Some friends of mine are worried about their gold holdings. Understandably, Gold has retreated from the high of nearly $1000 to below $900. There are more bearish comments from the analysts recently. Furthermore, it is very hard to “estimate” the value of gold.
Gold holdings are not like IBM that generate earnings to support the price. Gold is not even like commodity that there is always the fundamental “need” to support the demand.
Gold is simply a yellow metal that is of little practical use.
Attached is the weekly chart of the gold ETF, GLD.
Here is my thoughts to share with those of you who are worried.
At this price, GOLD could go down to as low as $770. However, there is equal probability it could go up to $1000. I think the chance for each case is about even.
What is to be considered, though, is the longer term.
If GOLD should drop to $770, I think the big money would come in and life it up to $880 very quickly.
On the other hand, if GOLD should move up to $1000 and up, chances are that it would never come back to $880 anymore. $1000 gold would be history , just like $35 gold is now a distant history.
I think the Risk/Reward favors holding GOLD at this price.
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