The price of gold reached another all-time high - topping out at over US$1,270/oz - on Tuesday, Sept. 14, 2010. The last notable benchmark in my mind was the first time the gold price hit US$1,250/oz on June 15, the day of the Meadowbank mine opening.
Gold bugs are rejoicing. Or are they?
I heard an analyst say that the price reached a record because investors don't know what else to do with their money. The point was that the US dollar is unstable, oil is sliding and equities are hit and miss. What else is an investor to do except park some money in gold? That attitude will support the price only until another market sector shows some steady strength. Then the gold price will suffer downward pressure on "profit taking," or a general shift to the next hot sector.
Today's world is spins incredibly fast as information flashes around the globe at the speed of light. The Internet makes so much information available so quickly that we are no longer content to read the morning paper for commodity prices. We want to know about everything NOW! We check caller ID to know who is calling before we answer the phone. The media writes stories about what will be discussed at an upcoming briefing rather than waiting to hear the presentation. Users of email and instant messaging assume that the receiver can interrupt whatever else he is doing to commune with the sender.
We can watch the price of gold rise and fall in real time on several websites. Coupled with charts of price over the last day, month, year or more, anyone predisposed to information overload will be feeling it. The number of gold analysts is growing weekly, and anyone looking for advice can find opposing opinions at the press of a button.
Am I bemoaning the amount of information available on the gold price? No. But I am wondering how the unsophisticated investor can make anything other than a decision equivalent to throwing a dart at a dartboard while blindfolded. Just sorting through all the information and opinions sounds like a full-time job.
Although their methods remain a mystery to me, kudos to successful gold bugs. Their investments pave the way for the next generation of gold producers, and I do love a good gold mine.