More on the same topic.
I read an article from the NY Times yesterday, talking about how gold has lost its luster and that banks are advising their clients to sell. There is some mention of the Soros argument that it is not acting as it should following events like Cyprus, but most of the piece thinks about how an improving economy generally mitigates the need for gold.
Which brings me back to my post last night, about how history may not repeat, but it sure does tend to rhyme.
As you’ll recall, it is my position that we had two prior bubbles that were largely enabled through easy money policies at the Fed. It is also my position that what people are mistakenly terming a recovery now is largely just financial assets getting bid up again due to money-printing. Now take a step back for a moment. When Nasdaq and housing were roaring higher, hardly anyone thought that there was a bubble, but instead viewed it through the lens of a “New Economy”. In the former, gold finally found a bottom after a 20-year bear market. In the latter, it outpaced the gains that were seen in most other asset classes. To be very clear on this point, even though the economy was being viewed through rose-colored glasses, gold still went up. And what that tells me is that gold’s role is not just as safe haven, but also as a hedge in a world of depreciating currencies. But somehow many are ignoring that fact.
So, let’s get to the point. I can’t predict the future. But given what we’ve seen, I am hard-pressed to believe that things are as promising as people would like to believe. In fact, I made a list last week documenting many of the statistics that point to a lack of recovery. And, yet, even if I’m right about a more guarded stance, there is no guarantee that I will be vindicated any time soon. Still I think it would be premature to sell gold. When you consider all of the fundamental factors that suggest the bull run isn’t over, that should give an owner of gold some confidence to stay the course. Time will tell.
