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We started buying gold as "cheap financial catastrophe insurance." After all, when is catastrophe insurance the cheapest? When there is no catastrophe... The last financial "catastrophe" was the late 1970s/early 1980s.

Gold has soared. The cost of insurance has risen from $250 to $900. It can keep going. I don't know how high.

But now we're reaching a scary place... For the first time in a quarter century, people are willing to talk about gold. Legitimate investment banks actually say it will go over $1,000 an ounce this year.

Everyone's a gold bull now. The Financial Times also said, "Speculators on the New York gold market hold 10 bets on higher prices for each one held on lower prices." Now that is extremely scary.

The bullishness is even scarier in silver... Unbelievably, in last week's London Bullion Market Association poll, all 21 of the analysts polled predicted we haven't seen the highs for silver yet.

But now, in the case of silver, it's the opposite...

"New mine supply is rising strongly," the Financial Times tells us. "Deutsche Bank is forecasting the silver market's supply surplus will rise from 66.2m ounces in 2007 to 82.5m ounces this year and 91.2m ounces projected for 2007."

So supply is rising. But silver demand is down... You see, silver used to be used significantly in film. But with the rise in digital cameras, silver use has fallen by 22% in cameras.

Yet speculators have disregarded this... Silver just hit 27-year highs.

My unscientific guess is that we'll have a violent correction in the near term, to cool some of this excitement. Then we'll return to the gold bull market and have a few more years to run.

By that time (in a few years), gold will likely be the talk of cocktail parties.

And it'll likely be time to move on to the next big thing...

With experience as our guide, it probably means we have a few more years to run, but the "easy" money has been made.

Zdroj: MM

24.01.2008

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."   Alan Greenspan