Why gold is hot right now

Don't be distracted by attempts to correlate gold with global events or interest rates. The rush is as simple as supply and demand.

By Jim Cramer Dec 14, 2010 11:38AM

more investing advice and stock picks from jim cramerGold marches to its own drummer. I keep saying this, and I keep hearing otherwise.

 

Two weeks ago, gold was supposed to be weak because the dollar was strong. Last week, gold was supposed to be weak because interest rates were up. But gold is going higher because of demand wholly separate from these correlations.

 

Yes, it's true, we have seen gold go up with low rates -- it becomes easier to buy. But we have seen it go up during periods of high rates. We know that gold might be going higher with China opting against tightening. But I also think gold demand is stripping supply in China regardless of inflation, because the government is actually encouraging gold purchases. Meanwhile, gold buying in India has been unabated all year.

 

I can't tell you how many times people have said to me that "this is the peak" for gold. Last week when I said "buy more into the weakness," I was blasted on Twitter for telling people to buy right into the top.

 

Why is it a top?

Did we find much more gold? Is there less of a demand? (Did you read last week that the U.S. Mint has too much demand for silver coins and that it is worried about scalping?) Post continues after video:

There might be a moment next year when we see a dip in gold, when the International Monetary Fund has to sell some in order to shore up Greece, Spain, Ireland and whatever country the bond vigilantes hit next. That's a real supply issue.

Otherwise, the endless attempts to make gold correlate with currencies or world events or interest rates continue to confound people, causing them to miss the trading dips that are so important to buying the world's currency -- which is how people increasingly view gold in this country and abroad.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Follow Cramer's trades for his Charitable Trust.

 

Related Articles

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
275
275 rated 2
482
482 rated 3
656
656 rated 4
643
643 rated 5
650
650 rated 6
638
638 rated 7
485
485 rated 8
281
281 rated 9
127
127 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
CTSHCOGNIZANT TECHNOLOGY SOLUTIONS10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
HPQHEWLETT PACKARD CO10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.