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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (17726)	3/29/2003 5:34:10 PM
From: sea_urchin	Read Replies (1) \| Respond to of 81092

ild > We (gold bugs) need just a few billions to spill into gold to make us happy. Indeed so! But where does the money come from? So far, there haven't been too many takers. Most people still seem to prefer the bits of paper. I'm not a permanent gold-bug, I'm only a goldbug when I own some gold shares. My studies have shown me that there is no secular bull market, in either gold or gold shares, and I think investors would be wise to bear this in mind. I had hoped that the recent situation pertaining to gold (breakout of long-term resistance, Iraq war, possible change in investor sentiment) would alter its cyclical behaviour of the past 20 years (in fact, as if it was a commodity) but my current observations show me that it hasn't. Of course, I could be wrong, as I am about so many things, but that is my opinion. Apropos the trading of derivatives affecting the gold price, it definitely does. But, the point I was trying to make is that this price change is a different phenomenon from that if actual bullion was being bought and sold. In fact, demand for gold metal actually fell with the recent increase in price (as per WGC) and, as a shareholder in producing gold mines, it is the demand for actual gold which in the long-run determines the profitability of my investment. In fact, a price rise on its own without an increase in actual demand prompts the mines to produce more gold because their marginal reserves now become "payable". This eventually brings more gold to the market which, if it is not purchased, will depress the price. From the above I think it is clear that the investor should distinguish between gold price fluctuations which arise from changes in demand for the metal and gold price fluctuations arising from speculation. Failure to do so can have disastrous consequences. If you call yourself a goldbug then I think you owe it to yourself to define precisely why you say you are and why you invest in gold/shares. In my opinion, it is an insufficient reason to own gold/shares merely as a non-specific "insurance". As with any insurance policy, one has to specify precisely what risk one is insuring against and I believe it is so with gold, too. In my opinion, there is possibly only one financial risk that one can insure with gold and that is inflation. In times of deflation, when cash becomes more "valuable" than assets, I think it's better to hold cash or TBs than gold, and in good times "growth" stocks are unrivalled.