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What’s Up With Gold These Days?

10 March 2010 One Comment

It’s been a while since I’ve done an update on gold.  Maybe part of that is because it’s been fairly boring in recent months.  Since it’s massive run above $1200/oz. in early December, gold has settled into a fairly narrow range around $1100.  You can take a look at the following chart for SPDR Gold Trust (GLD):

GLD Chart

So where does gold go from here?  I still hang on to the belief that the overall market / economy will experience a “double dip” or a correction (doesn’t matter how you label it) where stocks and assets across the board will suffer.  Gold will probably go down as well in such a correction.  As such, you could very likely see more attractive entry points should you want to pick up some gold (or silver).

If you’ve read my recent article on Gold as security, not speculation, you will know my strategy on holding physical gold.  The short term price of gold is fairly irrelevant as I’m attempting to hold this asset more for insurance versus a quick buck.  With regards to insurance, I still think it’s a policy worth holding.  Fundamentally, nothing has changed in my eyes and a day of reckoning for the U.S. economy is coming.  It might be this year, or it might be in 2012, but I do believe it’s coming.

The biggest threat in this so-called day of reckoning is the potential for a currency crisis.  This is why I want to own gold.  Marc Faber recently said that you should buy gold continuous “forever” because you can’t create gold as fast as central bankers can print money.  The idea is that your gold will hold its value better than your paper money.  I tend to agree with this, although it can take years for this to pan out.

Gold will likely stay around current levels for the short run.  Looking several years out, I very much like it’s fundamentals to be significantly higher.  I recommend a course of action of easing into the position slowly, buying chunks over time.

Now seems to be a good time to sell gold scrap for cash, as the price of the precious metal has been on the rise.

One Comment »

  • Robert Eberenz said:

    Kevin, I'd have to agree with your forecast for gold, given a market correction in equties. The interesting part of any such correction will be the magnitude of price destruction. If stocks in the U.S. and abroad fall by 10-15% most institutions and home gamers will see this as an "acceptable correction" in prices, given an uncertain outlook, causing assets such as precious metals and commodities will cool in tandem. However, there will come a time at which precious metals diverge from falling asset prices, most likely in the 15-25% price destruction zone, where gold will come back and begin to represent the potential risk of long term price depression and inflation. If gold corrects below 1100 per ounce put a toe in the water, but get in heavy if we see prices near 1000 in the next two months.

    Happy Trading