That's very insightful and very true I think. People tend to compare these two very different raw materials, and in their comparing forget that they have many fundatmental differences. Also when/if gold hits 2000, it will be with much help from the declining dollar.
I think the "top picking" and "it is too extended, it has to correct now" psychology is exactly the same, regardless if something has an industrial use or not. That doesn't mean that gold will necessarily have to follow oil's move of 2008, neither up nor down. Still helpful to look at oil from a psychological and risk management point of view. Our human brain is wired to love to pinpoint and anticipate turning points before they happen. We love to pick tops (and bottoms). And we get killed in the process more often than not.
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Good point. So let's say we do get a single, world currency. What happens to gold then? Is it the same situation? Your ounce is worth $1,000,000, 500,000 Euros, $100,000,000 Yen.... and 500 new world dollars... what did you just accomplish?
Here is an interesting recent article that addresses several points mentioned in this thread: http://www.safehaven.com/article-15078.htm
You come out break even, that's the point. How is that a trade? The gold bulls think they're making money. Best case scenario, you're break even. Worst case scenario, you get in at the top of an extremely overcrowded trade and it tanks. I don't know what your risk/reward strategy is, but a best case of break-even and a worst case of a massive loss = bad idea IMO.
In your scenario, if 500 new world currency is worth $1,000,000 USD or an ounce of gold, I think it is an obvious choice to buy an ounce of gold cause it is unlikely you will accumulate $1,000,000 USD. I'm still waiting to hear any proof on that gold is a crowded trade and by whom. I know maybe one person other than me that owns any bullion. But guess what, they all do own stocks. Most people are still clueless about gold & silver.
But the point remains that the gold "trade" is nothing more than break-even. However, you're risking some solid downside. Let's see... proof that gold is overcrowded... It makes news headlines almost every night. I'm getting family and co-works telling me to buy gold (people that know nothing about investing). I see 3-4 "Cash 4 Gold!!11!!!!1!!" billboards on my ride to work, and that number is increasing. Every third commercial is a "gold is at an all time high!!" from a pawn shop/metal broker/etc. Zerohedge runs at least 3 articles on gold every day, and another 3-4 after market close - read through the comments on them and you'll find about 700 bulls for every bear, if you can find a bear. IMO - will it continue up from here? I wouldn't be surprised to see a massive blow-off top like oil did last year as the last couple bears buy in desparately. However, longer run, I say it falls just as hard as oil. Just wait until the stop losses start getting triggered. It'll get ugly. Don't get me wrong. I wouldn't even short it with your money, but I wouldn't long it even with my enemy's moeny.
Consider the other side of the coin and holding dollars. Best case scenario, you only lose 3-4% per year to inflation like you have been for the last 40 years, or worst case...you lose EVERYTHING. At least gold will still be worth something even if it does go down hard. The dollar could get wiped out. So risk/reward of being a dollar bull....Best case you lose a little money, worst case you lose all your money = REALLY bad idea IMO. its a lose/lose situation.