Monday October 07, 2013 08:47
Not blindly, but with reasoned recalibrations, the concept of holding gold as a percentage of a balanced portfolio is clear. Putting aside the extreme views of government confiscation of your gold, or the need for barter assets in the eventual economic scenario where mediums of exchange are premised on small gold bars, it’s the current and expected future shocks to the economic landscape that solidify the argument. The current political stalemate in Washington over the debt ceiling has global implications should the US default. Resolution is the most likely outcome, but, just the thought has the US dollar at an eight month low and taken some 5% off the equity markets in the past ten days. The reality of a debt default would be catastrophic for the USD and global equity markets. Bernanke et al do not understand the role of gold in a portfolio. I guess he doesn’t have cable.
The metals continue to waffle in a tight range. I believe the market is heavy and see a bearish tone, but no one is stepping in aggressively on the short side. A resolution early in the week will produce some heavy selling. As the week works itself out, without a solution the market will drift higher as the short interest will not stomach the risk over the weekend.
By Peter Hug
Global Trading Director
Kitco Metals Inc.