for the laughs, I just want a clip of the interview. Apr 28 10:37 PM
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