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Re: Gold as Safety
Old 01-04-2006, 05:20 AM   #81
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Re: Gold as Safety

Originally Posted by HaHa
I wonder if this may have to do with the idea that the Fed has stopped or is very near to stopping its rate hikes. One thing gold loves is negative real interst rates.

I notice that the US$ was weak today also, possibly for the same reason.

Bring it on!

According to my "gold bug" dad a big driver right now is foreign demand for gold finally starting to come alive. Remember that with the dollar weakening over several years gold was really only gaining against the dollar while remianing flat against many other key currencies. Now gold is rising against all currencies. Why the increase in foreign demand? Pick your reason. Two other key factors are record low mining output (just like oil companies, mines can't increase output as quickly as prices rise and the easy stuff is already out) and big reductions in central bank selling. The "bugs" will argue the central banks don't even have much to sell. One other factor: given a tough situation, Bernanke will choose inflation over deflation.

For those who trash gold as a relic I would say to at least be aware of what is happening even if you never touch the stuff, and not just assume rampant speculation by some "Hunt Brother" types. Americans who live on plastic and mortgages might think gold is a joke but many foreigners (think India, China) treat the metal differently (the same way they hate debt) and they are the only savers. If Asians and Europeans decide to increase even a small portion of their savings into gold instead of US debt (or US real estate / equities or other foreign IOU's) then gold could have much further upside. Yep, a very tough investment that doesn't win often. But,...... until the US government stops abusing the dollar I am happy to hold onto my gold/silver/mining stuff.

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Re: Gold as Safety
Old 01-04-2006, 05:49 PM   #82
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Re: Gold as Safety

Gold and gold stocks are indeed on a tear right now. I don't believe that gold represents safety at all. It does represent an asset class that can really fly under certain circumstances.

Thus to me it is more of a speculation than an investment, and also not something that I feel comfortable putting a lot of money in. My wife could cope without her gold jewelry a lot easier than she could without her car, for example. And she is a woman who loves gold.

I was out of gold for many years until 1997. Then I bought some and immediately got hosed. I closed most positions at a loss, and hung on to others. In 2002 I bought quite a bit near the bottom, and have sold a lot of that already, perhaps too soon. But anyway it was profitable, and allowed me to recoup my earlier losses as well.

Now, I am down to $100,000 worth of mining stocks, mostly juniors. My cost on these is $55,000. So I am inclined to let 'em ride, since I think we are approaching the sort of situation where the general public can easily get irrationally hot about gold. "Helicopter Ben" is just beginning his shift, and I expect great things from him. In the sense that he has hubris written all over his egomaniacal face- a real Mama's Boy/ Teacher's Pet if there ever was one.

If things go well (well for gold, badly for the country) my stake could easily triple or more from here.

Of course, he may turn out to be Big Paul in disguise, and I get my ass handed to me. C'est la vie!



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