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Tuesday, November 30, 2010

Competing Opinions On Gold Prices

I've been, and continue to be, bullish on precious metals.  I think that with what is happening to our economy, coupled with what the Federal Reserve and FedGov have announced they will be doing (QEII and tax increases, respectively), gold and silver will continue to rise in price.

There are others who disagree.

As I've stated numerous times, DO NOT make your investment or retirement plans based on one or two blogs or websites.  Read contrarian views.  Scratch below the surface, especially when it comes to something as important as your money. reports that someone at The Wall Street Journal has an explanation for the recent rise in gold -
Weaker currencies such as the dollar and euro, even weaker these days due to stimulus measures, often send investors rushing to gold.

But there's another reason why prices have risen so high, The Wall Street Journal reports.

It's an exchange-traded fund called SPDR, spearheaded in 2004 by the World Gold Council as a conduit for investors to pump money into the precious metal when prices were a third of what they are today.
No one less than multi-billionaire George Soros has called gold, "the ultimate bubble".
Some heavyweight investors, however, feel gold prices are due for a fall.

"I called gold the ultimate bubble which means it may go higher," says George Soros, according to Reuters. "But it's certainly not safe, and it's not going to last forever."
He could absolutely, positively be right.  But he sure isn't acting that way.  From -
Securities and Exchange Commission filings this month by Soros Fund Management LLC, Paulson & Co. and Touradji Capital Management LP listed investments in gold as their biggest holdings. Exchange-traded products own 2,088 metric tons, equal to nine years of U.S. mine supply, data compiled by Bloomberg show. Precious metals will produce the best commodity returns in the next year, Goldman Sachs Group Inc. said in a Nov. 9 report.
A year ago, Soros first made his "gold bubble" comments, yet for the past year, he's been buying the stuff like it's going out of style.  Funny, no?

Read the whole article.  Soros now says he's riding a bubble, and it just depends where you get on.

He's absolutely correct if you think the rise in price is due to speculation or an artificially inflated market, such as we just witnessed with real estate.

I tell everyone that will listen to me - and some who won't - that I don't see PMs so much as an investment, but as a hedge against inflation.  A maintainer of purchasing power, if you will.
“Gold is the preferred currency right now,” said Ronald Stoeferle, an analyst at Erste Group Bank AG in Vienna who expects gold to reach $1,600 by June. “The Fed can print and produce money, but it cannot produce confidence and trust in the U.S. dollar.”
Amen to that, brother...

Accept The Challenge

I was listening to a radio show where the guy was gushing about how great the economy is performing.  This indicator is up.  That one is down, but better than expected.  Blah, blah, blah.

His main push was for people to buy into the stock markets.  Poised for a great leap, says he.

I nearly crashed my car!  He was talking about how all of these company profits are up - way up.  What he neglected to discuss what that they aren't up because of increased sales, but because of lowered expenses.

They're cutting to the bone, and lobbing off a finger or two for good measure.  Now, that's great for the company and the stock holders - for now - but it does nothing for the economy.

Until sales go up, and unemployment goes down, we're in deep kimchee as a nation.  You've got to have customers with money to have a viable business.  IMO, the stock market is propped up by nothing more than Hopes and Dreams, not reality.

Spend your money on tangible goods and commodities.  If you have anything left over, put some into PMs.

Know that the price of PMs absolutely, positively will go up and down.  You hope you make your buys on the lows, and your sales on the highs, but you'll go nuts if you're an every day price watcher.  Watch the trend, not the hourly fluctuations.

Also remember:  Gold and silver have never been worth zero.  Fiat currencies and stocks have.

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Copyright 2010 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.


suek said...

I saw an interesting headline today: "Sales of foreclosed houses drops"

I'll have to see if I can find it again - I didn't follow up to find out what they were trying to say. All home sales have dropped? Just sales of foreclosed homes? because maybe people are nervous about the titles? or maybe title insurance is no longer available? Are sales of other homes going up to compensate?

I really need to find it again, because it's sticking in my mind, and the longer it "sticks", the more questions come to mind.

If sales are down...are prices as well??

suek said...

Here's another Soros link. Didn't know about this before, but it does explain some stuff: