Date: Wed Dec 01 2004 16:00
trotsky (Sherlock) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i agree with your comment regarding J.Q. Public's non-participation. the history of Fidelity's pm assets is the gauge of that, and we're barely off the secular lows in them.
but i don't expect such participation until much later, in a few years time...presumably at far higher prices. there will be many opportunities to both make money and lose one's shirt in the sector until then.
Date: Wed Dec 01 2004 15:45
trotsky (Aurum@bonds in the 30's) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
this is true, at least in part. in a one year period ( mid '31 to '32 ) bonds joined the stock market and crashed as well, due to a combination of liquidity needs and doubts about the government's solvency.
however, thereafter yields declined for 16 years running, until they reached record lows in the 1940's.
anyway, i don't think the 30's depression is a good example for what to expect. nowadays we tend to get 'soft' depressions a la Japan, due to massive government and central bank intervention. also, it will take a much higher cumulative budget deficit to make anyone doubt the government's solvency. note that Japan's cumulative deficit is about 2.5 times that of the US ( as a percentage of GDP ) - this hasn't hurt the JGB market one bit.
Date: Wed Dec 01 2004 15:31
trotsky (Sherlock) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"So what you're saying is that only sharp market savvy people buy and sell precious metal stocks."
i have said that? where and when?
"And they, being so smart, see gold at 16 year highs as toppy and the catalyst for it's fall the upcomming jobs report, which is expected to be in the plus 200k range...."
that strikes me as a distinct possibility, yes.
"Couple that with falling energy prices causing a drop in inflation expectations, and a revival in other stock sectors like tech and manufacturing from the drop in the dollar, add in a little tax-loss selling, a little asset re-allocation into the gold ETF and it's a no-brainer; sell the precious metals stocks."
inflation expectations are low to begin with...and energy prices don't count in today's popular 'core' inflation gauges anyway, so i guess we can ignore that factor. the revival in other stock market sectors and the tax loss selling may well play a role, but i think the most important factor is a widespread expectation that both gold and the dollar are bound to correct soon. whether that expectation will pan out remains to be seen, but it almost certainly is the major reason for the weakness in pm stocks.
Date: Wed Dec 01 2004 15:22
trotsky (AU_NB, 14:31) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i don't disagree with you...like i said previously, i don't think the ETF is responsible for the weakness in gold shares.
but if there's one subsector of pm investors that MIGHT have done some switching, it's the gold mutual funds. we'll know when they update their published holdings at quarter end. hedge funds? perish the thought...if they want direct exposure to the gold price, they buy futures contracts.
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