Jase

12 Reasons to Short Gold

Louis, shorting gold is the right trade. Though it's astoundingly far from the mean, the oil/gold ratio still has room to run before reverting, so careful not to enter a short too early. DZZ is a buy on a breakdown to $11 to $14. Considering going long Canadian dollars, also.

This Is Just the Beginning

Yank,

You've missed my point:

1. I do hold Gold, there's a place for it in my portfolio. I just don't worship it. It's a dead store of wealth as it generates nothing for me;

2. Brown was right in 2001, the US Dollar Index had topped out that year and it was an excellent year to dump gold. You mention that he dumped it at $250/oz. What you fail to mention is that the $250 referred to "2001 US Dollars", the buying power of a US Dollar in 2001 was over 40% more than is today. It's incorrect to compare gold's $1000/oz price in 2008 and think that gold appreciated by 400% since 2001. It absolutely did not. If it did, then an ounce of gold would buy 4x as much oil as it did in 2001. It does not, not even close. If the gold/oil ratio is anything to go by, oil is set to rocket and gold set to dump when viewed over the next 24 months.

As for your XLF comments, if it goes to zero, you won't have a vault to store your yellow metal, nor a functioning country. I suggest you lads sort out that problem in a hurry.

I maintain that the XLF will outperform gold, on a % basis, over the next 24 to 36 months. Gold belongs back below $500/oz, ready for the next generation of suckers.

This Is Just the Beginning

Ron,

Thanks for the feedback. There are few indicators that together suggest that gold's upside is limited, the technical reason I commented on is just one such indicator. The gold/oil ratio, the US Dollar Index, interest rates, various sentiment indicators--all these paint a similar picture.

As far as I'm concerned, gold is a dead store of wealth. It doesn't interest me, save for its place as part of balanced/diversified portfolio (I hold about about 8% of my wealth in the form of bullion: 0% silver, 3% gold, 5% platinum. To me, holding gold via an ETN like GLD is missing the point entirely.)

If push comes to shove and the US dollar begins to decline substantially (personally, I believe it will eclipse 95 to 103 on the US Dollar Index before any such reversal materializes), then a balanced investor shouldn't be hurt materially by this. Holding ones wealth in a single currency is a stupid, stupid idea. 40% of my portfolio in is Canadian Dollars, about 25% in US Dollars, the balance is in a mix of Francs and Sterling (yes, Sterling--never, ever bet against the United Kingdom long term.). I'm also holding crude oil in several of these currencies as a hedge. Australian Dollars, Brazilian Real, Canadian Dollars--currencies from resource-rich nations, are a good way to protect oneself from future chaos. I consider currency losses a small price to pay for a good night's sleep. As you get older, such things matter.

I like the US Financial sector from a 5-year point of view. I like crude oil (and the solar sector, for that matter) over that same time-frame. I still really like tech and especially the digital content industries, longer term. 2009 and 2010 is the time to pick up some of these assets. You complained when they were too expensive, now they're really inexpensive. Buy something, learn technical analysis, and sit tight.

Peter makes some excellent points, but the fact of the matter is... the world isn't going to end. Let things worsen, those living life within their means (be it those with assets of 100k or 100M) shouldn't be affected in the least. If you're an entrepreneur, now is the time to build. If you have a job, now is the time to work harder for your company to improve its competitiveness globally. If you are young, now is the time to educate yourself. If you're no-so-young, enjoy yourself, you've earned it.

The cycle playing out right now is just that, a cycle. It's the logical end to the actions that were made during the past several decades. The reasons for it aren't important--they can't be changed. Focus on what you can control. Blue skies will return, they always do. Until then, go build something.


On Feb 08 10:20 PM ron_paulite wrote:

> Hi Jase
>
> Good contrarian view. Gold is in for a rough ride. I'm always
> very cautious when every pundit is saying the same thing, and now
> almost everybody, including all the Wall St investment banks, are
> saying Gold will go up -- and that's scary.
>
> Yes, I don't believe Gold has completed decoupled from the Dollar
> -- although lately that seems to be the case.
> But if the Dollar strengthens, even if Gold can still go up (as it
> has been doing so lately), its upside is limited.
> On the other hand, the Dollar weakens, Gold will go up by quite a
> bit.
>
>

This Is Just the Beginning

Gold broken out? You must be kidding me. It's pierced the declining tops line, but it has yet to confirm the move. It's more likely to break $800 than it is to break $1000.