Paul Brodsky always has great insight into the credit markets and interest rates, along with the market in general, so it was great to receive his insight on gold.
Here are the two points I want readers to realize:
- Real interest rates (nominal rates less CPI) are negative across the majority of the largest developed and emerging economies, implying that a stable or rising gold price has positive carry.
- When valued in terms of Enterprise Value per Gold Ounce (EV/Gold), in-ground bullion may be owned for as little as $30/oz through shares in operating companies already in production (we will distribute a more in-depth analysis of this to Fund investors later in the month).
I would encourage you to read the entire piece to get a quick summary of the dynamics in the gold market.
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The poor man's gold.
Silver was going wild, then came back down. I had bought it in the teens, and sold it in the 40's, and was pretty happy to sit out for most of the recent volatility. But here's the thing - I still believe that central banks will have to print.
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Sure, gold is an old relic, but we've held on through the recent hiccups without losing focus.
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There is a flood of data and headlines that seems almost spiteful to anyone trying to enjoy their usually-slow August. For me, it gives a good excuse to turn away and read even slower as most of the flood is meaningless for my portfolio. That being said, some of it is not.
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Gold broke out, but is showing signs of being extended.
Even a pullback to 1200 wouldn't break the uptrend from 2004, and it could break down even further and STILL not break the uptrend off the lows.
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Gold reached a new milestone today as it surpassed SPY to become the largest ETF by assets.
From
CBS Marketwatch:
Net assets in the gold fund Friday were $76.7 billion vs.
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Just a quick reminder: gold will peak on fear, not greed, and fear hasn't peaked.
No charts, no nothin'. Gold is a safe have when there's no trust in the system.
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August 2nd was the debt ceiling deadline, and as anticipated, our leaders came through with a deal that raised the debt ceiling, but has only negative long term implications in terms of fiscal policy.
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I recently got good news from a sell-side analyst: Equity might be bottoming because when measured against hard assets like gold the S&P 500 is already down 80% and at some point will start moving higher. Below is the inverse chart of gold:spx, with the argument being that gold vs.
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Approaching new highs in almost every currency. Euro can sustain any bids, and I'm not even sure who's bidding other than the Chinese. Why are the Chinese bidding? No clue; maybe they like losing money. Regardless, gold and even more importantly for me, the gold miners, are rising today.
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Gold was down for a week and the fear was palpable: yes, ladies and gentlemen, gold will have pullbacks; however, seen on the weekly chart, gold remains stable and strong, and not just technically.
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Warren Buffett famously remarked that when the tide recedes we get to see who has been swimming with not bathing suit.
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Osama bin Laden is dead, and while it gives me a great sense of emotional and psychological satisfaction, I also know, logically, that this is at best a temporary and symbolic victory.
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You wouldn't believe the vehemence of the responses I've received for selling silver last week, and the chides so far this week. Sure, I sold silver and bought GDX and XLU in its stead and missed out on a few percentages of relative performance.
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A lot of minor adjustments today, so I'll keep it brief:
- Looking at relative sector valuation and performance, I initiated a position in utilities through XLU.
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Commodities/Futures | | 
December 21, 2011 9:31 am | 
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