Gold is not a good hedge

The reason that people loves gold in the past is because it was a good hedge against inflation. However, GOLD has several problems:
1. The demand for gold is tied to the economy, and it needs a strong economy. If the ecomony is weak, the natural demand for gold will dinimish, so you can't hold gold with confidence in a weak economy even if there is some inflation there;
2. It is not easy to trade GOLD even with the ETFs like GLD today. The market for GOLD is too small.
3. There are lots of better alternatives, the best is the oil.

So, in my opinion, if you have to buy something to hedge the inflation, oil is much better than gold/silver/...

However, I don't think inflation is a real concern world wide now. It was, but will not be in coming months because you need liquidity to drive up the inflation. In current economic environment, I don't see any big driving factors for the inflation in coming months. So, in my opinion, the commodity game is over, at least for the next several years. Countries worldwide have to take a long time to fix the problems and that will take a very LONG LONG time. I am not joking on this, there are signs: USA is the first one to step into this trouble and is probably only half way; however, I noticed that dollar is very strong against other currencies, what does this mean? this shows that the problems in other countries start to show up, notice the word that I used "START to show up"... You have to wait until all the countries to clean up their own mess, and this is a long process, couple of years. But remember, since USA is the first one to get into this, it will be the first one to get out, also, it could benefit from this. If you compare LEH and MER, you will understand that, the sooner you expose your problem, the better it is. We have to remember, on the other side of the earth, i.e., Asia, the problems have started to surface. For example, Japan, the stock market has dropped below 13300, the pivot point for a bear market! One of the biggest concerns, in my opinion, is China, I remember that I read an article days ago, and it said that the central bank needs to raise capital!!! The first reaction when I read that is "IT IS COMING"!
So, protect your cash and you will have tons of opportunities. The only problem is you need to have the cash when that opportunity is coming.

所有跟帖： 

• not just a hedge against inflation, but also -putwriter- ♂ (25 bytes) () 09/09/2008 postreply 14:38:07

• Yes, but oil is still better if you have to hedge it -Bluesea_Bluesea- ♂ (447 bytes) () 09/09/2008 postreply 14:42:44

• several parts -putwriter- ♂ (497 bytes) () 09/09/2008 postreply 14:51:53

• This is the point: gold is gold, but oil is weapon -Oct13-08:Mond- ♂ (0 bytes) () 09/09/2008 postreply 14:58:36

• 回复：Gold is not a good hedge -GreatPost!!!- ♀ (0 bytes) () 09/09/2008 postreply 14:52:21

• Thanks, all -lujizize- ♀ (0 bytes) () 09/09/2008 postreply 14:58:49

• thx for the discussion -FaCai168- ♂ (0 bytes) () 09/09/2008 postreply 16:10:45