Tuesday, October 06, 2009

BAGAKOAA Oct 6 2009 Late Night Alchemy


Oct 6, 2009

Someone asked, Is gold a leading inflationary indicator?

Here is my late night response.

Gold is many things to many people. Gold has gone “sky high” in recent years but by historical comparisons adjusted for inflation gold is far from an all time high. Some are taking gold to hedge against inflation, some of the increase like all other commodities is rising due to a dropping dollar, not the same as inflation, some are wary of deflation, some of the rise is due to a true increase in demand. Take your pick. It is weird to see equities go up and gold go up simultaneously. The question is, should you own it, how much, and how should you hold it. My humblest of opinions is yes you should own it, and I would have 10-20% of my portfolio in the metal either through out ownership or a sound ETF (GLD). Personally I have switched from direct ownership to the ETF, only for the liquidity and to move something resembling a trailing stop to protect my gains. After a nice win last year and talking all the profits from 735 to 910, I am back in enjoying a 17% gain right now with 11 of it protected with a stop. I am looking for another 15% on the upside between now and the end of the year. I hope this helps.

Salve Lucrum


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