the big gold trade over the last 5-10 years was buying a portfolio of small gold miners and watching them fly. Huge returns have been made doing this by intelligent investors. My thinking is that the easy money has been made. Everyone now thinks gold is destined to go higher and it seems like everyone is getting in on some type of gold trades. Does this show signs that gold might be coming down or an even larger bull market is forming that will include the masses?
i read a great quote last week to the effect that the market cap of the two largest blue chips is greater than that of all the gold mining companies combined. just a point of interest that if a lot of money starts migrating towards theses type of stocks - could be a lot of upside.
"i read a great quote last week to the effect that the market cap of the two largest blue chips is greater than that of all the gold mining companies combined" not justified, imo.
I believe the bull market in gold is in an early stage 2 right now. The public is becoming aware but is still being discouraged from owning gold related investments. The whole point to a precious metals bull market is too keep as many investors away as possible until the stage 3 advance begins. This is when the institutions and money center banks begin distributing gold shares to the public. We are still at least 2-3 years away from this event. When people are lined up around the corner at bullion shops, then you will know its time to sell. For now, we are not even close to this yet. Many traders are digusted with gold right now as the price action continues to deter them away from the metal. The reality though is that gold and silver have outperformed the major US indices for over 6 years now. I'm not a self-proclaimed gold kook but my chart analysis shows the strong possibility of a spike to US2000 in the coming years. For futures traders, millions will be made and lost. Traders that take positions and stay on the right side of the bull will win huge. Those that attempt to short on every major move are likely to encounter a religious experience with unrecoverable losses.
I just saw an infomercial on the television from the US mint about commorative coins. It was all about encouraging the public to get into gold and how it was such a great investment. It showed how the price went from ~250 to 725 in ~5 years. This shows that the public is becoming more aware. Also is this truly a gold bull market or is simply a dollar bear market? If you look at these charts: http://futures.tradingcharts.com/chart/US/M http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx it shows a good portion of this gold bull market was attributed to the USD. Another fact that has me concerned is that a large percentage of gold is strictly used for jewellery. If the prices for gold get too out of whack this demand will rapidly shrink - will it not? The gold bugs believe that one day in the not too distant future an ounce of gold will be able to buy you a house. The thesis is that the USD will collapse and every major currency will follow and gold bullion will go out of sight. It will become this universal currency and so few people will have possession of it that people will give up lots to get it. This does sound hard to believe but it does sound possible... So what is the course of action? Do you put 100% of your money in gold and hope for the big payoff in the future? Or do you keep 10-20 ounces around the house and if this thesis ever plays out you will do well anyways? The latter seems more sensible...
There are outlandish predictions for a much higher gold price but I'm more realistic about what price is achieveable over the next year to two. An inflation adjusted price of $2000 is possible imo. Keep in mind that India and China are huge importers of gold and utilize the metal as a means of savings. As these economies continue to grow exponentially, the amount of wealth created will be drawn that much closer to gold. The US Dollar is close to breaking a multi-decade low which will also propel the gold price as well. The Broad Dollar Index already made a 10 year low last week actually. The reality is that most Western investors keep their money in paper assets. As these paper assets decline in value against other currencies and the exchange value decreases for goods/services, then the potential to see an explosion in physical demand lies dead ahead.
an opinion...... keep in mind that the central banks hold anywhere from 15,000 to 30,000 tons of gold depending on who you believe... and there are likley hoards of gold in the Mid east of impressive size.... the central banks dont even have to hold the bullion, it can be created just like printing money..... if you ask the central bankers for serial numbers and bar weights of their holdings, lotsa luck the bankers will do everything in their power to prevent gold from replacing paper money at the stroke of a pen, they can impose controls of currency and exchange.... it happened once in the US and history repeats..... all these hopes and wishes for $5000 gold and the collateral economic panic that would come with it..... I know the whole system is screwed up, but watch out what you wish for....
btw, US Dollar index is a farce to start with The six (6) currencies that make up the index and their weights are: Currency ....Weight Euro â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦. .576 Japanese yen â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦ .136 British pound sterling â¦â¦â¦â¦â¦â¦â¦.. .119 Canadian dollar â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦ .091 Swedish krona â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦. .042 Swiss franc â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦.. .036 notice who's missing on the list ?? (understanding that some currencies dont trade "freely" yet the Yen is on there even though Japan sets interest rates to zero to keep it from climbing, but that's another discussion) missing are our largest trading partners, Mexico and China and our mid east buddies who sell us buckets of oil..... the index should be near 30 or 20, not 83........ an opinion of course