More Fast and Fun Times With 'Fast Money' - 01/24/11

I continue to make the case for lower gold prices this year.

Slow down, you move too fast
You've got to make the morning last
Just kickin' down the cobble-stones
Lookin' for fun and feelin' groovy
I've got no deeds to do, no promises to keep
I'm dappled and drowsy and ready to sleep
Let the morning time drop all its petals on me
Life, I love you, all is groovy

-- Simon and Garfunkel, "The 59th Street Bridge Song (Feelin' Groovy)"

On "Fast Money" on Friday night, I continued to make the case for lower gold prices this year in a steel-cage match vs. Kanundrum Capital founder Brian "BK" Kelly.

It is always hard to develop a relatively complex thesis in the staccato style and fast-paced format of "Fast Money" - nevertheless, I think I accomplished what I set out to do in our brief debate.

I started by stating that when an asset class such as gold rises by a 16% compounded annual growth rate (from $250 an ounce to $1,340 ounce) over the course of the 11 years, one needs very compelling reasons to own gold today but that now those reasons that spurred gold's price appreciation are waning and have reversed.

BK queried if interest rates were the principal reason for my pessimism. He asked, Isn't rising inflation a good reason to buy gold on this pullback and a signal that it's headed higher?

My response? I still think BK's buy-on-the-dip thesis is wrong.

Gold bugs/bulls, I have said, view gold as God With the Letter "L," but, from my perch, worshipping at the altar of the shiny metal is wrong-footed.

Gold bulls are clinging to the tired thesis that the world's central bankers are in an inflation/money-printing action that should support higher gold prices. Unfortunately, for those bulls, such as my friend/buddy/pal BK, many non-U.S. central banks are hiking interest rates and restricting credit. Moreover, our Fed seems likely to be on the last leg of quantitative easing, which is not likely to be advanced further than QE2 beyond midyear.

I continue to view the price of gold as exhibiting wild volatility (particularly against its steady price appreciation over the past decade) and ending the year about $150 per ounce lower than it is today.

Let's go to the tape.