Thursday 21 February 2013

Bubbles - Gold & Government Bonds?

I've written before on a few occasions that I'm quite bearish long term on gold and gov't bonds. In case you missed that check out these links.

To briefly sum up the situation; Western governments have pushed bond markets to 300 yr highs by pumping them full of QE money. Investors fearing that this strategy will cause hyper inflation and lead to currency collapse have fled into 'safe haven' assets such as gold etc thus also driving the price of these assets into orbit as well.

At some stage the QE policy will have to be reversed or at least abstained, thus sending bond prices through the floor. Also if/when the current debt/Eurozone crisis blows over and a shred of optimism returns, the price of gold will be spiralling the same way.

It would be nice to be able to profit from short selling these assets when they finally give. I have a CFD (Contract For Difference) trading account that enables me to bet on prices falling, it is a risky strategy, and more akin to day trading than investment. Furthermore because CFDs are essentially leveraged it's quite easy to lose more than your initial stake if you get it wrong. The main issue is timing. Gold has fallen 13% since October's highs around the 1800 level. Could this be the start of the collapse or just a temporary pullback? I'm not really willing to bet either way just yet, better to miss the boat than get on it at the wrong time.
I am however keeping a close eye on these markets and may make a move when I think the time is right.



  1. It's sounds like betting to me. Some people I know made £500 betting the spread on the touchdown yardage of the Super Bowl.

  2. It is betting really. But hopefully with an edge!