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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (47016)	12/11/2005 7:59:11 PM
From: Wyätt Gwyön	Read Replies (1) of 110194

the rise in gold is not necessarily reflective of a deflationary environment, although your interpretation of it that way is not surprising.* i would guess that 99% of the people buying gold are not doing so because they think we are in deflation. i think the following three classes of gold buyers greatly outnumber the buyers who think we are in deflation: -- those who believe we are in an inflationary environment and think gold will protect them -- those who are buying gold for jewelry -- those who are speculators the last one is probably having the biggest impact lately as the price rise itself begets demand from momentum investors who believe in TA voodoo and buy gold as part of trend-following superstitions. who knows where it will stop. since gold has no intrinsic value, you can't say it's overpriced or underpriced at any level. it's worth whatever people want to believe it's worth. in that sense, it reminds me greatly of tech companies, especially Internet companies. it is not surprising that gold miners are historically destroyers of capital, a happy status they share with the airline and semiconductor industries. of course, airline and semiconductor stocks have occasionally had great performance over select time periods as speculative vehicles even as their industries destroyed capital. miners have been the same. imo, though, fwiw, semiconductor and airline industries are essential for modern civilization, whereas gold miners aren't. Don Coxe thinks it is the (largely Indian) jewelry demand for gold which is the major factor pushing up the price. i that sense, it would be like any other commodity affected by increased buying power out of Chindia, and one need not wax philosophical about what the rise "means" w/r/t your favorite flavor of flation. * gold is basically a Rorschach test.

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