Wednesday, January 14, 2009


I just wanted to do a quick post on gold today. I'm still see incredible bullishness in the gold bug camp.

I think most inflationists assume the incredible expansion of the Fed's balance sheet is going to immediately lead us into a hyper inflationary environment.

While I agree that this will be the eventual outcome and this is exactly the unintended consequences that are going to result from the Fed's current actions I don't think it's going to happen quickly.

I have a feeling all the gold bugs loading up on gold right now are going to be too early and probably end up selling at the exact bottom.

I'll remind everyone that the main source of demand for gold is jewelry. I don't see that demand skyrocketing in a deflationary environment or with unemployment over 10% (where I expect we will be at some point this year). Actually if unemployment were still calculated in the same way it was several years ago we probably already have over 10% unemployment.

There will come a time to buy gold and silver again but I think it's probably still too early at this point.