700 Billion Reasons to Own Some Gold
October 02, 2008
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Given the $34 decline in the price of gold today as continued troubles in Euroland propelled the USDX above the psychologically significant 80-mark, I could hardly have chosen a more dramatic day to publish the attached article on gold.
Surely, those who were already long gold and other commodities will be in need of a pick-me-up today, and so hopefully will find solace in my continued assertion that gold remains the most viable safe-haven asset to countenance financial turmoil of this nature.
Those who eschew gold as a barbarous relic will no doubt point to today's action as evidence that gold is not so safe. To both groups, I say sit back and watch the show. Daily swings amid volatility and panic mean absolutely nothing... we're after the long-term trend here. The lion's share of today's selling came from writhing hedge funds lacking the liquidity to survive and the wisdom to hold. All the remaining deflationists here in CAPS, I urge you to go back to the drawing boards and retest your conclusions based on the reality of the $1.1 trillion the Fed has injected into the system in September alone, the $700 billion about to come, and the untold trillions that will follow. The deleveraging of the $1.2 quadrillion global market for over-the-counter derivatives will be met by our government and its dear Fed with a nearly limitless outlay of USD to counter those losses in an unsuccessful attempt to maintain an orderly financial system. The consequences of their acts will be borne out for generations, with acute hyperinflation characterizing the early stages.
As always, I am wide open to debate, and do not simply cling to my ideas as some sort of predisposed dogma. I am an open-minded individual constantly striving to test my ideas through re-examination and discourse. As always, I appreciate everyone's input, and thank you for examining these important issues with me. This is what makes CAPS the greatest place on the web for investors like us. If you enjoy the article, please don't hesitate to click recommend at the top of the article to increase its circulation through the site. If you've discussed the merits of gold with a friend or family member, my hope is that this article may serve as a useful tool to help being that discussion to the next level.
To those who have precious metal exposure due even in small part to my blogging or past writings, please know I share your pain today. A single-day move like this is very difficult to stomach under any circumstances, but all the more so when the tube is dominated by people declaring that the commodity run is over. I commend you for not giving in to panic and selling into a fall like this. Gold will move higher.
Fool on!
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