Gold Unloved Even Among Some Bulls

Today’s Financial Times features an amusing John Dizard piece which captures much of my sentiment on gold, a sentiment that can be summed up as intensely pragmatic and completely unimpressed with any supposed intrinsic value the metal may contain.

After poking a little at gold bugs, Dizard makes the immensely sensible recommendation to hold off on any new positions in gold for the time being, especially considering the premiums for small coins like Krugerrands.  He then suggests dollar-cost averaging into positions as the gold market is notoriously volatile.

I share Dizard’s reticence in buying in around $900 (or $800, for that matter). And while I also share his long-term view that gold has further to run, I would be more selective in any dollar-cost averaging.  With a little patience, investors can take advantage of gold’s wild fluctuations to get in at attractive levels.  Perhaps this smacks too much of market-timing but it may be warranted, not least to lessen the toll on investors’ psyche.

Of course, my strategy runs the risk of missing the boat should gold finally take off.  No less a personage than Marc Faber predicts gold will eventually be valued on a 1:1 basis to the Dow Jones Industrial Average.  He leaves the actual price level unnamed so it could be a case of gold going to $8000 or the Dow coming down to 900 or both could meet somewhere inbetween.

While it may seem implausible for an ounce of gold to equal the Dow, who can truly rule out the possibility?  After all of the events of the last year and a half, anything is possible.  Ultimately, Faber’s call is rooted in the principle of cycles.  Unless you believe modern investors have evolved (a tough stand to defend given the current mess), Faber’s call should be considered.

One Response to “Gold Unloved Even Among Some Bulls”

  1. Independent Accountant Says:

    In January 1980 gold was $875 and the Dow 889. That’s history.

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