Iso,
You apparently have become even more bullish on gold than before. I hope you are right.
I too expect gold to do well & have backed my expectations with 30% of my portfolio. However, in the belief that it is prudent to make arguments against one’s own position, let me offer two reasons why gold may not go up.
1) The coming oil bust.
I don’t know if you saw this:
vny.com
but it appears that the Russians are selling as much as 5 mb/d into the oil markets. If so (and one never really knows about the accuracy of these reports) then OPEC will be forced to respond -- more than likely by an increase in exports in order to protect market share. It is astonishing how well oil prices have held up, if the numbers about Russian production prove accurate, but the moment OPEC moves to protect market share rather than price, then good-bye price -- we get a decline in the cost of oil and energy, the equivalent of a tax cut for the world. Seems to me euphoria would follow, and at least stabilization of trends now in decline.
I don’t think a second oil bust would change the basic gold story -- in fact would in the long run make it more compelling -- but, as they say, we don’t live in the long run. Anyway, oil price is one factor to keep an eye on.
2) The other is government, and its parallel interests.
One reason I like gold is that I like liberty. One reason government does not like gold is that it likes power.
If gold becomes more important, I gain a measure of liberty, and government loses a measure of power. It is not hard to predict that government will fight gold tooth and nail.
(By the way, this does not mean that I accept the whole GATA business. I tend not to believe in conspiracies, for no other reason than all the difficulties inherent in coordinating human beings. (((Example from personal life: the other day, a sudden shower forced few hours postponement of a Saturday afternoon game of doubles. It took 12 phone calls to find one replacement and set a new time.)
But tho’ I don’t believe in conspiracies, I very much believe in parallel interests. There are many powerful players who would be threatened by a gold bull, and who would take steps to damp it down. These people can probably find a great deal more gold to put on the market if they put their minds to it. If not, then they could start a talking campaign -- with senators and bureaucrats mentioning possibilities like an “Excess Profits Tax.,” or a “Gold Speculators Tax.” If that fails, they can start marking up bills with retroactive clauses; and if THAT fails, they can pass the bills.
There is no doubt in my mind that the great, vast, complex amoeba called government -- and all who are aligned with it, benefit from it, feed on it, etc etc etc -- will move in parallel ways to protect itself from a threat to its power.
If so, then why fool with gold at all?
a.) My hope -- and yes, I know, hope is not the best hook to hang an investment on -- my hope is just the scenario you describe, Iso, that gold will move fast off the mark, and catch the vast, lumbering amoeba by surprise, before it has had time to collect itself, ooze around and contain the problem.
b.) The self-same amoeba that is government, also to protect itself, HAS to inflate the economy. No way out. But if there is inflation, the pressure on gold sooner or later becomes irresistible. Or, said another way, for the parallel interests in and around government, a gold bull is a lesser evil than a depression.
Hence my 30% . |
