(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.)
Alix Steel, a reporter for thestreet.com, discussed gold on Nightly Business Report, July 26. She claimed that gold’s low volume, summer rally is being fueled by fears of a default on U.S. debt. Nevermind that gold has been rising long before any such fears ever took hold in the market. What caught my attention was Steel’s characterization of two opposing “camps” of thought on gold, both of which think gold will go in one direction no matter what how the government resolves the debt ceiling debate.
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In my opinion, the characterization of these two polar extremes on gold is the kind of confused logic that helps people lose focus. It is not possible to resolve the conflict between these two camps of logic. For me, the only reason to hold gold is to provide insurance against devaluation of a currency…especially when that currency is being used to stuff holes in the economy at each and every sign of weakness or calamity.
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…I can accept that gold may correct from here even if the longer-term thesis remains intact. Any bull market experiences corrections, and even I trimmed back some of my holdings in Goldcorp (GG) to raise cash in case I can get more gold at cheaper prices. (As a reminder, I keep GLD as a core position and trade the miners. Lately, I have been holding the miners for longer periods of time). Accordingly, I will welcome any sell-off in gold for the opportunity that it represents.
Watch the full episode. See more Nightly Business Report.
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.)
Long GLD, GG