Once upon a time the initials 'BB' to this man meant Brigitte Bardot. Now they conjure up the image of a middle-aged, bearded academic civil servant and toupé candidate*. And, today, once that picture takes hold, it is not long before things economic take over - especially commodities, and especially gold. How sad that is.

Gold priced in terms of the S&P500 has steadily appreciated since the tech wreck - see Exhibit 1, below - and is lately accelerating. The economic narrative that might accompany such a graph is voluminous; and there are good reasons to expect the trend to continue: threats of economic malaise, prospects of a dollar collapse, the spectre of inflation, flat gold production with few signs of mine expansion, capped European central bank sales, store of value reputation etc etc.


Exhibit 1: SPX priced in Gold

Yet this is a very, very crowded trade and/or investment - and growing more so with every Fed Fund cut. Today's violent action which saw a price fall of almost 6% in gold reflects that reality.

That volatility by itself might prompt some questioning of the weight in gold's price movements of its fundamental attractions (as well as those of many other commodities). But considered alongside some of the opportunities emerging in other asset classes (c/f for example, the previous post) investors looking for the best possible risk/return profile might do more and seriously pause and wonder.

It is clear now that the ongoing turmoil in financials and resultant stampede into commodities has jointly caused collateral damage and a funds vacuum elsewhere. As with nature, that void will be filled at some point. Sceptics may say it is too early, the timing is wrong, go with the flow, momentum rules and so forth. But in this story events may end up rewarding most those who looked very carefully at what price they placed their cash - and not simply when.


NB: Cassandra is the man on commodities speculation, and the prompter of this scribble

*Fortunately images of the original BB can be found readily enough on the web thereby restoring the natural equilibrium of the universe.

Bookmark and Share

0 comments

Related Posts with Thumbnails