Wednesday, February 2, 2011

Gold investors must stay put!

The recent drop in gold price should be taken as buying opportunity rather than a proof that gold is a bubble. The same "fools" who were arguing with the likes of Peter Schiff and Marc Faber about the Real Estate bubble are now seeing bubbles crashing all over the planet. Bubbles occur when governments issue too much money into the economy, artificially lowering the real rate of interest which mislead entrepreneurs and consumers  into overextending themselves in some asset classes despite the lack of fundamental value.

 Gold on the other hand is " money", it is " real value" that has protected people for thousands of years from governmental price manipulation! Gold cannot be " printed" by central bankers nor can its price be tempered with  indefinitively. While governments and central bankers tend to bash gold, they never miss an opportunity to confiscate individuals gold when the opportunity present itself. The era of easy paper money, which has fed all sorts of resources misallocations and governments programs is over! Despite their growth in power since 1971, most governments around the world are structurally bankrupt. Their bills are higher than the revenues they rack up because people have become complacent and unproductive due to the inherent moral hazard that are caused by government dolls. A productive society can only be ushered when the government plays a marginal role into individuals lives!
Gold and other commodities are talking to us, they are telling us that individuals, entrepreneurs should regain control of society in order for price to be reset on their natural rate. Governments have destroyed the price mechanism, transferring wealth from the productive to the unproductive sectors of society. This is fundamentally unsustainable and ethically wrong. Did I say " ethically"?
Gold investors must therefore stay put, they should even take advantage of the recent drops to maximize their dollar value like the Asians are doing!

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