rockymtnway

Countdown of Manipulated Gold Price Running Out

Gold is an excellent hedge against inflation, but right now it appears we're in for a period of stagnation or even deflation (housing prices dropping, oil prices dropping, food prices likely to begin going down soon). As a result, gold isn't likely to do much, imho, as there's not a dramatic increase in unsupported money supply.

While I'm pretty old school and believe that every portfolio should contain some dividend yielding gold stocks, I wouldn't go crazy and overweight in the stuff. While the current prices are attractive because of the improving dividend yields, as demand drops because of the slowing global economy, profits will suffer. Remember that a company like Barrick still spends $450/oz. to mine it and they're hedged with futures contracts to protect that margin. A lot of their sales are at prices fixed last year. That puts a cap on their potential profits and losses. Unless gold stays over $800 in the long run, profits will stay fixed or decline.