I agree speculators ran away pretty quickly to $1200, but I don’t think it is done. Also, natural gas did get pretty low. But there is a lot of supply currently. That said, I did purchase some CHK at $15 that I am happy about.

I just think the speculators have ran away with this one, and the amount gold can continue to appreciate is neglible when compared to other commodities. Natural gas, timber, or maybe even boring old TIPs will be better inflation hedges since they’re either trading at a discount, haven’t participated in the rally, or are guaranteed to return the rate of inflation.

Those who actually bought into the gold game on leverage might have received a margin call. Same with investors who leveraged over at Monex. But at the same time, they were eventually long term right about why they invested in gold, as was Peter Schiff. They possibly have less wealth because of their approach to investing, or more.

This up and down cycle will repeat as the gold bull tries to knock weak players off (or those that leverage). I had a friend who over-invested in gold mining stocks last year after running up some nice profits the years before (after listening to my advice). I had no idea he was so heavily invested. About a year ago he almost “cried uncle” and sold to protect what he had left, but was smart enough to ride out the bull trying to buck him off. His problem was that he doubled down when gold fell (not my advice unless it’s physical gold).

He rode the double down and original investments to nice profits and sold not too long ago. Lesson learned. Interesting thing was a year ago we had discussed actually converting his IRA to a ROTH IRA and buying those same mining stocks back. Now all of the growth and income would have been tax-free.

I cautioned about gold possibly peaking a little early on my blog. I wrote some articles about the fallacies of Elliot Wave Theory as well that Andrew above was nice enough to comment on. My being early to the selling is fine with my conservative approach. There were a couple events that happened to keep the gold game going a little longer than I expected, that being India Central Bank buying gold and Vietnam lifting its gold import ban.

Gold can go anywhere from here because of these types of “unexpected events.”

I critiqued a CFA’s analysis of gold recently on my blog. He had a distorted historical perspective, but I did agree with his short term analysis.

That 72 mark on the dollar index still hasn’t been breached (let alone 74), so I’m still cautious. Because of the aforementioned events however, the dollar index did hit lower 15 months lows, but still hasn’t broke the March 2008 low.

I like Jim Rogers, Schiff and Jim Sinclair, but I like Marc Faber better as he takes into account shorter term analysis. They are all correct in their long term forecasts and we have the Fed and the U.S. Government (Treasury, Congress) to thank for that.

As I always say, holders of physical gold care not that it falls to $800 (as March Faber says) on its way to $2,000 or higher.

You’ll get your $2,000 to $3,000 pop, but it won’t happen till the dollar index falls below 72 again. Then we might possibly hit 3rd stage euphoria.

You’ll see interest rates much higher too.

I don’t like calling short term declines, as I’m such a gold bull. We’ve had a nice run in gold. Nothing goes straight up. What would happen if a January 1980 price action occurred right now? People would be coming out of the woodwork to bash gold prophets. I hope we get it! It won’t shake my confidence in gold one bit. If we did get the hit in gold, it wouldn’t be because Bernanke pulled a Volcker and raised interest rates to double digits to lure people away from gold. That’s the difference.

But this eventually will be the game the Fed plays….at the detriment of the stock market and bonds. But, as I said, people can go broke waiting for it to occur.

– Last paragraph omitted –

Couple points since you obviously didn’t read the post very well. Then again, that’s not surprising considering the only thing you forgot to do is jump, kick and shake your gold pom poms.

1) I’m not on any side of the gold trade.
2) I said gold could easily hit $2000 to $3000 per ounce before the bubble pops. Bubbles tend to shoot the moon, and I expect it to hit the 1980 inflation adjusted price.

Andrew

From a quick read, I dont’ disagree with short term investing, but we may disagree on the definition of “short term.”

Would be happy to discuss that as well.

I made the mistake of trusting a “marketing guru” in May when I first wrote my books as to best get them to the public. I wrote in May what people who are curious about what gold represents need to hear.

You know our system is biased against gold. You also know I possess good info on the subject of gold.

Hopefully the lower price of my books will get the word out to America. I plan a press release to get the word out to more when I can.

And I do continue to challenge mainstream journalists and financial advisors continually on my blog. Sooner or later, people will either reply to my queries or the truth will be known. That is my quest.

I accept any and all questions and enjoy the discourse. I don’t profess to know more than anyone else, but I do have CFP’s and the financial experts from CBSMoneywatch.com agreeing with me as to the need to acquire gold as a hedge against the demise of the dollar.

In reality, it’s not the commercials on CNBC that one should follow, you’re right, but the commitment of traders for short term traders, as well as an economic understanding of GDP related to government spending as well as Federal Reserve policy and continued left and right abuse.

Long term gold investors care not that gold falls to $700 on its way to $2,000 or higher. I hope it does fall so more can acquire the metal at a lower price.

And as you know, it’s not like I’m advising people to invest their life savings in gold. Just enough to hedge their U.S. dollar portfolio holdings.

Example, if I’m buying UGY (x2 Gold ETF) or DTO/ERY (x2/x3 Oil/Energy ETFs) to either long or short the ETF, I’m not thinking long term in any sense of the word, it’s not an investment. Or playing something like CLNE (NG gas company disguised as a green trade company). It’s a trade. I take into consideration of leveraged decay for x2-x3 ETF, for CLNE it’s run by a grandfatherly frontman, my trades in UGY/ might last an hour or three. My longs might be a month. And yes you can play puts of leverage ETFs because regardless of the promise of infinite returns of gold/oil/beanie babies, under the umbrella of a x2 leveraged ETF you always win because of falls/flats and the basic math behind leveraged decay of leveraged investments. If you want a basic spreadsheet on how to determine entries I have some older ones on the blog you can pull from google docs.

