Tuesday, May 18, 2010

Sears and Kmart offer cash for gold

http://www.financialpost.com/news-sectors/mining/story.html?id=3040110

Many believe the fact that companies offering customers cash for their gold is a bearish sign--that the price of gold is a bubble about to burst, much like NASDAQ stocks in 2000 and real estate prices in 2006.

I beg to differ. If the smart money are the institutions that trade in gold, and the retail customer is the dumb money, and the smart money is buying while the dumb money is selling gold, the prospects for gold are actually quite bullish. Why would a company buy as much scrap gold as they could if they thought the price of that commodity would decline?

In case there's any dispute in the smart money vs. dumb money debate, guess who's offering less than fifty cents on the dollar for the other party's scrap gold?

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