Gold Hype

Posted on October 5, 2005 , filed under Stocks | Print This Post

There have been recent articles by the “experts” encouraging gold as a positive investment. Here’s an example, you’ll need a Marketwatch account though, registration is free:

Marketwatch, Gold: Mega bull market underway

Remember these are the same people that helped fuel the creation and collapse of the .com bull run. When the majority of analysts and experts are in consensus, you can expect what they say to happen but then expect them to be the first to cash out as well. I continue to believe that the question of gold hitting 500 is not if, but when it will hit 500.

Gold hitting 500 will create the same kind of irrationality that caused the .com craze. Everyone will jump in to get a piece of the action.

I use a great site Kitco to track the daily prices of gold.

For the next 1-3 years I believe an economic slowdown is inevitable. A weakening real estate market and the U.S. dependence on foreign capital will result in a slight devaluation of the dollar, which will lead many individual investors to look at gold as an alternative currency investment. When these investors see the huge run up in gold, they’ll say wow and try to jump in. That’s exactly the same type of .com mentality that we must avoid at today’s already high levels. Articles like the ones above serve to fuel the burgeoning mania in gold.

My advice is don’t believe the hype. I’ll be preparing funds to short gold stocks if it breaks $500 in the next 6 months. As mentioned in an earlier posting, I’m watching BGO, IAG and GG to name a few.

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2 Comments »

Comment by grish

2005-10-19 23:25:21

your comments are just as dumb as those who jump on the band wagon. do you really think you can time your shorts on gold stocks? you may be months or years off the top. thats why its called irational exuberance. Dont be naive, just stay out of it. or risk losing your shirt being right

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Comment by Andy

2005-11-02 09:53:49

Timing the top of a gold bubble is no different than timing the top of the .com bubble or a real estate bubble. Every bubble has indicators that a top has been reached. That’s all the hype is about. The last leg of any bull run tends to be the one that is the most highly publicized. I created RawGreed to write and track this type of greed and speculation.

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