Friday, April 30, 2010

Why Gold Is The Most Obvious Bull Market Of Our Generation

Moses Kim from Expected Returns makes the case for why gold is " the most obvious bull market of our generation". A lack of government prudence in fiscal matters and the debt downgrades of sovereign nations, all point to an increase in this 5,000 year old currency. See the following post from Expected Returns.

The gold explosion appears to be well underway, absolutely befuddling ignorant investors who view gold as a commodity. Do you think gold rose yesterday against every single currency because of the bullish dynamics for jewelry demand? Let's get real here- gold is trading as a currency. After all, gold has a 5,000 year history as a monetary metal. That the average person has no clue about history should have no bearing on your decisions as an informed investor since the facts never change; it is just perceptions that change.

You are currently observing the masses miss out on the most obvious bull market of our generation. How many times do gold bears have to be proven wrong before people believe in the gold story? In investing, inflexibility will get you killed. This is a bull market, stop fighting the tape!

I am telling you right now: get used to seeing perpendicular spikes in gold as shorts get stampeded by the golden horde. It is going to get ugly for gold shorts.

There is often talk in gold circles about gold manipulation at the hands of the likes of JP Morgan. Is gold being manipulated? Probably to an extent in the short run. But that doesn't concern me one bit since it is impossible to stifle a bull market driven by supply and demand in the long run. Impossible.

By manipulating the price of gold, paper shorts are implicitly betting on government prudence in fiscal matters. As someone who has studied history in times of crisis, this is a bet I would fade every single time. As anyone with a brain can see, fiscal and monetary stupidity is clearly in a bull market.

Keep this in mind: every time a sovereign nation gets a debt downgrade (Spain joined the party this morning), gold gets a tacit upgrade. Also keep in mind that investors are much more likely to be piling into gold at $2,000 than they are at $1,000. Don't ask me why- this is just how investor psychology works.

I assume most of the readers of this blog are already invested in gold. As such, I would recommend sticking a sign on top of your computer screen that says: Don't Sell, Stupid! Trust me, the coming explosion in gold will leave even the most ardent gold bugs in a state of shock.

This article has been republished from Moses Kim's blog, Expected Returns.

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