Gold: Heads You Win, Tails You Win
Thursday, September 9, 2010 at 05:40PM If someone came up to you and said that they were going to flip a coin and if heads came up you win and tails came up they lose, you would probably walk away and tell the person to get lost and go try to con someone else. In terms of gold, though, we are increasingly beginning to hear people argue that gold will rise no matter what happens!
Today we read one article that quoted an analyst as saying "Either a swift economic recovery or further dismal economic performance should bring new buyers into the market." We realize that there are certainly some valid arguments for buying gold, but a comment like this is not one of them. Now, we wouldn't necessarily go as far as to say that gold is in a bubble. After all, unlike a lot of recent asset bubbles where prices skyrocketed even as supply expanded, the supply of gold is relatively constrained. That being said, arguments presented as a win win regardless of the outcome are usually found closer to the peak of a move than the beginning.
Reader Comments (2)
Actually I think what's being conveyed is just poorly expressed. Gold goes up in recovery double dip because gold's main driver is not economic but monetary. There is a very bad possible outcome for gold in the event that the federal reserve decided to print fewer dollars. That seems improbable and so gold continues to rise,
I'm a bona-fide gold bug, but mean-reversion is a powerful thing. And it looks all in the world like we could roll over, here, which will dismay the True Believers. I would imagine that as long as the Fed keeps printing, buy any dips you can. But this over-caffeinated level of sentiment has got to stop.