Ray made the following comment:
This type of commentary cracks me up, do you retract it if gold is up on Monday? I personally believe it’s crazy to be putting money in stocks or thinking the dollar will rebound but I don’t jump off a cliff based on each single days activities or call people idiots based on a fall (or rise) in a single day
Ray is right, do I retract my comment? Answer no, and gold is up. My point in that blog entry was the following.
Peter Schiff made the assertion that in the next crisis people would jump out of the dollar and into gold.
I replied the fact that people jumped into the dollar, and out of gold at the slightest whiff of a financial crisis called Dubai says that Peter Schiff is wrong.
Do I think the USD will rebound? Without a crisis, probably not. But let’s be real this is a crowded trade. And like Guy in the video says, “if there is no downside then I become sceptical”. In every investment, and every strategy there is always a blind side. And if one says that there is no downside then it is a dream and a bubble.
Any fund manager that truly believes that there is no downside to their strategy is an idiot! Fund managers are there to make money, not propagate a “religious” belief on their investment strategy. Had Peter Schiff said, “you know you are right, here is where gold can go down… But you know I really doubt that the actions… will happen.” I can respect a difference of opinion, but not dogged determinism.
My theory on why gold is up and going to continue up is due to the fact that people are chasing performance. Gold can go up because there is nothing to stop it. Crude oil cannot go up because there is too much supply. The Euro cannot go up because the ECB will simply push the euro back down. With gold there is nothing and nobody that can stop it from going up. Thus if you are chasing performance it is an amazing vehicle. But that then puts gold into a bubble and momentum trade.
Folks, being part of a fund performance is everything. Like Cramer said last week, if fund managers can’t show performance then money walks. And if money walks then the fund managers make less money. Thus they need performance and gold is that vehicle. Thus I will say gold will go up. But it will go back under a 1000 USD. I am giving one of my predictions early, but I think in 2010 gold will drop below or around 1000, before shooting up, and then dropping down again. Probably in 2011, with a steady state price being around 700 USD. Though of course there will be overshoots and undershoots. What would be an ultimate high price? Probably around 1800 USD.