Seeking Alpha Article Predicts Gold Hype Will Return

Back in November, at least one article on gold per day was sure to hit the top 10 list and generate a lot of comments. Nowadays, one hardly shows up in the most-popular list at all and the number in the "Gold Price" theme has dropped by more than half. The interest in gold at Seeking Alpha has seriously dwindled. If it can be taken as representative of the investment community as a whole, interest in gold has all-but-withered outside of the usual haunts.

Richard Graham think the hype will return, though. He makes an important point regarding a coming Fed rate hike, noting that it implies that the Fed now sees inflation as a problem:

On a very mechanical level, this will appreciate the dollar and decrease the price of gold, which should provide a good buying opportunity. Raising the interest rate, however, is also a much larger signal. It signals that the Federal Reserve perceives inflation to be a real and imminent threat and that the Fed is willing to sacrifice turning off the money spigot and slow US economic growth.

...Raising interest rates will be the first salvo of attacks from the Fed and provide a very good indicator that inflation is picking up. These attacks, though, will be too little too late. Gold should enjoy a strong rally before the Federal Reserve finally gets inflation under control.

This is the first causal factor that will bring back gold hype, in his opinion.

The second is a default by, or bailout of, Greece. As would be the case with a rate hike, Graham believes it'll be short-term bearish but longer-term bullish.


I can't fault him on his logic about the rate hike, nor for him playing the Fed-underreaction odds. That's been the way to bet in previous cycles.