Gold Bugs Rejoice: Bernanke's Back, Stronger than Ever
Source: Seeking Alpha, Mike Conlon (8/27/09)
"I think we'll see gold move disproportionally higher than oil and other commodities because gold is more of a tradable asset. . ."
I wrote awhile back that I thought oil was a better hedge against inflation just because of the utilitarian value of it vs. gold. This sent the gold bugs into a tizzy. Well, I'm now firmly in their camp. It is now fairly obvious that the "transparency" that we were told to expect from the government and the market is all but a forgotten campaign promise. While there is no direct evidence of any government tampering, some the numbers just don't add up.
It appears as though we are going to see a continued, yet much more gradual decline in housing prices. The deflation experienced by falling housing prices will be offset by the rise in commodity prices and the costs of all other goods that aren't big-ticket items (i.e., inflation). In other words, every other product that doesn't have a stimulus ("cash for _______") associated with it.
The reason I think we'll see gold move disproportionally higher than oil and other commodities is because gold is more of a tradable asset and is not something that the average citizen will be affected by.
Enter Bernanke—the unwitting fall-guy—with new powers at the Fed through the expansion of oversight. It is going to be the market vs. the Fed. Once the powers that be are on board and everyone except the little guy knows that long oil is not the play, money will flow to gold. This is something that the administration can live with as well as the average citizen.
Not to mention the gold bugs, who'll be dancing in the streets!