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ThenewM (53.08)

Finally... someone who agrees with shorting gold.

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February 18, 2009 – Comments (4) | RELATED TICKERS: GLD , GDX , IAU

At least that's what I think they are hinting at :) 

I have been searching various websites to find someone that agrees it is a good idea to short commodities INCLUDING gold & silver.  I didn't get explicit buy-in from Bernanke today, but he essentially indicated the FED is much more worried about deflation than inflation.

 http://finance.yahoo.com/news/Fed-cuts-US-growth-view-and-rb-14402999.html 

Just to refresh - if prices go down, the gold you hold today will be worth less dollars than it is now.  While it may keep pace with other commodities, it isn't going to increase your relative wealth.  You would be better off holding dollars, which would get you more gold in the future than you can get today.   (or shorting gold ETFs)

4 Comments – Post Your Own

#1) On February 18, 2009 at 5:13 PM, SideShowMel0329 (96.67) wrote:

I've been blogging about shorting gold for quite some time now, so have a few top CAPs members.

Unfortunately, I got in a little early, but it's already overbought so I should end up green in the end.

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#2) On February 18, 2009 at 5:30 PM, Glendorian (< 20) wrote:

Tight credit, tight money supply (at least by velocity measures), depreciating assets everywhere, falling prices. Aren't we basically in a deflation?

Even deflationist (Mish being one of them) see some reason to hold some gold.

I don't know, Thenew. The gold I've been holding has given me a lot more dollars to spend in just the last few months.

Maybe good to short now, but you might be fighting a trend at the moment. It's not a short I would feel comfortable with yet. 

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#3) On February 18, 2009 at 7:32 PM, SharpSEO (88.74) wrote:

"Just to refresh - if prices go down, the gold you hold today will be worth less dollars than it is now.  While it may keep pace with other commodities, it isn't going to increase your relative wealth." -thenewm

Less than 1% of Americans own gold as an investment. It is a hedge against the possibility of hyperinflation, and in 20 years it will still be worth something, even if the dollar isn't (small possibility of the dollar totally crashing, but it IS possible).

Gold has been a store of wealth for 6,000 years. That might be ending, right now, but I doubt it.

Gold isn't an ideal investment, but it's a good tool for some of us. It may decline over the short-mid term. But what couldn't? I like a store of wealth that I can physically hold. Call it a security blankey if you wish. That feeling is spreading throughout the country.

Gold's popularity is directly related to distrust of the banking system and our government. And that distrust is continually growing.

Also, most people who own gold/metals invest 5-15% of their portfolio in it. That's not a huge risk, but it's a nice insurance policy. Access to a precious metals fund in my 401k is the only thing that's kept losses reasonable.

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#4) On February 18, 2009 at 7:45 PM, SharpSEO (88.74) wrote:

BTW, the Fed hates gold. They consider it to be an "unproductive asset" and a threat to the dollar's position as the international currency.

According to the Fed, wealth should be stored in banks/dollars so it can be lent out to productive enterprises.  Apparently "productive" means big companies that pay out ridiculous dividends and buys back stock at overinflated prices, all while taking on ever-increasing debt. Yeah... that sounds productive.

If you're bored, read this piece on a "confidential fed memo" about gold, the dollar, and the Fed:

http://www.gata.org/node/7095

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