Gold: Buy, Sell, or Hold?
Gold may have blown away stocks,
bonds, and practically ever other risk asset for the past few years, but if you were late to the party, chances are you got shafted pretty bad - in May alone it dropped 6%.
With yesterday’s climb however, goldbugs and skeptics have fueled debate once again.
What do you think monkeys? Is this time different? Will this rally grow legs? Or is this just another blow-off?
There are a lot of good arguments
for going long; short interest has gradually fallen from their highs,
and all the late shorts will probably be scrambling to cover after yesterday’s
spike. The Fed may be happy to stand pat and fix its eye on CPI, but with unemployment as it is, I highly doubt they’ll continue to ignore it. Supply and demand is still out
of whack thanks to China, and of course, let’s not forget the world’s ever-worsening debt problem. Hell, if you think about it, practically nothing has
changed since we started touting it 2 years ago.
The cons? I’ll leave that to this
guy.
So what do you think monkeys? Is
gold still a buy? Or was Warren Buffett right about it all along?
Have a good one WSO.
Comments
If (or should I have said
If (or should I have said when?) Greece leaves the Euro, gold prices will rise.
If Spain's banking system goes even further down the toilet (it's already pretty deep), gold prices will rise.
One concern I have with gold, is that it might become the adjustable rate mortgage of the 2010's. In the 2000's you couldn't watch TV without seeing advertisements for ARMs and other subprime loans (RIP ditech.com), the same is true today for gold investment/cash4gold commercials. Is there a bubble? Maybe, but gold is actually used for real products, and has been a standard of wealth since antiquity, so I'd bet on prices continuing their rise, albeit not as rapidly as the past five or so years.
My WSO Blog
"Unbelievably Believable" -- RG3
These days, gold is more of a
These days, gold is more of a political instability and market volatility hedge than an inflation play. Gold can move pretty violently depending what kind of position you have on it (futures,etf, miner stock). Due to the potential for political issues and volatility to elevate over the next few weeks, it could see a nice pop. However, I think its expensive at these levels as I am not a gold bug. I would rather go cash and then buy discounted investments on big dips than gamble on hedges before a potential shake up - but that's just my style.
Bottom Line:
If you do not own it, don't buy it.
If you bought it recently, hold it.
If you bought it a long time ago and have an outsized position (anything north of 20% of your investments), sell some of it to hedge your risk going into the next couple weeks but still hold a good position until macro concerns level off a bit.
If you want a short-medium term hedge, buy the VIX or an etf that tracks it like the VXX.
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Haha I forgot about
Haha I forgot about ditech.com
If I had gold, I'd hold. I'm too tentative to buy now, though.
“The debate around
“The debate around currencies, cash, and cash equivalents continues. Over the last few years, we have come to doubt whether cash will serve as a good store of value. If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side. If you stacked the money seven feet high, you could store it in a warehouse roughly the size of a football field. The value of all that cash would be about a trillion dollars. In a hundred years, that money will have produced nothing. In a thousand years, it is likely that the cash will either be worthless or worth very little. It will not pay you interest or dividends and it won’t grow earnings, though you could burn it for heat. You’d have to pay someone to guard it. You could fondle the money. Alternatively, you could take every U.S. note in circulation, lay them end to end, and cover the entire 116 square miles of Omaha, Nebraska. Of course, if you managed to assemble all that money into your own private stash, the Federal Reserve could simply order more to be printed for the rest of us.”
Bottom line: You can fondle
Bottom line:
You can fondle money, but it would be much harder to do that with gold. Therefore, gold has no utility.
I think all materials will
I think all materials will rebound with the economy, and I think precious metals will lead the charge. I have no evidence to support my opinion.
Gun Control Discussion
Gold isn't the only thing
Gold isn't the only thing that glitters. If you want recession proof, just buy KO or WMT or something. Gotta stay true to my man WB here and say that since the most utility you can get out of gold is drilling a hole in the side of it and fucking it (thanks DealBreaker), it's not worth much.
Then again, you can't really do that with a can of Coke either...
