Intermarket Trading Strategies

7

Gold

Good judgment is usually the result of experience and experience frequently is the result of bad judgment.

-Robert Lovell

 

 

In 1925, in a speech at the University of Cambridge, the English economist John Maynard Keynes called the Gold Standard “a barbaric relic” but even though the Gold Standard has since been abolished the “barbaric relic” has not lost its value. Federal Reserve Board chairman Alan Greenspan once wrote about gold: “This is the shabby secret of the welfare statistics’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights ...”.

Gold topped $1000 an ounce in March 2008 as investors bid gold prices up amid worries about the falling dollar and the sub prime financial crisis. In fact, investors who bought gold in 2003 have more than tripled their initial investment, enjoying an annualized return of over 20 %.

One of the reasons gold has surged so much is that it’s much easier to buy. For many years it was difficult for ordinary investors to trade gold. The minimum amount needed in order to buy gold bullion was $1 million. Buying gold coins or jewellery was also a problem because of the hassle of storing and reselling them. An alternative way to buy gold was to trade gold futures on the New York Commodities Exchange (COMEX). Most investors, however, do not have a futures account or prefer to trade only stocks because of the volatility ...