Mercenary Trader | Mar 20, 2012 10:46AM ET
There are three mentalities for those with an interest in gold:
Traders see gold (and all precious metals) as vehicles to go long or short depending on the opportunity set, nothing more.
Long term investors are a bit more emotionally committed — they have a thesis involving runaway inflation, government corruption and Central Bank themed moral decay (though admittedly some of the value-minded just like the intrinsic value of gold stocks).
Those in the third category — what we’re tongue in cheek calling the religious category — see gold as not just a trading vehicle, or even a long-term investment, but a form of capitalist religion.
For true believers, gold ownership is a sort of transcendental societal salve: A form of redemption and shelter and cure for all our accumulated ills. For these folks, gold is something to hoard and never let go — or at least, not until the armageddon smoke has cleared and an ounce of gold is worth more than the Dow (perhaps crossing around 7,000 or so).
As traders, all we pretty much know is that gold looks absolutely terrible right now (if you are long).
First the chart:
And then the fundamental realities:
And if the charts and macro view tell us to buy gold and gold stocks again in future, we certainly will. A trade is a trade.
From a trading point of view right NOW, though, precious metals are clearly a sell (if not an outright short). As are gold stocks. (Seen a weekly GDX chart? Woof!)
And from an investment point of view, the macro value is dubious (unless you are waiting for a total Europe meltdown, war with Iran, or some other apocalyptic event).
Fade the hype, or at least sidestep it. And be wary of the potential retail deluge if small invesetors finally get sick of “Waiting for Godot,” I mean Gold.
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