why shouldnt I invest in gold?

Gold up another 1% today (and a new all time high?) some people tell me impending bubble will burst, and some tell me as long as there is economic uncertainity gold is a good investment. I have a few k I'd like to invest in something, i'm not a finance wiz, can someone please give me a brief reason as to why I should or should not invest in gold? sb for the best (informative/brief) answer, thx.

Comments (24)

Aug 19, 2011 - 7:30pm

Personally, if you were holding I'd say hold. But the steepening curve (approaching parabolic) of the 4-hr December gold futures chart is telling me that there is a short-term top coming...probably in the next week or so. Do I think it's gonna go up in the LR? Yes. Do I know what the retracement will be? You need to see a top, gold has held Fib lines pretty well in the past.

A huge problem that I see is that Venezuela is removing massive amounts of gold from the market (used to back paper like GLD). The 8% reduction in gold supplies in the BOE is significant enough to cause a supply squeeze and backwardation. It has been speculated that there might be only 1 ounce of gold for every 100 ounces of paper gold. Depending on how much you believe in the government's need to prop up GLD, it would probably be safer buying physical, futures, or miners.

Reality hits you hard, bro...
  • 2
Aug 19, 2011 - 8:06pm

It's possible the Venezuela situation has already partially been factored into the markets, seeing as we were below 1800 just a few days ago.

The way I see it is that there are 3 possible scenarios.

1) We continue to slide and gold keeps rallying (likely)
2) We get some type of easing from US or Euro next week & gold spikes above 2000 (maybe)
3) We rally and gold dips (Not likely)

I may be simplifying a bit, but my case in point is that all directions point to gold still going up in the mid to long term. People have always been afraid of gold popping, but unless we from some kind of bottom and start rallying, I don't see a reason for it to go down. And even if it does, mid to longterm it's still in an uptrend and should be for awhile.

I'm still holding from 1400 & I bought more today just for the fact that I took most of my $ out of equities.

Aug 19, 2011 - 8:54pm

I wonder what would happen if there were to be a wave of profit taking on gold. Could we see a correction of 20% or more in a matter of a week or so? I think it's quite possible, regardless of what the trend 3-5 years out is going to be.

How much are gold spot prices a function of the money supply? Would a QE3 make gold rise equivalent to represent the full price of that inflation?

Best Response
Aug 19, 2011 - 9:05pm
TDSWIM:
I wonder what would happen if there were to be a wave of profit taking on gold. Could we see a correction of 20% or more in a matter of a week or so? I think it's quite possible, regardless of what the trend 3-5 years out is going to be.

How much are gold spot prices a function of the money supply? Would a QE3 make gold rise equivalent to represent the full price of that inflation?

20%? Not going to happen.. at least not for AWHILE. You may see a pullback of $100-$200 MAX in the near term, but remember that gold was already around 1600 and still moving up when the US raised the debt ceiling and markets collapsed. As long as volatility remains, people aren't going to take $ out of gold and invest in equities. Even if we get a few strong rallies, there is going to be hesitance until we get a solid few weeks of lower volatility and strong moves up.

If QE3 happens, it only goes higher as people get out of the dollar and pour into alt. currencies.

Aug 19, 2011 - 9:14pm

I cant help but feel that the dollar is gonna tank and that its gonna tank real hard. If it does, then gold will obviously benefit bigtime.

People like Coldplay and voted for the Nazis, you can't trust people Jeremy
Aug 19, 2011 - 11:06pm
FXTrader:
Jorgé:
I cant help but feel that the dollar is gonna tank and that its gonna tank real hard. If it does, then gold will obviously benefit bigtime.

Tank against what currencies....?

I'm guessing pretty much all of them, CAD, EUR, GBP, etc... There's been a ton of bearish news in the UK as well as in Europe and yet their crosses still rallied against the Dollar. It's either the central banks are doing more than your typical QE or the Dollar's about to jump off a cliff. Could be wrong, but that's how I see it. Besides, with zero rates for the next two years I highly doubt that people will keep their money in it.

People like Coldplay and voted for the Nazis, you can't trust people Jeremy
  • 1
Aug 19, 2011 - 10:01pm

I see the value of gold in the short-term, but how will you call the ultimate top in gold? Looking at the 30-year chart on gold prices makes me very wary. If you're late in getting out of it you'll either have to realize some significant losses or be in for the very long term. Am I wrong?

Aug 19, 2011 - 10:16pm

Fundamentally, Gold is a definite buy at the moment. There will be price movements in the next few weeks, but on the whole there is too much economic uncertainty in the Medium to long-run. Inflationary pressures, European debt crisis, oil low, and possibilities of a double-dip means that traders and investors are too scared at the moment.

I would buy.

Aug 19, 2011 - 10:51pm

Everytime I'm too scared to buy gold at these prices all I have to do is look back over the past few years how many gold bears have been shot down. 'Oh it will never break 800' 'Oh it will never break 1000'.

Shortly after that I look at how many people said 10yr yields would never hit 2% and now people are saying they can't go any lower.

Suspend your disbelief and stick to what's happening - http://stks.co/cn

Aug 19, 2011 - 10:53pm

do you understand gold? i don't so i don't touch it i stock to financials and energy

when you concentrate your time on just certain sectors you begin to build a subconscious predictor ability of where stocks will move and what causes them to

Aug 20, 2011 - 5:54am
blastoise:
do you understand gold?

Gold is a pure speculation because gold has no tangible value.
I don´t know if it is possible to "understand" gold. I think it is not possible.

Aug 20, 2011 - 10:37am
Massiveattack1987:
blastoise:
do you understand gold?

Gold is a pure speculation because gold has no tangible value.
I don´t know if it is possible to "understand" gold. I think it is not possible.

Gold is 'pure' speculation.. how so? Fiat money has no tangible value but we still value it.

Do you really expect our method of exchange to be something of tangible value? Do you suggest we use oil or wheat as currency?

Aug 20, 2011 - 3:55pm

Really surprised there hasnt been a major profit taking event thus far. Particularly since a fair number of people have been in since ~1100

If I had asked people what they wanted, they would have said faster horses - Henry Ford
Aug 21, 2011 - 10:24pm

Note to all you gold speculators thinking about initiating a position. There is a 28% cap gains tax on gold when you decide to sell because its classified as a collectible... really eats into your returns. IMO there are better defensive plays.

Here's the thing. If you can't spot the sucker in the first half hour at the table, you are the sucker.
Aug 23, 2011 - 8:21am

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