Tuesday, January 04, 2011

Still Like Gold, But.....

It has been decades since it first came out but Sean Connery as James Bond in the movie classic, Goldfinger, is back in vogue. When gold shows up on the front page of the New York Times, you know that a lot of the news is in the price (see TV ads running 24/7 and radio). We remain big fans of the yellow metal and still see potential for $2-3,000 an ounce over the next decade, as its hedging properties against the integrity of the global financial system will likely remain intact.

The reality is that gold has made such a continual upward move over the past several years that speculative fervor is evident, and the fact that gold is now a front-page story makes it susceptible to near-term pull-backs. Nonetheless, it can correct all the way down to $1,200 per ounce without violating any long-term trendline.

As in 2006-2008, when real estate schemes were all the rage, investors need to be careful when any asset class receives so much attention that your cab driver is talking it up. We will continue to add to the precious metals area at opportune times during 2011.

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