Gold is the king of commodities. Everyone loves gold, whether they invest in it or not.
It is the classic haven from uncertainty and the highly regarded hedge against inflation. People who believe inflation will run riot believe gold is the only place to invest. However gold is actually quite difficult to own.
Paper gold, securities pledging gold or representing it, such as futures contracts and ETF aren’t the same as owning gold during a financial meltdown. You gold is on paper and your cash can go up in smoke with your broker.
God mines seem a good way to own gold bit anyone who follows mines will also have noted nothing runs smoothly in mining. When gold rockets somehow there is always a reason profits aren’t so fat as they should be. At the extreme end mining explorers are as much a haven from uncertainty as a high stakes table in an opium den.
So owners of gold are left with the option of owning the physicals, again a difficult option. Having a safe in your house with your gold in it comes with its own dangers. Insurance is costly for a start. Even then its not really safe as owners of Gold found out when FDR confiscated their Gold in the depression.
The optimum solution to owning Gold for the truly worried, is 10th oz Maples because you could actually do your shopping with a 10th oz Maple on the day before the world ends, something which would prove tricky with a single ounce coin.
But lets move on from the doomsday scenarios that drive a lot of Gold interest.
What next for gold?
These charts caught my eye.
The look extremely strong to me. Recent volatility compression with a rising trend suggest Gold is about to move again.
Why?
For a start the European holidays are coming to a close. There are two ways ahead. Euro break up or Euro compromise.
Option one creates mayhem, gold rises. Option 2 Europe prints lots of cash, so gold rises.
In any event monetising debt will one day kick off and once the process starts in earnet Gold will go off the dial. Its when not if.
With most developed countries with 6 months GDP above a sustainable benchmark (60% used to be considered the sustainable limit) inflation acute or chronic is the only way back for most countries to sustainable debt levels.
This is at least what the Gold bulls see.
You can be an apologist of course and there are plenty of them but once you have played with the numbers enough, you will be left feeling pretty doomladen, just the sort of state of mind that has people looking to gold as a fall back.
If you need any more convincing, the US deficit in 2011 was higher than all Federal income taxes collected.
Can I sell you some Gold now??
Anyway Gold look about to go on a strong run and $2000 is not off the cards if I’m right. If this happens it will be the begining of a new phase of recovery, reflation and nominally exploding asset prices.
This will hurt the economically passive but will present the economically active plenty of exciting opportunities to profit from this never-ending saga.