"Gold fever": no safe bet

More and more buzz these days about gold fever. See: Gold Fever strikes mom and pop prospectors in US west

“The poor economy and a record price of gold have renewed interest in prospecting in Western states where public lands are rich with deposits and small-scale operators are all but free from government regulation.”
“…When gold goes over $1,000 an ounce, everybody becomes a miner,” said Russ Bjorklund, minerals manager with Salmon-Challis National Forest in Idaho”
“…We've got all types: individuals out there with pick and shovel and companies with heavy equipment”
“…You start finding a little gold in the pan—that's when gold fever kicks in. It's like a drug and you're ready to work all night”
“…it doesn't replace a full-time job with benefits, but you work hard enough at it, you might get lucky,”

“You might get lucky” sound like a rational investment thesis to anyone?
Just daring to express scepticism about gold-love today is sure to insight the anger and attack of many ardent worshippers. However as George Soros pointed out this week, the gold rally can continue for a while, but it is definitely not a “safe” bet: “It's certainly not safe and it's not going to last forever.”
No rational investor can afford to fall in love with any one theme or asset class. Buyers beware.

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3 Responses to "Gold fever": no safe bet

  1. Anonymous says:

    Danielle
    Great site, but I think you are missing the point of gold's rise. It is becoming an alternative currency, which is a role it has played for thousands of years. No investment is “safe” including bonds.

  2. Anonymous says:

    when you read more and more stories in the press like this one it tells me without a doubt we are near the top in gold and it's ready for a correction. I would think a pull back to its 200 day moving average is reasonable at 1170

  3. Anonymous says:

    Barron’s: “Central Banks Embrace Risky Currency Gambit. Having cut interest rates to zero, central banks look to cutting currencies. First, interest rates were slashed by central banks in reaction to the credit crisis of 2008. Then, they ballooned their balance sheets with massive bond purchases in what euphemistically was called “quantitative easing.” Now, with short-term interest rates in most economies at or near zero percent, central banks have run out of basis points, the main weapon in their arsenal. Moreover, their quantitative easing has had far less than the expected impact. Having run out of conventional options of lowering short-term interest rates and getting less from their relatively unconventional tool of buying bonds to bring down long-term rates, central bankers are utilizing their next option – currency intervention. . . . Nevertheless, the path of least resistance for paper currencies is lower while governments fight over shares of stagnant economies. That seems to be the message of gold’s rally.”

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