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Friday, October 15, 2010

Mr. T Pities the Fool Who Doesn't Buy Gold


I think this, and the ever shifting series of justifications for gold (including arguments that it is your hedge against inflation, deflation and prosperity all at once) are beginning to flash big warning signs that gold is about to top out and possibly top out for some time to come.

Blogger Barry Ritholtz, who is a far more esteemed observer of financial markets than I, argues for maybe having 5% of your total liquid assets in gold or precious metals more broadly. I can't say that I'm entirely opposed to that proposition, but I think the issue here is the entry point. While no one has ever developed either a good empirical or theoretical framework for valuing gold, the odds are that gold has seen its best days for some time to come.

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