Saturday, September 11, 2010

Gold: Heads You Win, Tails You Win

If someone came up to you and said that they were going to flip a coin and if heads came up you win and tails came up they lose, you would probably walk away and tell the person to get lost and go try to con someone else.

In terms of gold, though, we are increasingly beginning to hear people argue that gold will rise no matter what happens!

Today we read one article that quoted an analyst as saying "Either a swift economic recovery or further dismal economic performance should bring new buyers into the market." We realize that there are certainly some valid arguments for buying gold, but a comment like this is not one of them.

Now, we wouldn't necessarily go as far as to say that gold is in a bubble. After all, unlike a lot of recent asset bubbles where prices skyrocketed even as supply expanded, the supply of gold is relatively constrained. That being said, arguments presented as a win win regardless of the outcome are usually found closer to the peak of a move than the beginning.

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