streetTRACKS Gold Trust (ETF) (GLD)

intelledgement (96.36) Submitted: 10/09/07 2:52 PM

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There are two problems with your thesis.

First of all, even if the real value of gold stays even or declines a bit, shorting it in a dollar-denominated account is a sucker's game. You illustrate this with your own example: "Gold's price, when adjusted for movements in the U.S. Dollar value vs. other currencies, is actually lower than last year's US$720 high". In other words, you can be right about gold and still lose on this trade (shorting GLD) because the dollar will decline more.

But, you say, the dollar will appreciate in 2008 because of the US election...which brings us to our second problem with your thesis. LOL US power brokers have evidently given up on the dollar, and intend to inflate their way out of debt. If I am right in this observation, then the dollar is doomed.

However, for the sake of argument, let's posit I am wrong, and they really do want to increase the value of the US$. How can they do this? I submit they would have to [a] move to cut the budget deficit and solve the entitlements funding issues, [b] raise interest rates, and [c] peg the value of the dollar to a basket of commodities (e.g., gold, silver, oil, coal) or stronger currencies (e.g., yuan, Euro, yen, Canadian dollar). Is any politician in America caling for any of these steps?

You are dreaming, and right now, it is a nice fantasy, but if you don't wake up soon, you are in for a real nightmare with this trade, IMO.

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FourthAxis (89.36) Submitted: 10/30/07 10:41 AM

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Get a clue.

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cubanstockpicker (75.85) Submitted: 11/17/07 10:10 PM

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Adjusted for inflation, Gold is worth exactly the same as it has for the past two hundred years on a continuous timeline 200 YEARS. ONE DOLLAR IN GOLD IN 1807 would have made you one dollar today, adjusted for inflation. One dollar in equities, and well I am sure you know the rest, You are a good stock trader as your rating shows. Yes gold has its bulls with some great years, followed by straight down nose dive bears. The institutional investors, that have the luxury of buying dirt cheap and waiting forever are slowly now getting out of gold. It may not happen now, but whenever the consensus of ANY MARKET BECOMES 100% BULLISH, you run out of buyers, and, unlike PUBLIC COMPANIES, gold is not coming out with a new exciting product.
By the looks of the latenight infomercials touting gold as the best investment in the world, they have the same look and feel of the same commercials running towards the end of the last gold run, only to be followed by a straight nose dive. Unlike other commodities, e.g. oil, copper, paladium, etc... Gold has very little use except as a monetary weighted value that moves at the pace of inflation in the long run. Gold right now is 22% higher than its all time high in the 80's, right after the 77-79 housing bubble burst. By the way, gold tanked soon after. Gold may make one feel powerful by owning it, BUT GOLD DOES NOT HAVE EARNINGS, it has no demand and supply like oil and it doesnt report quartlery like stocks. Why should gold keep going up?

GOLD GOES DOWN TO 500 IN THE NEXT YEAR AND A HALF. PROBABLY LOWER. IM NOT PSYCHIC, JUST BASING MYSELF ON THE WIDELY ACCEPTED TREND.

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intelledgement (96.36) Submitted: 11/29/07 1:51 PM

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cuban,

We agree with you in principle: historically gold has been (and likely will continue to be) a bad investment vehicle. Where we think you are going off the track here is in mechanically applying T/A to a situation where F/A is called for. Gold is a buy here for dollar-denominated investors because the dollar is tanking. It is a hedge, not an investment. Just a coupla questions to illustrate the point:

What does your history tell you invariably happens to the value of gold when fiat currency fails?

If the dollar merely continues it's current rate of decline for the next 18 months (we expect the death spiral to accelerate after the election but never mind), $500 in 2007 money will be worth $600 or so by mid-2009 in then-current-value dollars. Conversely, for gold to fall to $500 by mid-2009 in then-current-value dollars, the price would have to decline to the equivalent of about $400 in 2007 dollars. In an environment of supply-constricted commodities and challenged fiat money...do you really think that is likely?

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