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Is It Time to Buy Or Sell?

I was talking with a friend this past week when I mentioned that I had a gold necklace that I wouldn’t mind selling.  “Why haven’t you sold it now?  The price of gold is pretty good.  What are you waiting for?”

Well, it’s exactly that. I am waiting.   Last week, we compared gold prices now, tottering between $1050 and $1060 per ounce, which sounds good initially, but in compared with the highs of the 1980’s, and adjusting for inflation, we see that actually is a pretty low price. 

Which ought to make one wonder why invest in gold?  Obviously, because the market makes you nervous and, when the dollar falls, gold is generally a safe haven.  But right now, the stock market is teeter-tottering up and down and the price of gold is following along.

Here’s what I mean: in 2009, the Dow Jones Industrial Average is up 14%.  Gold futures, meantime, seen as a safe haven and purchased by economic naysayers, are also up.  They are up 19%.  The reason for this: low interset rates and cheap money from the government stimulus package have poured into the financial markets, stabilizing the economy and cementing stock positions. 

The long-term net effect of creating all that money?  Not good.  Creating new money, together with the Fed’s maintaining near zero interest rates and the huge deficits that the U.S. is building will weaken the dollar, fuel inflation and cause untold economic hardship down the road.  Investors are pushing into gold to hedge against that future, but at the same time, the efforts of the government are stalling the losses that will undoubtedly be felt in the future because of the weakened American dollar.

Some experts are now predicting that $1000 per ounce is the new floor, and that the dollar will hit $1250 per ounce before the end of this year.  If you haven’t noticed, the year has only about two months left in it, and that, dear readers would be a hike indeed.

So no, I’m not ready to sell any of my gold yet.  If I were in “investing mode” personally, I think gold might be a likely candidate.   Buy on!

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