Pages

Monday, February 1, 2010

THE "LONG VIEW" ON GOLD


OK... we timed our late-November "gold is overbought and ready for a decline" forecast pretty well. Gold has fallen from over $1,200 an ounce to below $1,100 an ounce. But before you get too concerned with the decline, consider this...

Gold is "real money" and wealth insurance. But you can't value it the way a stock buyer says, "I'll pay 10 times earnings for this company," or the way a real estate investor says, "I'll pay eight times annual rent for this house." This "hard to value" component makes the metal fluctuate wildly with investor sentiment.

Don't be surprised if the next "fluctuation" is toward lower prices. The dollar is rallying from a deeply oversold condition... which likely means lower gold prices.

But instead of panicking over your gold, take the long view. Here is a five-year chart of gold.

As you can see, gold could fall all the way down to $850 and still remain in the confines of its long-term bull trend.

No comments:

THE MONEY MARKET

FRIENDS