A “Golden” Opportunity?

As the global economy continues to cartwheel and stocks seesaw on a seemingly daily basis, certain investors are shifting their resources into commodities.  The belief that investing in physical goods is a smart strategy in a volatile marketplace is not new, but gold prices have recently hit historic levels as more and more investors seek out secure investment “safe havens” during this tumultuous period.

But is betting on gold actually such a safe gamble?   Take a look at a graph from Kitco.com from the most recent full trading day — September 7, 2011.

Live New York Gold Chart [Kitco Inc.]

In this video, which is a timely analysis from TheStreet.com’s Alix Steel, EFT Securities Vice President Tim Harvey discusses whether the developments Wednesday indicate a gold “selloff” vs. a “correction”:

A report from Bloomberg takes a look at gold prices from a British perspective.  The authors explain how Gold is in the 11th year of a bullish run in London.  This marks the longest “winning streak” since 1920, according to Bloomberg.   And in the absence of a solution to Europe’s ongoing debt dilemma, experts believe bullion prices will continue to rise until a “credible solution” is established.

Staying across the pond, another Bloomberg report highlights the booming Pawnbroker business in the United Kingdom stemming from gold’s recent run.  The article’s author, Colm Heatley, argues this is due to banks shuttering branches and reducing customer credit.  So in a pinch, people are pawning their gold in greater numbers again.

And a Reuters report from August 29 explains how China has developed an enhanced “enthusiasm for bullion” during the recent uptick in gold prices.  The article, cited in India’s Economic Times, explains how jewelry shops in Shanghai have seen strong sales throughout the summer.  Despite prices trending upwards, they report a “gold-buying craze.”

the Yummy Moon Cakes at Golden Bakery in China...

While many business news reporters and outlets are presenting various attempts at analysis, advice, and insight, Forbes writer Panos Mourdoukoutas turns to China for a slightly more festive, and flavorful, indicator.  He explores the “golden mooncake” phenomenon and what it may say about China’s new found sense of economic prowess.

Noted New York Times columnist Paul Krugman prepared a series of opinion pieces for the Times pertaining to the surge in gold prices.  In the first, titled “Treasuries, TIPS, and Gold (Wonkish)” from September 6, 2011 he cites a an “old but very fine analysis” from 1978.  Originally published in The Journal of Political Economy, “Market Anticipations of Government Policies and the Price of Gold” is incredibly dense and not meant to be digested by those with a cursory understanding of economic trends.  Don’t believe me, check out this formula from their research:

In a follow-up piece the following day, Krugman explores why gold seems to stand alone as a particularly strong commodity to invest in.  And thankfully he stays away from heady economic data to He briefly explains the “Hotelling model” and compares gold to another readily discussed commodity, oil.

But here is another intensely intricate report that examines gold producer trends and attempts to glean information that can help explain the current state of gold prices.  It’s from Robert Sinn, who claims to be a market analyst.  His interpretations are a bit dense and his evidence should only be examined by a trained expert.  Good luck:

So you think you get it?  Well then give this one a try:

Canadian economist, Jeff Nielson, weighed in on TheStreet.com too, writing an op-ed about why the axiom “cash is king” is actually flawed, and why gold is truly a sound investment.  His rationale stems from the belief that gold is one of the only assets capable of maintaining profitability during either an “inflationary” or “solvency” crisis.

But in another opinion piece, this time in the Washington Post, Reverend Bill Haley attempts to refocus people’s priorities.  Modestly titled “Gold and God,” Rev. Haley calls upon religious text from the 3 Abrahamic religions in order to reframe the discussion about investing in gold.  Instead, he ultimately advocates that there are far more meaningful avenues for people to devote their resources to.   Ponder away.