I posted a little piece about gold on the RealMoney.com columnist conversation where I opined that the big move in gold might be behind us.
I obviously have a great chance of being wrong. CNBC just had a 2006 Outlook segment about gold. Two smart guys came on, both with plausible scenarios for higher gold and they may turn out to be right.
Seeing this made me realize that I can't recall seeing or reading the bear case for gold anywhere recently. Feel free to correct me if I'm wrong.
Anyone else think fading the bullish case gold might make sense? I find this all to be confusing. I am not a gold bug, I don't think that with what the market knows today, gold will challenge the 1981 high anytime soon.
The case for another 20% seems plausible but my guess is that it needs to go down or consolidate for a while first.
The thing to take away from this piece is that you should care about the thing no one is talking about.
Wikinvest Wire
3 comments:
I have written about Gold topping as a result of real interest rates around the globe. Today it was New Zeland that hiked a fraction of a point.
Roger, while gold may in fact pause here (or not) what is interesting is that public participation (via COT data or the Rydex fund flows) has been very subdued...So while there is lots of 'talk' of gold lately...there still hasn't been much belief in it outside of the Gold Bug community...this is a story that will continue...but as you know, nothing moves in a straight line.
I started investing in the late 70's and learned to pay attention to gold even though I thought of it as more commodity than money; still do. There were usually better profits to be made in real estate and T-bonds back then anyway. That said, other folks certainly seem to think of gold as a store of value and I learned that, from a technical standpoint, when the perception grows that inflation (devaluation of buying power) is accelerating then gold responds - steady inflation growth doesn't seem to have that effect, a bit like the old frog in boiling water parable.
I can't really make a strong bullish case, not being a gold bug, and there are plenty of folks out there making a stronger case than I could anyway even if that case often tends to be rather long on hyperbole. Personally I started seeing better technicals late in 2001 and began accumulating early in 2002 when the fundamentals started looking stronger. As I've previously commented I'm pretty much standing pat for now but do think it's overbought here and a pull back, possibly a very sharp one, is a distinct possibility. If it's sharp enough I may buy some more as I think a 20-30% rise afterward is a reasonable bet. After that we'll just have to see how the global economic scene unfolds.
One thing I might add was suggested by a poster on Bill Cara's site: The gold ETF's might raise the gold support level due to the index effect but I haven't investigated this as yet.
From a bearish standpoint the Economist certainly doesn't care for the stuff: http://www.economist.com/displaystory.cfm?story_id=5246636
But the strongest bearish case seems to be in the fairly significant short interest, particularly in the junior golds. Not a lot of bearish articles perhaps, but there is a fair amount of bearish action IMO. I can see the case for that since gold, and mining generally, is energy intensive so rising energy costs are going to squeeze margins and if you think energy is going up, well .... But at current gold prices those margins are very good now and, as something of a contrarian, I do find that kind of action hard to resist -- I will resist (mostly) since I'm a long term trader and rely on macro-trends ... but it's tempting.
RW
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