Thursday, Apr 26, 2007
Inflation v deflation: make your mind up time
bloomberg: Gold Prices Are Little Changed Amid Demand for Inflation Hedge
Gold goes up when inflation goes high
It also goes up when banks are threatened and confidence is lost.
It's time to decide if this bubble will end with hyper-inflation or as a deflationary depression.
As the US economy slows, inflation fears will recede and gold will fall.
We are seeing this now.
Personally, I am in the deflationary depression camp
For those who share my views it might be worth waiting for the first stage of the stocks crash before buying gold.
Gold should tumble with stocks initially, as everything gets sold off.
We saw this in February
Once the scale of the crises begins to appear then gold will rise again – into orbit.
Posted by sold 2 rent 1 @ 01:44 PM (309 views) Add Comment
11 Comments
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1. harold said...
This is basically my strategy (such as it is). My portfolio is largely liquid at present (various denominations), but am looking into shorting the Dow and moving into gold at an opportune moment, i.e., sub $600/oz, should it fall that low. My feeling on stocks is that the euphoria may last until late summer before reality sets in. When the fall in stocks occurs it is likely to be rapid and savage, given the unsupported growth of the past 12 months. The trouble is timing - there could be a confidence crisis at any time. Personally, I think it likely that the Fed has plunge protection teams in place (certainly this is the case for the dollar), and therefore the present scenario of daily new records being set may continue for longer than logic and sense predict.
2. harold said...
...Oh, deflation - definitely.
3. Whiteknight said...
and if people think the currency will nearly fail as opposed to a normal level slow down?
4. sold 2 rent 1 said...
harold,
Excellent points
Just been watching Bloomberg for the starting DJ bell
Who are they trying to kid with that clapping and cheering nonsense at the start.
Confidence seems to be really high at the moment - with institutions bringing in new money.
The end of the summer seems a likely scenario to get in before the big crash but you may miss out on the summer peak.
From what I’ve read on safehaven.com recently it is a Chinese stock market crash that may signal the peak for the US. This is likely to happen in May to mid June.
If we are up another 6-7% by early June then I am upping my stakes.
As for the PPT, they may be able to defend the dollar, but where were they on Feb 27 when the DJ fell 400 points
5. Dom1 said...
Gold may be a good investment in a deflationary environment too. Problem is we have too few episodes to check this against.
The 1930s is an obvious one, where adherence to the gold standard helped bring about the slump. But I believe it did well as an investment in this period.
6. inbreda said...
Harold...
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/10/30/ccview30.xml
7. David20040_0 said...
Put your money into hosuing, it went up 3k last month.
A much better investment all round instead of discussing gold.
The Dow Jones is at record levels but you guys keep trying to convinve yourselves are are heading for the Great Depression.
Whatever next, little green men invading?
8. lvmreader said...
@S2R1
Good points as always.
9. harold said...
inbreda, thanks for that timely link.
Three cheers for the "free" market: Hip hip... (silence).
10. lvmreader said...
Moral Hazard - that is what this mess is. And to think, these folks berated the Japanese for doing the same thing.
They criticised the cross-lent keiretsu, but let's look at CDS - what are they after all?
http://en.wikipedia.org/wiki/Keiretsu
11. Counter Argument said...
S2R1
Hi, If the depression comes - as I believe it will - why do you reckon gold will be a good investment? Gold is a hedge against massive inflation, not deflation. I am no economist (as this next comment may well show!) but surely cash is the best bet against deflation. Which feels very odd, I know. To insure against banks going under it would need to be held as a government security. Interesting article: http://www.usagold.com/gildedopinion/crowdsandgold.html