James Higham has asked my views on Gold. It is a long time since I wrote on the Gold price. In 2006-8 I was a huge holder of gold, it was my biggest asset by far and it did well during that time too - in both ETF's and Funds. Subsequently I shorted it through the financial crisis and timed a repurchase well at $700 an ounce. Then I sold out at $900 an ounce to get into shares at the beginning of 2009.
Now on reviewing the above I see that the calls made were all good. Even the sale at $900 was OK, because although I missed another 50% increase my shares that I bought at that time went up over 300%.
But now to today, where is Gold going now? It is flat on the year so far.
Well, the end game for the West is still inflation, in the UK we seem to be getting there early. Massive debts can't be paid and the in some ways the most equal way of sharing out the remaining wealth will be through a period of high inflation. Much like the 1970's. In fact we are going to have stagflation, a prediction made here long before the financial crisis.
As such, Gold is going to be a good store of value, but then again Shares will be too as they outpace inflation. Indeed anything that is not cash is going to be a good investment. So Gold will go higher, maybe even to $2000 at some point next year (one for the 2010 predictions), but other investments will be too. On the other hand, if the World Economy collapses and we do end up with deflation then Gold will only do OK relative to other assets.
With this in mind I own shares in (potential) Gold miners such as EMED, but am not heavily into Gold. I prefer Oil, it has more practical use and will only get more expensive as we pass peak oil. Co-Capitalist Nick Drew takes a very different view. Given he is more successful and wise than me, probably best you read his posts on Gold too!
(The real trick is going to be to get debt now, fixed at a good rate, that I can then invest in more profitable ventures. Normally I would be erring to get free from debt slavery, but not now. Just as in March 2009 I called to buy shares, now I will try to fix debt for the inflation ride to come - thinking of it as my revenge on the Banks).