Dueling keyboards

Roubini (The New Bubble in the Barbarous Relic that Is Gold) and ZeroHedge (Roubini Blasts "The Barbarous Relic," Recommends Spam Over Gold ^{new) have some views on gold.  As is in the press everywhere, dueling opinions abound.  There is some common ground.  Like the reasons why gold has some support for the thesis of reaching and breaching "technical" levels at $1350 and to the heavens.  Chaos. Uncertainty.  Sovereign risk.  Carry Trades.  Deflation/Inflation.  Supply.  Liquidity.  The other thesis is of course that this is just another bubble.  Really?  How can anything of such incredible "value" that is held by so few be in a bubble?  The core of this thesis is the same as the reasons for supporting  higher prices, just the impact of the risks are reversed and present only downside potential.  As is the trading business.  There are always two sides to a trade.  If there is a market, there is someone buying and someone selling.  Pure and simple.  If either of these parties refuses to play/attend/whatever, the market collapses.}

A common theme in today's realities is that the massive liquidity and free (read zero percent and BETTER) cash injections from governments all over the world has been like ether to a carburetor.  Or white gas (naptha), tinder dry kindling and a carefully held ignition source.  Frank, what R U Doing?  Yes that actually happened.  A story for another time.  Fire is made up of three elements - fuel, oxygen and heat.  Restrict or take away any one element, and the fires die.


Much is being written about the impact (depth, nature, speed) of removing the economy from the Koolaid.  China has been identified as in the process of withdrawing such support.  I believe it is mindful to recall their stimulus package was half a trillion dollars.  The US is looking at No.2.  What if some of the potential defaults in the 20 riskiest countries is realized?  And the effect of the price of gold brings more discussion and debate.


A while back someone (obviously) that does not support the escalating price theme said to me, a pound of gold your your pound of wheat, fair trade?  I have no idea, but certainly another interesting perspective.  The ZH folks provide some very detailed discussion arguing that the Fed can only import global inflation for so long before becoming a victim themselves.  I'll be honest, I 'm not sure I understand it all, but it makes for some fascinating mind gymnastics.  Their view takes them not past $2000/oz but onwards to $6000/oz.  

Minus perception, gold is basically worthless.

Back to the pound of gold for the pound of wheat when we're all starving.  This is taken from the comments posted by Silver Bullet.  And he goes on to talk of perception  is the key.  And I don't disagree.  Its like trading the chart, just trade the chart, just trade the chart.  However, it is also my belief that perception unsupported by some level of fundamental data and activity is risky.  Know the risk.  The risk of staying in the trade or getting out of it.  And where does that risk fit according to your own risk tolerance and profile.  Find the place where those two meet, and you'll have found a happy place.