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engstocker (< 20)

Fools Gold a fool's errand....for now?

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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. 

5 Comments – Post Your Own

#1) On December 11, 2008 at 3:56 PM, XMFSinchiruna (27.76) wrote:

My fingers hurt from effectively countering this argument more times than I care to remember. The 80% drops among the miners proves nothing of the sort, and reflects two main phenomena:

1.) we had panic-driven markets absorbing forced liquidations across the board at the same time that the USD enjoyed an anamolous rall.

2.) the investment banks, fueled with limitless cash from the Fed, were able to double up their efforts to manipulate gold and silver prices through naked shorting on the COMEX and other exchanges and at the same time propping up the very dollar rally referred to above.

Gold is more than an inflation hedge ... it is an insurance policy. At a time when Treasuries are yielding negative interest, I suggest you reconsider your assessment of the proper timing for obtaining such an insurance policy.

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=117753&t=01006124249416869148

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=114778&t=01006124249416869148

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=111246&t=01006124249416869148

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=110475&t=01006124249416869148

http://www.fool.com/investing/general/2008/11/28/be-thankful-for-this-precious-bounce.aspx

http://www.fool.com/investing/dividends-income/2008/10/22/yawanna-have-yamana.aspx

http://www.fool.com/investing/general/2008/09/18/the-gold-ounces-bold-bounce.aspx

http://www.fool.com/investing/general/2008/10/02/700-billion-reasons-to-own-some-gold.aspx

http://www.fool.com/investing/international/2008/11/26/39-trillion-was-a-drop-in-the-bucket.aspx

http://www.fool.com/investing/small-cap/2008/09/12/in-defense-of-gold.aspx

http://www.fool.com/investing/general/2008/03/19/dodge-the-dollar-with-a-silver-bullet.aspx

http://www.fool.com/investing/general/2008/05/05/gold-delivers-a-gut-check.aspx

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#2) On December 11, 2008 at 4:21 PM, HansHauge (31.41) wrote:

More like a Motley Gold Fool. Sinch said it, the drop in price means exactly that it is time to buy.

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#3) On December 11, 2008 at 8:40 PM, engstocker (< 20) wrote:

I restate...I don't believe gold will be a bad "investment", just not quite yet. Until all the deleveraging stops and inflation starts ramping up I believe cash is a better position. Gold is an insurance policy as you state Sinch....against inflation, but right now the insurance is to expensive (at least the physical stuff) but miners looked to be cheap at least as compared to a few months ago. Why buy gold now when the price should come back down?

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#4) On December 11, 2008 at 8:43 PM, engstocker (< 20) wrote:

I restate...I don't believe gold will be a bad "investment", just not quite yet. Until all the deleveraging stops and inflation starts ramping up I believe cash is a better position. Gold is an insurance policy as you state Sinch....against inflation, but right now the insurance is to expensive (at least the physical stuff) but miners looked to be cheap at least as compared to a few months ago. Why buy gold now when the price should come back down?

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#5) On December 12, 2008 at 1:18 PM, XMFSinchiruna (27.76) wrote:

engstocker

Gold is insurance against more than just inflation.Gold is insurance against a weakening USD, which we are getting right now ... the dollar rally is over.

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