As a gold bug (I officially turned bullish on gold bullion in 2002), I see every weakness in the price of gold as an opportunity to buy more gold-related investments. That has been my strategy for the past eight years—gold prices correct on the downside and I invest more.
The last time I bought more gold was when gold traded at about $1,320 an ounce. I’ve been waiting ever since for another buying opportunity and it just hasn’t developed. But investment goes up or down in a straight line, so I will eventually have my opportunity again.
If we look at the long-term bull market in gold, 2010 has been particularly strong for the metal. Many gold stocks are up over 100% this year. Gold producers have never found it easier to raise money.
This got me thinking as to what the strong bull market in gold really means for investors and the economy. Here are my conclusions:
For the economy, one word: Inflation. The government’s easy money policy, the Fed doing quantitative easing again, interest rates near zero in the U.S.: all of this is very inflationary. If the real estate market weren’t still in the dumps, we would have outright inflation right now.
Bill Gross, the head of giant PIMCO, the world’s biggest bond fund, said last week that the U.S. will not likely be able to raise interest rates for years because of the fragile economy. I disagree with Gross, because I believe that the U.S. will need to raise interest rates sooner rather than later to support the weakening Greenback.
But supposing Gross is right and I’m wrong, the longer interest rates stay at zero, the more inflation we will get (which is bullish for gold). If I’m right and Gross is wrong, and interest rates do rise, gold will rally, because interest rates will only rise to support a devaluing U.S. dollar. We all know that gold rises as the greenback devalues.
As for investors, they are obviously flocking to buy gold. Why? Because they are not only concerned about inflation, but also worried about…
Read more here:
http://www.profitconfidential.com/stock-market-advice/what-gold-really-means-for-the-economyinvestors-at-1400/
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