An anonymous writer for CNBC shows once again today that the media don't grok gold, in The Shocking Lack Of Gold Volatility:
Orderly commodity markets are an oxymoron - watch for a catalyst to move this market much higher or, much lower.
However, gold trades more as a currency. It has almost no industrial uses, it never gets consumer, etc. So there are no supply squeezes, since current production is not needed for consumption. (This comment ignores for the nonce the potential that "gold banks" have promised much more gold than they have in the vaults and thus there could be a run on said banks.)
As a currency or more properly a money-equivalent/alternative, is gold any more volatile against the dollar than currencies issued by other sovereign nations? I think that's the correct way to look at this matter, rather than comparing gold to consumable commodities with vastly lower stock-usage ratios. It is this fact of having massive stocks relative to actual consumption that differentiates gold from perhaps every other "commodity".
(Of course, everything that one can buy with money is a commodity, such as T-bills, which have almost no volatility to the SPY fund to natural gas futures. That's not the CNBC writer's point, though.)
Given gold's structural bull market, and the current very low premia to net asset value of Canadian gold ETFs that when gold hit important intermediate highs, this CNBC article continues to discourage me as an American who truly wants to see a strong dollar that deserves its strength. It just may be that until the dollar hitches its wagon once again to gold, at which time gold would cease to be either a "commodity" or an investment and would revert to its historic role as actual money, this trend of devaluation of the dollar against gold is, from an investment standpoint, your friend.
Copyright (C) Long Lake LLC 2010