Wednesday, June 5, 2013
Why has gold moved down to $1400 and what is affecting the price?
Here are the current arguments as to why Gold must head lower as put forth by none other than Nouriel Roubini:
1) Gold is a poor investment as it can move down in price even when one would expect it should move up.
This is so stupid it doesn't bear refuting. It can be said for every investment ever.
2) Gold is a barberous relic only championed by right wing gold-standard nuts.
Again, embarrassing. You might was well call gold a "socialist plot" or "a fundamentalist islamist terror investment." Just simple minded name calling.
3) Gold provides no income.
Neither do Goverment Bonds, Bank deposits, CD's etc. This is in fact an pro gold argument because Real Rates are still deeply negative.
4) Gold is an inflation hedge and there is no inflation.
First, there's plenty of inflation just inflation that doesn't show in the CPI. But anyway: Gold is not an inflation hedge. Gold is a monetary instability Hedge. This is the single most misunderstood factor in valuing gold.
5) With the RECOVERY TAKING HOLD there are a host of better investments.
Sure invest in the stock market with valuation at ALL TIME HIGHS. Good idea.
4) With the RECOVERY TAKING HOLD the Fed will draw back on quantitative easing.
Okay,. the recovery is a dream. But that said, if the Fed backs off on easing yes, we might experience a serious bout of DEFLATION that will bring down all asset prices, including gold
Perhaps this is what gold is seeing. Perhaps this will drive gold lower.
BUT: AT THE SLIGHTEST WHIFF OF DEFLATION THE FED WILL PULL OUT ALL THE STOPS AND DOUBLE DOWN ON EASING. THEY'VE TOLD US SO MANY TIMES.
THE PRICE OF GOLD WILL REACT ACCORDINGLY....
SO DON'T TRADE. INVEST LONG TERM