Found thıs on the excellent Goldtent posted by eeos and ıt's worth repostıng here.
Gold and gold shares continue to be in a consolidation phase since the dramatic rescue of Bear Stearns by JP Morgan Chase at the end of the first quarter. Credit and capital market stress continue at a high level as evidenced by the weak performance by financial sector shares during the first half of 2008. Such concerns tend to drive capital market flows into safe haven areas including gold. Following the current pause, we expect gold to achieve new highs later this year. We believe that gold shares are awaiting leadership from the metal itself. Once gold attains new highs, we believe the shares will break out of their consolidation mode. The $1000 per ounce threshold for gold is at present a psychological barrier for investors. Once that level is viewed as a floor rather than as a ceiling, we expect a significant rerating of gold shares.
We suggest that gold’s underperformance relative to other commodities will change based on one simple notion that has become wildly popular in the financial media: demand destruction. There is no doubt that high commodity prices, regardless of whether they are labeled a bubble or not, are economically destabilizing. They have the potential to cripple normal economic functioning. High inflation, perceived or anticipated, will probably alter economic behavior as it did in the 1970’s. The efficacy of a “hard asset strategy” would ultimately be undermined by the associated economic disruption. This, in our opinion, would leave gold and other precious metals standing alone in the world of commodities as true safe havens.
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Portfolio Manager of the Tocqueville Fund, will appear on CNBC’s “Squawk on the Street” on, Thursday, July 24th at 10:40am to discuss The Tocqueville Fund and its investment strategy with Erin Burnett, in a segment called “5-Star Strategy”.
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