I hate victims who respect their executioners
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BlackHat: Gold isn't the only
Gold isn't the only thing that glitters. If you want recession proof, just buy KO or WMT or something. Gotta stay true to my man WB here and say that since the most utility you can get out of gold is drilling a hole in the side of it and fucking it (thanks DealBreaker), it's not worth much.
Then again, you can't really do that with a can of Coke either...
Black, I know you're a fan of Einhorn, how did you feel about his recent defense of gold (mocking WB)?
“The debate around currencies, cash, and cash equivalents continues. Over the last few years, we have come to doubt whether cash will serve as a good store of value. If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side. If you stacked the money seven feet high, you could store it in a warehouse roughly the size of a football field. The value of all that cash would be about a trillion dollars. In a hundred years, that money will have produced nothing. In a thousand years, it is likely that the cash will either be worthless or worth very little. It will not pay you interest or dividends and it won’t grow earnings, though you could burn it for heat. You’d have to pay someone to guard it. You could fondle the money. Alternatively, you could take every U.S. note in circulation, lay them end to end, and cover the entire 116 square miles of Omaha, Nebraska. Of course, if you managed to assemble all that money into your own private stash, the Federal Reserve could simply order more to be printed for the rest of us.”
Edit: I thought the comment was hilarious, but I generally side with WB.
WSO Writer | View my blog
anaxi: Black, I know you're a
Black, I know you're a fan of Einhorn, how did you feel about his recent defense of gold (mocking WB)?
I found Einhorn's remarks to be hysterical, he really knows how to get a point across in an effective way, haha. Anyway, I'm not so sure Einhorn was defending gold as much as he was aligning WB's arguments with the idea of holding cash either. Given David has something just south of $300MM invested in gold producers like Barrick, our discussion around the office revolved around Einhorn's support earlier in the Partner's Letter for going the distance with AAPL. I doubt Einhorn disagrees with WB about investing heavily in gold - both parties know good businesses are the best hedge against inflation... hell, against anything - but he did have a point to make and he made it well.
Still on WB's side, and given the way ABX and other gold miners move with the value of gold itself, I don't like that particular investment too much.
I hate victims who respect their executioners
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You definitely do not want to
You definitely do not want to be long gold if QE3 is initiated...
The difference between successful people and others is largely a habit - a controlled habit of doing every task better, faster and more efficiently.
I think if QE3 is initiated,
I think if QE3 is initiated, you won't want to be long anything, since the shit will have hit the fan.
My WSO Blog
"Unbelievably Believable" -- RG3
IMO the 3% rally in gold
IMO the 3% rally in gold yesterday was the markets way of pricing in QE3. I don't like gold for one simple reason, it has no real value unless we assign it value, in that sense it is no better than cash. I say this because well over 50% of the demand for gold is investment demand
I would much rather be long real assets that have real value, like real estate or farmland. The human need for shelter and food will always give these assets value.
Gonna be interesting to see
Gonna be interesting to see what'll happen with gold by the end of the summer if greece leaves and we get another 6% correction. At least 6&.
I trade currencies and
I trade currencies and gold...I got off of of gold couple months ago around $1650. The thing with Gold is that the spread to begin with is huge:50 points about. So if you are going to enter gold at 1600 for example, you will pay 1650, and you will need to sell at 1700 to breakeven...this is their commission.
Gold has been overbought by governments the past 3 years (Russia and India made big purchase like 2 years ago), this had reduced immensely the amount of Gold contract being traded. So two things can happen in my opinion: governments hold on GOLD and makes it very volatile or governments sell a lot of their reserves to protect their currencies, therefore reduce the price of Gold tremendously. What I hate with gold is that you are trading against governments which are not very rational in their decisions. Currencies are the same, but since it is always against another you can hedge your bets.
How much more utility does a
How much more utility does a dollar have over a bar of gold? I would venture to say...not much.
"I'd rather die than be a phony." - Patrice O'Neal
Burgundy and Gold Blood: I
Just get your desired
Regardless of gold prices,
Work hard, play hard.
zeropower: Burgundy and
Work hard, play hard.
IlliniProgrammer: Regardless
beakerbeaker: IlliniProgram
Work hard, play hard.
IlliniProgrammer: ...Obviousl