Even in my long trades that I’ve held for years to take advantage of dividends on preferred shares, they are still realistically a trade, I have shed the delusion they are investments. As soon as I seen trouble in fall 07 I dumped as fast as I could click “sell” for all of my assets in a long position. Made out like a bandit, but there is one thing I can promise, I did make more than 180% over a four year hold. The sad thing I outperformed my long holds day trading during that time. I honestly was not going to get caught like the Asian currency crisis or dot.bomb. That was brutal. I was under the auspicious magical thinking I was protected by hedges and diversification. There is no hedge, never was. The “hedge” is how we trick ourselves into thinking that we are safe. Now I’m all in, keep a tight SL, move the stop loss constantly and use a minimum 10k block size.

So two things, when not in doubt, get in doubt fast and take a profit even if it’s a penny.

As far as a hedge against currency free fall. Seriously currencies get kicked around like a soccer ball, always have and always will. Talking heads will jabber on for months about anything around the subject. They typically make comparisons to zimbabwe or post war germany. If they could interview currencies like people they would ask them if they wore boxers or briefs and who are they currently dating.

The news universe hasn’t got much else to do but manufacture crap to put on between ads. And the experts they trot on and off the stage like trained horses are there to sell you a book, services, both or attempt to move the market in their favor depending on their “weight” in the investment community.

Now gold isn’t a currency. It’s a material good, a commodity and a rock. It can make stuff and be bought under market value at anytime through a half dozen non regulated sources. As a value play in investment is isn’t. It’s a trade and like any trade keeping the SL tight and moving up is how you make money from it. Holding it in the form of a shiny rock will only lead to a couple of things.

1) People want the shiny rock and steal it from you. As I’ve mentioned dumb people covet shiny rocks and will target you for it.
2) When you need the capital of the shiny rock, you are usually in a position of going in the underdog position.

Now that’s not to say gold won’t be a currency again. Just not until the entire system falls down, the gun nuts hiding in the woods surface with AK-47’s and fists full of gold. At that point in time it’s probably more likely people will agree to exchange things because of AK-47’s and not the carat of the bullion being carried around. I’m not holding my breath on that option though. The current default currency is the USD and will be for a while. People have bought so much of the US debt, a serious drop in the dollar and someone will declare war or governments will simply print more money unfortunately. Give it time and you’ll start to see some serious reform to FOREX, it’s already started in the banking industry and governments are back pedaling all the silly reforms of the late 90’s. It’s only a matter of time before FOREX is regulated again.

Just be sure, understand holding something with a value versus selling it and having its value in hand are two different things. Why would anyone care if it was gold, pig knuckles, camel toe or used rubbers. A profit is a profit, take the profit and run as fast as you can to the bank. Cash is worth more than the thing at the moment it was purchased and in turn can be put into other deals to make a dime off of. If you find yourself cheerleading a vehicle to make money it means you are not investing or trading, at that point in time it’s magical thinking of using a market condition as a fixed dogma.

$300 to $1050 is a pretty kickass trade if you don’t mind me saying so! If you spotted the value back then, then hats off to you sir.

I think my big pet peeve with gold is that it’s being pitched to the retail investor. I can always tell we’re near a top when the commercials on CNBC try to convince me to buy something.

Maybe next year they’ll have an ETF to mimic the price action of the Snuggie!

http://fedupbook.com/blog/gold/is-gold-peaking-for-now/

Just yesterday, Jim Rogers and Marc Faber said the same thing.

Also Matt, many of us who had followed Richard Russell from DOW Theory Letters had been following gold since the $300 – $400 range (many earlier, but that’s when I first dialed in as an investment advisor).

And JPL, I’ll take the rock with 5,000 years of existence as a dollar hedge/insurance over a piece of paper that has 38 short years of existence without gold backing. Not that your advice of having a few cocktails isn’t good…(as Matt knows, lol).

Cheers!

I think you make some noteworthy statements, but traditionally (as I’ve seen), gold is just the first investment of choice when the fear trade is going strong. Investor psychology is funny that way since speculators are programmed to go after the fast money first.

Personally, I always like to ask if the gold bugs were this bullish on gold when it was at $250 instead of pushing the BUY BUY BUY button when it closed above $1001. As I see it, gold above $1000 isn’t an investment… it’s a trade!

For the life of me, I can’t figure out why people wouldn’t be selling into the rally. If you were smart enough to get in several years ago, basic portfolio maintenance suggests you should be periodically re-balancing instead of trying to squeeze the last drop of blood from the proverbial turnip. Hopefully, most folks slaughtered because they were too greedy or weren’t fast enough on the trigger.

I do disagree with you on the use of gold as a hedge. Most traders (of what my limited experience tells me) are told that if the Dollar goes down, gold will go up… and will make it a self fulfilling prophecy. So if the dollar takes a slide, you’re protected on the downside. I’ve even heard that gold is a decent put option that never expires. But like most things, how much you pay for that put option determines whether your in the black or in the red.

Thanks for the comment!

I believe Greenspan also stated that the models he believed were true (e.g. that the market can police itself and the world’s financial economic system) were incorrect.

This was stated in his October 2008 Congressional testimony. I hate to pick on the guy since he looks so frail, but his testimony is available in this Frontline video (Chapter 6, 49:20min).