For me it’s a case of why wouldn’t everybody want to own gold here? I don’t think it’s so much a case of inflation protection from a domestic perspective as we have such slack in employment and overcapacity in so many sectors. In the developing world, I think the inflationary pressures could be much more prevalent. More than anything though, the most compelling reason that I want to own gold is the dysfunctional political system in the US which has led to protracted deficits as far as the eye can see. This is so disconcerting to me, I just don’t see how that doesn’t devolve into a total morass and I don’t at all rule out the possibility of civil unrest in the US. People like Glenn Beck are capable of inciting some real nutcases out there, and gold is the natural hedge for that.

I see the fundamentals and the technicals both very much aligned in gold’s favor and that should make for a very powerful move. It reminds me of the dollar back in the early 90′s when German overnite rates (post fall of the Berlin Wall) were up at like 7 or 8% vs the dollar’s 3% and the charts were just falling apart for the dollar. Perfect combination, and it overhwelmed the dollar down to about 1.37 $/DM from $1.80. The fact that gold has been so quiescent for 1 1/2 years and the volatility completely fell out adds to my sentiment that the move up can be a lot more powerful and swift than people think. Consider how oil quickly oil moved from $60 to $147. I don’t see any reason why gold can’t have the same type of move, and I don’t think the dollar has to crash for that to occur. Just an orderly continuation of what we’ve been seeing. and maybe a crescendo of worry in the US as we get very close to the 2010 Congressional elections leading to sharply heightened volatility.

Actually, it is a trade against all fiat currencies, especially the G8s. Individual investor demand across the globe is driving up the price. Now, that everyone appears to be jumping on the bandwagon, it would seem logical for me to take a little off the table.

“Everything is a trade unless you plan on holding ’til you’re dead.”

You know what I mean.

As for the definition of money. I understand that you define money from some ideal you have in your mind how it should be, but not from how it is in the real economy.

“The liquidity hat has been pumped into the system is a fart in a hurricane. It disappeared into a black hole of overwhelming debt. Kind of like an exotic atomic particle that winks out of existence the minute it is created. I don’t know if the Fed knows where the money actually went, much less if they can call it back.”

On the contrary. I think it is quite well known where all the liquidity the Fed has pumped into the system has gone:

http://research.stlouisfed.org/fred2/series/EXCRESNS?cid=50

Only a smaller part has gone into circulation:

http://research.stlouisfed.org/fred2/series/CURRCIR?cid=50

I agree with you that the pumped liquidity is only marginal compared to the mountain of debt in the system and doesn’t do much with respect to this debt. This doesn’t mean, though, the money has vanished. It’s circulating or it’s hoarded as reserves by the banks. The graphs show the failure of the thinking based on neo-classical economics to which the Fed and government’s economists subscribe that it would be possible to solve the crisis and get credit expanding again by pumping liquidity in the system. However, if the Fed really wants to do so I don’t see anything that would make it impossible for the Fed to withdraw the added liquidity again.

rc

Gold = $1060

Everything is a trade unless you plan on holding ’til you’re dead.

I define money as that which holds value over time and which can be used as a proxy in the exchange of goods, property, and services, that is recognized universally (or as close to universally as possible), and preferably something that cannot be created at will. Some things are better at it than others, in the long term.

Strengthening relative to what it purchased 1, 5, 10, and 50 years ago.

The liquidity hat has been pumped into the system is a fart in a hurricane. It disappeared into a black hole of overwhelming debt. Kind of like an exotic atomic particle that winks out of existence the minute it is created. I don’t know if the Fed knows where the money actually went, much less if they can call it back.

“Long term, the “value” of your investment in dollars (not money) will be distributed away from you simply by holding them.”

Is Barry’s call one for a long-term investment? I understand his call as one for a trade.

What do you mean with “in dollars (not money)”? How do you define “money”? I suppose you don’t just refer to the difference between money itself and its unit with which a number is assigned to it.

“QE and a strengthening currency in a fiat system?”

Strengthening relative to what? Relative to all other fiat currencies in the world?

As for QE. You seem to take it for granted that the liquidity pumped into the system won’t be withdrawn again.

rc

Life is a Gamble. Cut out the Middleman.

Agreed. Gold’s action seems to be saying it’s back to business as usual.