Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Worship and Donuts

Commodities / Gold and Silver 2011 Jul 31, 2011 - 03:06 AM GMT

By: Ned_W_Schmidt

Commodities

This week markets have taken two prices to new highs: donuts and Gold. One is eaten. Other is now worshiped. Which should be our choice for today? At today's prices, donuts may be better choice.

For those wondering why donuts came to mind, Dunkin' Brands stock(US: DNKN) came to the market this week. First day pop was almost 50%. At the same time, $Gold was pushed to a record high. At that same time as anticipating the U.S. government defaulting, investors are buying donuts?


On this topic we note that the world champion donut eater is Canada. No nation consumes more donuts per capita, or has more donut shops per person. With Summer only a three-day weekend, donut shops are certainly more practical than swimming pools. They also own a lot of Gold.

Question that investor must address today is whether or not to convert $Gold, at more than $1.600, to donuts, or to continue worshiping the grand metal. Note what is excluded from this set of choices. Buying Gold at this price is a bet that the U.S. government will default on its debt, and the U.S. dollar will plunge in value. Both of those expectations may simply be another example of the madness of crowds.

In the panic induced discussion of the U.S. debt situation what is being ignored is the very positive development that it represents. The Obama regime, and its minions in Congress, lost the last election, big time. When one loses an election, one does not dictate policy. Rather, one accepts the terms offered. U.S. House of Representatives is in the process of changing policy, altering the trajectory of U.S. government spending. This development is an incredibly positive event. One that should be applauded, unless one is eating at the public trough or receiving money in exchange for votes.

Pundits, many of whom previously recommended investing in internet stocks and mortgages, are telling us with near certainty that the U.S. government will default on its debt and the dollar will collapse. Suspect that a week from now those ideas will be gathering dust. Alternative scenarios do exist. As a consequence of this madness of crowds, those that ignored Gold a thousand dollars lower are scrambling to buy Gold, without regard for the price. Buying hurricane insurance when the flag is flying means dramatically over paying for that insurance.

This week $Gold touched about 6.4 times the last major low. That level of valuation is equivalent of a yellow card in each of the referee's hands. Any price action above that level should give investors reason to know where the exit doors might be. The time to use those doors has probably not arrived, given the dysfunctional government still in power in the U.S. But, every investor should know the location of their personal door.

We bring no charts to you this week. At current price levels, and with a near mob mentality on the U.S. debt situation, no charts are needed. No technical analysis, good, bad, or mythical, is likely necessary. After twenty years of success for Gold and failure for Keynesianism, t he verdict has been delivered: Gold 1 Keynesianism 0

Investors should be considering several possible actions. $Silver is over priced, and has experienced a bear market rally of ~20%. It is clearly demonstrating that it is not a store of value in times of uncertainty. At today's price, Silver is again a strong sale. Alternatives for those proceeds to consider are Rhodium and Chinese Renminbi deposit accounts.

Be careful next week, running with the mob puts one at risk of being gored!

By Ned W Schmidt CFA, CEBS

Copyright © 2011 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to www.valueviewgoldreport.com

Ned W Schmidt Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

do NutZ
07 Aug 11, 08:51
donuts

It is not the worry of default, butt downgrades, soaring unpayable debt, donuts are a bad business. If one does go into dunkin he will find donuts that no longer taste good; have very little toppings, are dry and the people behind the counter are all from an alien land. Europe will not help; they don't even serve milk at dunkins in Europe - what is that all about. Keep the Colour; by a donut or 2 but for god sakes skip the stock purchase.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in