Posted on 11/25/2010 7:11:40 AM PST by SeekAndFind
The gold bears continue to come out of the woodwork with every tick higher in the precious metal. This type of speculation appears to be particularly rampant in the professional trading community and among "sophisticated investors." The favored argument against gold is that it has no "utility."
Gold indeed has very little practical utility. This line of thinking, however, completely disregards the fact that gold has been equated with "value" and "money" throughout human history.
While gold is not backed by earnings and dividends, or consumption trends (like oil and food etc.) it is backed by deeply entrenched human psychology. To think that this is going to change anytime soon is ridiculous - it won't. The price of gold may fall, but the yellow metal will continue to be thought of as a substitute for money.
Furthermore, the fact that gold does not earn income like dividend paying stocks, and is not as strictly governed by production/consumption trends like corn, wheat, crude oil and other commodities makes it's valuation a much more subjective endeavor.
In other words, gold's price is determined by human psychology much more than most other investments. The demand for gold, except for its uses in making jewelry, is based on psychological stimuli which are rooted in uncertainty. Therefore, it is exceedingly difficult to accurately say what price is "high" and what price is "low."
This is why it is so baffling to see respected market commentators and participants repeatedly attempt to call the top in gold. Who in their right mind would try to call the top in a 10 year bull market where the valuation of the asset in question is based on human psychology and little else? It makes absolutely no sense.
Furthermore, the reason gold is likely not nearing a top is because of the rampant skepticism about it in the first place. Markets top out when sentiment gets extreme and everyone has already bought in. Fortunately for gold bulls, these conditions currently just don't exist.
The likely end of the long bull market in gold will likely be dramatic and parabolic in nature. When the last bear goes out and buys himself a gold bar, we will have our top, but given the rampant speculation that gold is on the precipice of a steep decline, we are likely nowhere near a top.
Gold will stop rising when fiat currencies stop devaluing.
I can sleep pretty well at nights now, and might put more in as the dollar falls.
Gold has historically provided access to females - the ultimate Darwinian utility.
(No disrespect intended.)
He is Evil but he is not stupid...
Soros Gold Bubble Expanding as ETP Holdings Increase
Gold’s 23 percent surge this year to a record is proving no deterrent to George Soros, John Paulson and Paul Touradji, whose investments signal more gains for the longest winning streak in at least nine decades.
Securities and Exchange Commission filings this month by Soros Fund Management LLC, Paulson & Co. and Touradji Capital Management LP listed investments in gold as their biggest holdings. Exchange-traded products own 2,088 metric tons, equal to nine years of U.S. mine supply, data compiled by Bloomberg show. Precious metals will produce the best commodity returns in the next year, Goldman Sachs Group Inc. said in a Nov. 9 report.
The purchases show how investors are snapping up hard assets as governments and central banks led by the Federal Reserve pump more than $2 trillion into the world financial system. Gold in exchange-traded products, as much as half of which may be held by individual investors according to BlackRock Inc., is equal to more bullion than the official reserves of every country except the U.S., Germany, Italy and France.
“People who are selling gold here are making a big mistake,” said Michael Pento, a senior economist at Euro Pacific Capital Inc. in New York who correctly predicted gold’s highs the past two years. “The gold bull market will end when real interest rates become positive and we’re very far away from that. The Fed believes it’s going to have to print more money to keep real interest rates from rising and rescue the economy.”
Continue
Where do you think is the safest place.
The golden rule says that whoever has the gold makes the rules.
I thought we were at the top at $800 LoL
“Why Would Anyone Try To Call A Top In Gold?”
Make some profit on the stock market.
“Gold will stop rising when fiat currencies stop devaluing.”
Straight-out FACT in less than 10 words. Thank you.
As long as there are diamonds mounted on it.
We held onto Lucent stock as it reached $79
There are lessons to be learned from trying to time the market.
RE: I thought we were at the top at $800 LoL
According to the Inflation Calculator website:
http://www.westegg.com/inflation/infl.cgi
What cost $800 in 1985 would cost $1573.97 in 2009.
Also, if you were to buy exactly the same products in 2009 and 1985, they would cost you $800 and $390.92 respectively.
Gold is just adjusting to inflation.
.....Where do you think is the safest place. .....
Fabricated into segmented jewelry and on the body of your spouse. The segments should be small enough to be removed as required but secure enough to withstand the rigors of unintended flight to a safe place
RE: There are lessons to be learned from trying to time the market.
If you own Gold ETF’s and now on the money and significantly so, and you’re nervous about a repeat of Lucent, you can always put a sell limit on the ETF.
Say, you bought Gold ETF (GLD) at $800 and it is now way over $1300, why not put a sell order that triggers if it drops to say $1200?, You’re still on the money (way ahead) by doing that. That’s one way to control downside risk.
Just thinking allowed...
.....Gold is just adjusting to inflation......
Corollary:
Ditto housing except in locations where it got ahead of the curve
Where do you think is the safest place.
My place.
Thanks I’ll be right over! :D
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