Goldrush

It seems that everybody is long gold these days. But why should the price of gold really go up – even if we are going to see higher inflation or currency crises?

Here a comment on gold from Warren Buffet: “[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

Also, there is massive potential supply from distressed nations: the top 5 gold owners as of September 2008 according to Wikipedia are USA 8,133.5t, Germany 3,412.6t, IMF 3,217.3t, France 2,508.8t and Italy 2,451.8t.

Isn’t the price of gold already artificially inflated? Wouldn’t it be smarter to go long commodities that are of real use like oil, copper or zinc?

Last 5 posts by Rob

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1 Comment

• By thatsabet, June 4, 2009 @ 1:26 pm

  Firstly, I am and have been long GOLD. I think the reason why GOLD is sometimes favored over other CRB items is that it doesnt spoil (ag), cant catch fire (oil), there are no substitutes and its relatively easy to store. The CRB space is clearly a relative trade within the various subsectors. ie. Natty Gas vs Crude – or GOLD vs AG. Also, like all markets, with all the money sloshing around people need to have a store of value. If all the paper was forced into CRB it would clearly crush any forward growth. GOLD might be the safest hiding space the should cause the least political pain.

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