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Friday, November 06, 2009

Gold mania ahead?

“I think we’re still in the early stages of what could become a gold mania,” opines Chris Mayer. “While there are a lot more people talking about gold now and the gold price is close to all-time highs, it remains an underowned asset. Only a small fraction of investors own any gold at all. Hardly any institutions own any gold, either. As we now have 10 years of market-beating data for gold, it’s going to attract more attention.

“I think that attention will eventually carry it to a price of $2,000-3,000 pretty easily -- maybe more. So far, gold has had a steady march up since 2000. The last leg, the mania phase, always has a rapid and explosive move before it’s all over. We’re not there yet.

“As for what will pull gold back down, I think a strong economic recovery could derail gold’s story for a time, but as long as the U.S. dollar makes its way to new depths over time, I think the gold price will drift higher.

“Most people think of gold as an inflation hedge. To me, it is more than that. Gold is primarily a bet against the creditworthiness of the issuers of paper currencies. In other words, as the creditworthiness of the U.S. government weakens -- thanks to high debts and deficits -- gold will be a strong asset… and gold stocks ought to be one way to juice the return you get from gold. Our two gold stocks are up 80% and 40% since we bought them earlier this year. If we get any pullback in gold, I’ll be a buyer.”
--from "CIT Dies, Manufacturing Back to Life, The Recession’s Real End, When to Sell Gold and More!" by Addison Wiggin and Ian Mathias

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