Price of Gold

Being patient with the market is not all that stimulating to write about.

Looking at the price of gold over the past five days, it has been extremely volatile. The 5-day chart (for December gold delivery) is here:

As always, timing is everything. Although I believe gold is vastly overpriced, it is very difficult to compete against momentum and psychology, especially when the US government is still running deficits north of a trillion dollars – currency erosion (including that of most global currencies, not just including the US dollar) is playing a large part in the increase of the price of gold.

To get an idea of traditional valuation it is good to look at marginal cost of extraction in various gold mining companies. Of course, traditional commodity valuation methods only tend to be valid for a long term projection in terms of decades – the gyrations witnessed inbetween are gut-wrenching for most commodities.