Today’s key headlines:

  • Gold Cedes $1,800
  • CBO: $1.3 Trillion Deficit for 2011
  • Stocks Move Higher

There’s lots of talk and speculation about whether or not the gold bubble is about to burst – and whether you should buy, sell, or hold it.

Gold is a currency hedge, a place to make money when currencies – and economies, for that matter – are in trouble. Gold always has value, and more and more, that value is determined by stock market trading. The gold ETF is traded under the symbol GLD on the NYSE. Here is how gold tracked as compared to the Dow for the past year.


Both trend lines tell the same exact story the way you’d expect them to tell it. Neither indicates strength in the US economy. So to believe that the gold bubble has burst, you must also believe that the Dow has hit rock bottom and will continue strongly on its upward turn.

Don’t put me in that camp.

This reminds me of the run-up to the 2008 crash, when stock market participants chose to overlook basic Market fundamentals and speculate “the market” up on a positive dream that was just that – a dream. Back then they forgot that the “subprime crisis” was there, that it never went away, and that it didn’t fix itself. The same is true now.

Today central government policy is no different than it was back then – except it is exponentially worse. President Obama campaigned on “change” but has turned into Bush on steroids. He spends and borrows way more money than Bush. In fact, the Congressional Budget Office also projects a $1 trillion deficit for next year, 2012. Add this to the troubles in Europe and Mideast turmoil and you have to be crazy to sell out of gold and parlay it into the stock market.

The Dow closed just above the midpoint of the action zone today, and sits at 11,321. Gold was down almost $100, to $1,764. No big deal on either front.

Today was just another day and the story hasn’t changed. Market fundamentals remain negative and a currency crisis still persists. Traders could forget. You shouldn’t.

By now you should’ve made your investment moves and be totally comfortable with your asset allocations. If not, it’s never too late to get comfortable.

If you need help submit a question to Contact Dan.

Talk soon,