Jim Cramer goes wild on gold
Posted on 14 May 2008 with no comments from readers
Love this commentator or not he has recently got the gold bug, and his simple message is that the current weakness in gold prices is a great buying opportunity. With reflation the only policy option for the US to pursue to offset asset price deflation, gold is the only show in town.
Jim Cramer, the wild man of CNBC recommends Yamama Gold with his customary passion. This is an explosive growth story in a market where the gold price is taking a summer break.
But the charts show gold’s price check is getting close to the 200-day moving average from which the yellow metal has always rebounded in the 2000s. Bargain hunters should make hay while the sun shines and stock up on gold shares and bullion, and what about silver?
Silver is a leveraged play on the gold price – and the chances are that silver will outperform as it has in previous periods of financial crisis. My bet is that another wave of unexpected financial problems give precious metals another bull run, and perhaps rather sooner than this autumn. See Cramer’s gold video on:
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Gold has a fixed supply unlike paper money which is what the Fed is ‘printing’ by the ton with its emergency bailout measures for the banks and capital markets. There seems no sign of an end to this process. Standard Chartered Bank yesterday forecast a fall in the dollar to $1.75 to the euro by the end of 2009. Reflation is the only answer the Fed has to keeping the US economy afloat – the opposite policy of raising interest rates and tightening money supply would produce a depression in current circumstances. Therefore you buy gold which will rise in price as the dollar devalues and other assets – houses, bonds, most equities – fall in price. There is no reason to think the dollar will suddenly stop falling and rally – European policy makers are going in the opposite direction, and US interest rates may go to zero. Eventually the dollar will bottom around $2 but that could take a couple of years while the US economy rebalances and consumers get out of debt. Don’t believe the Washington spin on dollar strength – based on what?