Thursday, February 23, 2006

Adding a couple of new trades to the book today...first, long Gold:

Just paid 557.75 in £25/point (that's £25 per $1 move in the price) for
Jun '06 GOLD. Finally back into Gold (I played in it a lot last year,
always from the long side), even if it is just in small size for now.
Would like to take this up to £100 per point eventually.

The rationale for being long gold is that for too long over the last few
years, central banks and ESPECIALLY the FED, have been pumping far too
much liquidity into the financial system over the last few years,
printing dollars whilst rates were at 1%. Running huge deficits,
financed by borrowing from Asia, has increased the amount of dollars in
circulation, and devalued this fiat currency. Gold is such a pure store
of wealth, that is bound to rise further whilst government borrowing and
spending carries on, and whilst real interest rates are kept too low
(although the FED is doing its best to stop that).

I think we'll see Gold up at 1000 in the not-too-distant future, look at
the old charts of Gold versus other metals such as copper, and if Gold
was to reach equivalent levels now as copper is (versus its old historic
highs), that would put it at around 650. Given copper is most certainly
linked to inflation, and the general cost of "things", there is no
reason gold shouldn't be catching up. And like many markets, expect it
to overshoot.

3 Comments:

Anonymous Anonymous said...

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17 May, 2006 12:28  
Anonymous Anonymous said...

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17 May, 2006 12:45  
Anonymous Anonymous said...

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17 May, 2006 12:48  

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