Wanted to make a few comments in rebuttal to your remarks…
1. small market-Considering that the U.S. money supply has doubled during W. Bush’s tenure, the fact it is a small market makes it even more compelling. What I’m saying is if you take the amount of money that was put into existence in this country since George Washington, that amount has been doubled in the last 10 years. Truly amazing. All those dollars cannot be drained and are always seeking best risk/return. This does not even speak to the Japan/US carry trade that also injected unprecidented amounts of liquidity.
2. Money is faith-Agree completely. A 1950 dollar is worth less then .12 cents now. See #1 and understand when its a good time not to have faith in the paper money. Gold has been money for 5000 years. Our current $ has existed for about 35 years and doesn’t have a great track record for that short period.
3. Recessionary affects-My argument would be we may get more then a recession (gold positive last time), a dollar collapse (given the amount of debt, current account deficit, and inability to fix this in a declining market), above mentioned inflation, and recources being used up with mine production sidelined for 20 years causing delay in more production coming online to fulfill investment demand.
4. Hedge funds- completely agree. But if something is in a bull market all the manipulation in the world is not going to stop the primary trend from completing.
5. Golds behavior-has been and always will maintain value. Unfortunately there isn’t a paper money in history that has ever survived. Paper money is political, gold is not. Paper money is created out of debt, god is not. If paper money is so great why do the banks keep tons of it? Doesn’t make any sense.
6. ETF’s-with the amount of corruption being announced almost daily in the financial world why trust them with your only real insurance against instability. The London Metal Exchange defaulted on their nickel contract just the other day.
Defaulted debt does not have the affect of reducing dollars in circulation. That is an old wives tale. Where did the money go that was lent?
Apparently some people do have faith in gold. It has outperformed the dow the last six years.
My feelings are basically that paper assets have been in a bull market the last 20 years. Commodities a bear mkt the last 20. That is reversing as we speak. Don’t believe me look at the trend of the US dollar index and a gold chart.
Obviously to each his own but you said you’ve thoroughly researched gold which I find interesting that your not a believer in this climate. Have you ever read ‘Creature of Jekyll Island” ?
