Tuesday, October 27, 2009
I try to refrain from using the term "bubble" but since its so widely excepted, I decided to use it just this one time to convey my point.
Gold, contrary to popular opinion, has many uses such as jewelery, medicine, electronics, and as a form of money. Today I would like to focus on the topic of gold in its monetary form. It is hard to ignore the price action of gold over the past 9 years, rising from around $300 to over $1000 an ounce. Although the price appreciation has been steady and consistent, there are constant calls for a gold "top" or identifying it as a "bubble." I am on the other side of the aisle in that gold, in its current state is not a bubble, but in a secular bull market that has a lot of room to run.
Bull markets are very difficult to ride in their entirety because the percentage gain from start to finish is sickening, but the best method is to be part of the bull market and walk away, looking from time to time. By "walk away", I mean to the point you forget you own gold.
I do actually think gold will become a bubble or mania, but again I believe that is far off. I don't have a price in mind, but sentiment will guide me. During the technology mania peak of 1999 and 2000, respectable businesspeople were quitting their jobs to become day traders. They believed this was the future. I believe we will know when gold is in the process of topping when, again these same respectable people will quit their day jobs to be gold dealers or brokers. That will be my sign, but until then the fundamental and technical picture remains in tact. Will you become a Goldmember?