(This is an excerpt from an article I originally published on Seeking Alpha on October 11, 2012. Click here to read the entire piece.)
When the Federal Reserve promises to print money for an indefinite amount of time, it seems obvious to put trashy cash into assets that cannot be so easily manufactured. This shift allows investors to gain the advantage of relative supply differentials. Gold (GLD) should be at least one of those assets. Yet, the gold bear arguments persist, mainly because gold seems like money from the “ignorant days” when civilization had not yet figured out how to breathe value into paper out of sheer will. In all my years of writing about gold, I have rarely referenced specific gold bear articles or posts, but I found myself compelled to break with tradition after reading a recent piece from Zacks Investment Research called “The Case Against Gold In Today’s Market.”
{snip} My response mainly focuses on noting how the gold bear arguments themselves demonstrate that gold is not nearly as different from other assets as the Zacks pieces suggests.
{snip}
I conclude by looking at the current setup for gold. The breakout from August 31st is well-intact. While I did not interpret this year’s Jackson Hole confab as a guarantee for QE3 in September, clearly a lot of people did. Gold was the first mover with stocks waiting a full week before experiencing its own breakout (to new 52-week and near 5-year highs). Just as stocks have stalled out at highs of the year, gold has stalled at its high for the year. I consider this point a rest stop for gold.
Source: FreeStockCharts.com
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on October 11, 2012. Click here to read the entire piece.)
Full disclosure: long GLD, GG