Facts

Why Gold at $1,200/Ounce Is Likely

"Comparing gold's run in the 70's is at best misleading and at worst retarded." This comment makes no sense.

Gold: The Only Remaining Bubble?

Since 1971 Gold has out performed every major asset class. It totally trounces both Stocks and Bonds.

The Manipulation of Gold Prices

Gold For the Long Run....

No major asset class has out performed Gold since 1971. Neither stocks, bonds or real estate.

I love how people always pick 1980 to trash Gold's performance!!! And this coming from Jeremy Siegel - Stock for the long run fame - who has probably cost more people money than even Alan Greenspan.

Gold: The Last Carry Trade

It is incorrect to say Gold Lease rates are due to Libor. Lease rates are an independently derived parameter. It is the Gold Forward rate that depends on Libor and Lease rates.

The reason Gold futures aren't in backwardation right now is due to high Libor rates. The Gold carry trade still generates a positive return.

Lets look at a 3 month term:

Libor = 4.8
Gold Lease = 2.5
Gold Forward rate = Libor - Lease = 2.3

So you make 2.3% in 3 months being short Gold assuming Gold prices remain unchanged. The Futures contracts reflect this pretty closely.

Is Gold A Sucker's Bet?

Alan interesting that you use 30 years or less to make your comparisson.

Comparing returns of Gold to Tbills from 1971 to 2008:

Gold up 24 times going from $35 to $850, while money invested in Tbills has gone up 3 or 4 times.

OUCH!!

I fear you fail to apreciate the precariousness of the current monetary arrangement. Just as the closing of the Gold window by President Nixon signalled the end of Bretton Woods, the recent credit crunch could well usher in the end of our current monetary arrangement.

Trusting government sanctioned paper money at a time like this is never a wise decision.

Don't forget that even in the Great Depression the targetted value of Gold was raised from $20.67 to $35. So should deflation actually gain a foothold, currency devaluation will be part of the governments solution.

Is Gold A Sucker's Bet?

Since 1972 the DOW is up 8.5 times and Gold is up 25 times. Gold quietly preserves wealth through time. 'Nuf said!