Fools Gold a fool's errand....for now?
December 11, 2008
– Comments (5) |
RELATED TICKERS: GLD
Gold is nothing more than a hedge against inflation. That's it. You can't take a gold piece to the local supermarket and exchange it for a loaf of bread, right? You first have to take your gold to the local gold buyer, sell it for dollars and then you can go buy your bread. The only reason to own gold is when inflation is going up in order to protect your cash assets. In that way gold is no different than any hard asset that will keep up with inflation.
The economy right now is in a huge period of deflation, so why would you want to own gold right now? I believe all the gold bugs are simpley to early in making their calls. Look at all the silver and gold miners that have went down 80% in value in the last 6 months and that unequivically proves I'm right.
Now that being said I do believe that owning gold in the near future will be a very prudent thing to do...but not until house prices stop falling, commercial realestate stops falling, and businesses stop failing for lack of credit.
Once the velocity of money is restored however it will likely be like drinking water through a fire house. All the pent up energy of the money that is now being introduced into our system will release and there will be inflation devaluing the dollar. That will be the time to own gold, but not for a while yet.
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