Fred Hickey On Gold
by ilene - November 6th, 2009 2:00 am
Fred Hickey On Gold
Courtesy of Tyler Durden at Zero Hedge
With the inexplicable recent reorientation by a traditionally very erudite, pragmatic and realistic Jim Grant (well, not that inexplicable) into what can only be described as pulling some serious wool over his readers’ eye, we decided to fall back on our other favorite newsletter writer: the inimitable Fred Hickey who writes The High-Tech Strategist. While we can not find enough praise for his work, it bears pointing out that whereas one may accuse Grant of selling out, such an accusation will be impossible of Mr. Hickey, who is a florid, objective and insightful as always, and maybe more so now than ever. His latest letter, Fighting the Fed, is a must read for all, and while we wish we had the copyright latitude to repost it in whole, we would like to at least share Fred’s thoughts on gold (among many other things, some of which have made his readers serious money over the years).
Owning Gold Becomes More Respectable
When Paul Volcker employed his tough love solution by driving interest rates skyward nearly three decades ago, he squashed inflation and also squashed the gold bull market of the 70s, banishing the metal into a near 20-year bear market. Gold plunged from a peak of over $800 an ounce to well under $300 an ounce in 2000, right at the top of the 2000 stock market bubble. Gold has been propelled ever higher since by the Fed’s extraordinarily easy money policies. At the bottom in 2000 there was absolutely no interest in holding gold (only internet stocks). It was a capitulative moment topped off by UK Treasury Chancellor Gordon Brown’s decision to dump half (395 tons) of England’s gold reserves at the rock-bottom average price of $275 an ounce. The only people left holding gold at that point were those derisively labeled as "gold bugs."
Thanks to the Fed, gold has been building up a head of steam ever since. Nevertheless, despite nine consecutive years, gold has remained disrespected and and under-owned, both by the public and by the professional money-managers. More recently, that has been changing. This past month I’ve read speeches from both billionaire John Paulson and David Einhorn, both of whom famously predicted (and capitalized spectacularly from) the collapse of the housing and credit bubbles. Both