Why Skyrocketing Gold Is Nothing to Worry About

The risk on/risk off trade- we hear that expression a lot lately on Wall St. What does that mean and how does that play out in decision making helps to understand why gold is going up? …and why it does worry me?

Here is the overly simplistic way investors/traders are talking and thinking:

If you think the world economy is snapping out of recessionary fears and the sky is not falling down- it makes sense to be involved with risky assets like equities and commodities because inflation and growth are good for these assets. Under this scenario, you can also buy gold.

Watch my video below for more on Gold.

Will gold go higher? I have not sold mine, but then again, I did not buy enough! Remember, the trend is your friend- right up to the end! I would not short a new high- but after a 10 year, 500% move higher, and everybody buying because it’s the answer to everything, don’t let the price of gold make you bearish about the big picture. The future remains bright: a steep yield curve, an unstoppable global build out, innovative new technologies; that’s what should be dominating your thinking and investment decisions. Don’t let gold keep you up at night.

If you think the governments around the world have taken on too much debt and will continue to debase their currencies and the sky is falling down- it makes sense to be involved with less risky assets. Avoid equities and buy gold.

If you think the world is getting more unstable, America is losing dominance in the geo-political big picture, then you can buy gold.

Another important factor squeezing the price of gold higher is the new popularity of storing gold, rather than owning gold futures. This is a result of the new gold ETF’s and a trend of some institutions willing to take procession and pay to store gold.

So there it is. For now, whether you are bullish or bearish on the world economy, “buy gold” is the answer. And remember, the gold market is overall tiny compared to the equity or fixed income markets, so this current buying pressure creates an exaggerated move in the price of gold. (This whole train of thought is amplified with silver.)

In the past, if gold was moving higher it represented fear in the markets and the thoughts of impending doom by the buyers. Now it represents almost every type of thinking. And while the four most dangerous words in investing are, “this time it’s different”- the fact that gold is moving up just does not worry me.

Will gold go higher? I have not sold mine, but then again, I did not buy enough! Remember, the trend is your friend- right up to the end! I would not short a new high- but after a 10 year, 500% move higher, and everybody buying because it’s the answer to everything, don’t let the price of gold make you bearish about the big picture. The future remains bright: a steep yield curve, an unstoppable global build out, innovative new technologies; that’s what should be dominating your thinking and investment decisions. Don’t let gold keep you up at night.

By: Jordan Kimmel

Disclosure: Long GLD

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