Email of the day (2)
on gold as a sound investment:
"In response to a reader, Capital Markets are really nothing more than a way to raise money for public companies and allocate that money, hopefully towards quality companies and away from questionable or overvalued companies. So during the formation stage, bubbles definitely help the particular markets, sectors, or companies who are receiving the capital. Unfortunately, the money eventually winds up in the wrong hands. In 2000, it was Dot Com companies with nothing but a business plan. In 2008, it was mortgages being sold to individuals who did not have the capability to get through the first three months of payments. As an investor, I find being on the right side of extreme momentum creates the most difficult trading decisions. Do you leave the moment you feel there may be climactic action? If not, and a heavy sell-off occurs, do you sell, or do you wait for it to test the top and see volatility there (one of the three Fuller characteristics of tops). I would rather sell early than sell late, but that does not make it easy to watch the asset you sold continue up another 25-50%.
"One other comment. I feel stronger than ever that Gold is not in any kind of bubble. It has been orderly and seems to follow the growth of balance sheets of Central Banks, particularly the U.S. and China. I think gold's behavior during the recent silver volatility is proof of its orderly market. China's money supply has actually grown more than the U.S. since 2008, and if one is attempting to predict the next bubble, I would look to a country that continues to grow 10% per annum and is dealing with extreme inflation, all while continuing to peg their currency to the $. Something has to give, it would seem. I feel strongly that gold is a safe investment now and, actually, should be bought off corrections as long as the global monetary conditions and sovereign debt issues remain."
Eoin Treacy's view Thank you for this contribution. I agree that gold does not currently exhibit bubbly characteristics but believe that such an outcome is more likely than not before prices eventually hit their long-term peak.Back to top