Short-Term Pain, Long-Term Gain
Posted by Investment Rarities on September 22nd 2011 in China, Federal Reserve, General Economy, George Soros, Gold, India, Monetary Policy, Short Sellers, Silver, Wall Street | Be the first to comment!
“Should you worry if the gold price falls another $100?,”asked a Daily Wealth article, when gold was just north of $1,800 an ounce: “As you can see from the chart, gold ‘sprinted’ this summer. The metal surged from $1,500 to $1,900 in under two months. This type of parabolic move is often followed by a healthy ‘shakeout’ that backtracks 50% of the previous climb. Should the ’50% rule’ apply to gold’s latest jump, the precious metal would fall down to $1,700 per ounce. This fall might scare some latecomers, but we’d see it as a natural, healthy selloff.”
About that sprint, Gold Newsletter editor, Brien Lundin, says that “If the European debt crisis and the S&P downgrade of U.S. sovereign debt had happened separately, say a couple of months apart, I think gold would have risen just as far, but the rise wouldn’t have been as steep and the market wouldn’t have overheated. But they happened to occur right on top of each other, so the market got ahead of itself and went nearly parabolic.” Longer term, he points out that “There is no way, especially under the weight of those austerity programs, that growth can be robust enough to overcome these debt burdens. At some point and to some degree, inflation will have to depreciate those debts away. That is the very reason why investors with a long-term view are buying gold.”
Related Links:
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KWN: James Turk – There’s a raging battle in gold below $1,800
Real Clear Markets: Investors ignore Andrew Lahde at their certain peril
Bullion Vault: Two charts, one big opportunity for gold investors
Bloomberg: Gold’s price surge skews inflation numbers across Asia
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Zero Hedge: Why the time for the US to “LBO” the gold market has arrived
Expected Returns: The market implications of more QE
Barron’s: Fed’s ‘Operation Twist’ throws market a nasty twist
Tim Iacono: Did Bernanke do that on purpose?
Reuters: Bernanke’s twist may do little for jobs
AP: Young becoming “lost generation” amid recession
CNBC: Soros: US is already in double-dip recession
Bloomberg: El-Erian: World on eve of next financial crisis
