Solid Gold!I found this article at Seeking Alpha from someone I am not familiar with who spelled out the fundamental (read bullish) case for gold.
For anyone new, I have had exposure to gold one way or another since before this site started and will keep gold (I expect) for the foreseeable future.
I am neither bullish or bearish, I view gold as an important diversifier for external shocks to the stock market and the fact that the trend has been up for so long has obviously helped returns.
In the article the author states "In order for gold to drop, here are some of the things that need to happen:" and then spells out 16 reasons that he feels supports his assertion.
The point of my post is not to debate the fundies of what gold should do. Even if he is exactly right on all counts gold could still go down. Things go in the opposite direction from what they should all the time. Gold as measured by client holding GLD hit a high of $100.44 on March 17. It then hit a low of $83.96 on May 2, so a 16% drop in six weeks.
I doubt that the fundamentals were any different on March 17 than when the author first wrote his article. Further I doubt buying at the high would lessened the potential zig from gold versus equity market zag if there had been a meaningful external shock.
The point is not to disagree with the author about anything but simply to add a reminder that no matter what the story behind something the price can easily go down.
3 comments:
Isnt USD going to fall much lower? Gold will be a good hedge.
I remember, about a month ago, seeing a very good chartist on Bloomberg describe what will happen to the price of gold, stating it will fluctuate between $800 and $1000 in the summer before climbing higher. She's been right so far.
brendan, i think the fundies point that way but the price does not have to follow the fundies. the fundmental story for the green back has been roughly the same for a long time yet 2005 was an up year.
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