Saturday, June 5, 2010

Marc Faber, Jim Rogers Continue to Hold Gold

Confusion over the daily fluctuation of the markets based on little snippets and tidbits of news can drive even the most astute trader or speculator batty, but in the case of gold, investors and pundits like Marc Faber and Jim Rogers aren't confused at all, and they both say they have no intention of selling their gold, and are always on the lookout for dips so they can acquire more.

Without getting into too much detail, the reasons these guys continue to do this is there overall understanding of the macro-economic circumstances.

If you understand the macro-economic situation affecting any investment, and gold in particular, the daily ins and outs of the market are largely irrelevant, unless you're trying to make a quick killing, which hopefully you're not. Even the day traders can't do that great in attempting to time the market, and very few are that successful, even though there is always the glamor attached to being involved in it.

In general, macro-economics as it relates to gold, will deal with issues like national debt, inflation, paper currency and the practices of central banks; all of which the above are highly affected by.

For example, around the world now central banks refuse to implement austerity measures into their practices, as they're committed to bailing out whatever major problems occur in order to save the various economies or industries they deem in need of saving.

That means they'll have to print money and government debt will continue to rise to astronomical levels.

Another indicator is job creation in the private sector, which is just above zero in the United States, with the government being the almost sole creator of jobs, which means they're propping up the economy while creating nothing of value that has a chance to last.

This is why Faber and Jim Rogers continue to hold gold. The central banks and governments have become addicted to these practices even more than in the past, and it's not sustainable by any stretch of the imagination.

Consequently, trust in paper currencies is eroding around the world, and the only reason the U.S. dollar is stronger is because the euro isn't. It's not because it has some type of safe or mystical power which makes it a place of safety. It's only relative in the sense when you compare to the condition of most other currencies in the world, which for the most are even more unstable.

So within these general parameters, gold can be counted on to continue to move upward in price, no matter what type of temporary correction will take place.

Some clueless analysts and pundits try to make it look like gold is in a bubble, but it's not even close, as until the general population gets into the gold market and drives up prices without knowing or understanding the fundamentals, similar to clueless house flippers and those with HELOCs in the housing bubble, where they kept refinancing or bidding up the prices of houses like it was a game with no end, not understanding it had become a ponzi scheme which was about to come falling down around their heads.

It seems the average or everyday investor hasn't even began to invest in gold, so until that happens it won't be those who bid up the price of gold, but the things mentioned above.

There will of course be the traders moving in and out of the market which will drive gold prices up over short periods of time, and then the price gets a correction when they sell their positions to cover other unrelated investments they've lost on.

Only when the price of gold goes up at unrealistic levels for no apparent reason will be be in a bubble, and that won't happen until far into the future, as people in general still stay away from the yellow metal, as they fear that which they don't understand, and only after years of financial reporting on it and they feel safe, will they enter in. At that time the market will be close to a top, and then they'll start to bid gold prices up based on nothing else than everybody has caught gold fever.

So that's when and how a gold bubble will occur, and until then we should feel confident gold prices will continue onward and upward.

This is why Marc Faber and Jim Rogers, among others, continue to hold and invest in gold, and will continue to do so for many years to come.


Robert Williams said...

You should learn the difference between there, their, and they're.

Robert Williams said...
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