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Pop goes the gold bubble
Posted Mar 21st 2008 8:06AM by Aaron Katsman
Filed under: China, Economic data, Commodities, Recession
With gold prices plummeting 11% since Monday, the question is whether we can say that the run up in the precious metals sector is over? Investors need to remember that nothing goes up in a straight line forever. No matter what analysts say, their is no new paradigm or anything like that, and with gold enjoying a nice seven-to-eight year run, it could very well be over.
From Internet stocks to real estate to China we always hear new reasons, that even though these sectors already produced returns in the hundreds of percent, it's still worth it to pull the trigger and invest.
I know about the argument that you need to hold gold as a hedge against inflation, but let's get real. That reason has been thrown around for the last few months. Previously, investing in gold was a supply and demand issue.
With such strong global growth causing major demand for gold, supply wasn't able to meet that demand. As such, we were told the price needs to rise. Now everyone is saying that global growth is slowing dramatically, so we need a new reason for the price of gold to rise and that is inflation. Well you can't have it both ways.
If you ask me, the inflation issues are temporary. I expect the Fed to start aggressively raising rates as soon as there is a hint of economic recovery. As such, investors should be very careful when investing in the gold sector. Remember, nothing goes up in a straight line forever.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 3/21/08.
Posted Mar 21st 2008 8:06AM by Aaron Katsman
Filed under: China, Economic data, Commodities, Recession
With gold prices plummeting 11% since Monday, the question is whether we can say that the run up in the precious metals sector is over? Investors need to remember that nothing goes up in a straight line forever. No matter what analysts say, their is no new paradigm or anything like that, and with gold enjoying a nice seven-to-eight year run, it could very well be over.
From Internet stocks to real estate to China we always hear new reasons, that even though these sectors already produced returns in the hundreds of percent, it's still worth it to pull the trigger and invest.
I know about the argument that you need to hold gold as a hedge against inflation, but let's get real. That reason has been thrown around for the last few months. Previously, investing in gold was a supply and demand issue.
With such strong global growth causing major demand for gold, supply wasn't able to meet that demand. As such, we were told the price needs to rise. Now everyone is saying that global growth is slowing dramatically, so we need a new reason for the price of gold to rise and that is inflation. Well you can't have it both ways.
If you ask me, the inflation issues are temporary. I expect the Fed to start aggressively raising rates as soon as there is a hint of economic recovery. As such, investors should be very careful when investing in the gold sector. Remember, nothing goes up in a straight line forever.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 3/21/08.
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