Posted on 03/16/2011 10:38:26 AM PDT by SeekAndFind
Sell first, ask questions later.
That appears to be what gold traders did earlier this week, when their actions caused bullion to suffer a huge decline — falling more than $30 alone on Tuesday.
Consider whether or not there are good fundamental reasons for gold to have fallen so much.
The default explanation, of course, is that bullion’s decline somehow traces back to the Japanese earthquake and the ensuing crisis.
But I’m not so sure why.
Consider what is perhaps the most-invoked rationale for investing in gold: It’s ability to hedge against worsening inflation. Isn’t that rationale even more compelling now than it was before the Japanese earthquake hit last week?
For example, the crisis undoubtedly will lead the Japanese government into spending a lot more money in coming years than previously planned — both in rebuilding the earthquake-ravaged regions, as well as in maintaining the value of the yen in foreign-exchange markets.
In addition, most analysts now seem to agree, the Japanese crisis makes it all but certain that the Federal Reserve in the U.S. will inaugurate yet another round of quantitative easing — QE3 — following the termination of QE2 this coming June 30.
Other things being equal, this should lead to more inflation, not less.
Another oft-cited rationale for investing in gold: It’s a hedge against geopolitical uncertainty. But aren’t the horrors we’re witnessing in Japan a textbook illustration of just that kind of uncertainty?
Indeed, Reuters has reported, premiums for gold bars in Tokyo jumped earlier this week to $1 per ounce, up from zero last week and a discount in the weeks prior to that. That's just what we would expect, given the desire to hedge against uncertainty — and suggests that it’s not reduced Japanese demand that is the culprit in gold’s recent plunge.
(Excerpt) Read more at marketwatch.com ...
WOW!You seem to have this gold thing really figured out. What is the correct price that gold should be???
You would definitely need Steely nerves to jump on that play.
The correct price is that of the last transaction.
Oh obsolete. On to the next correct price.
buy into weakness,
I have one word - GM. Enough said.
A fool follows aphorisms.
Considering it is not scarce and is reusable the true value is probably around $300 an ounce.
That is what I thought, but it seems Patrick1 has a different take on what the real, true price of gold should be. That is the number I was looking for.
I will be happy to pay you $100 over the “true value” of $300.00 for as many ounces you care to sell me!!
Just wait a few more months.
Ah, you want to know what WILL the correct price be.
Send me your SS and bank account numbers and I will tell you.
Tell you what, as Free Republic is my witness, I will pay you TWICE your fair value of $300.00 per ounce for every ounce you wish in a few (3) more months. DEAL??
“Ah, you want to know what WILL the correct price be”
I know what the correct price will be. It will be the price that the market pays. The price a willing buyer is paying a willing seller.
You're entitled to your opinion, but gold was trading for about $750 oz at the beginning of November, 2008 - so it has nearly doubled in price since the election of BO.
Institutional investors are having a collective forced fire sale in order to generate the cash for anticipated insurance payouts in Japan.
Right now gold is up over $4.00.
Any fool that doesn’t understand accumulation - markup/markdown - distribution deserves to get fleeced in the market.
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