Gold hit an all time high of $1,895 an ounce on Sept. 6, 2011. Now, less than two years later, gold is 33 percent down, recently trading at $1,249 an ounce. If you think this has never happened to gold, think again.
If history has taught us anything, it is that gold giveth and gold taketh away. During the 18 months following gold hitting $850 an ounce on Jan. 21, 1980, gold gave back more than half of its value. It gave back even more two decades later, when gold was trading at a 70 percent discount from that 1980 high.
Will history repeat itself? Well so far it has on the up side. The same 1980 arguments used in favor of gold a couple of years ago were the declining value of paper currency and high inflation that only gold could protect against. We also heard the same certain predictions of gold continuing to surge. And while I wasn't writing back in 1980, I'm betting the abuse that gold bugs heaped upon those who dared write that gold was far from a sure thing was the same as well. I've had a few emails berating me for the "idiocy" of warning people against chasing a potential gold bubble.
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