Every year or so at least I come across an essay that proclaims that gold is overbought, frothy or ‘in a bubble.’ Below is a link to another anti-gold column predicated on fear more than reason. I’ve read the same arguments before. They are always based more on fallacy than fact. Here again John Wasik rounds up the usual anti-gold sentiments. Reuters ties it up in a frightening bow of a headline:
“Some time in the future the price of gold will crash and it won’t have a fairy-tale ending for the millions of investors who piled on in recent months.”
Notice the slant–gold is portrayed as a fairy tale instead of what it has always been: Sane money.
“If I could tell you when gold was going to bust, I’d likely be wrong or bigger than Warren Buffett, so I won’t even try. Just be incredibly cautious now. There are too many signs that gold is frothier than a Starbucks cappuccino.”
More empty hyperbole designed to lessen buying pressure on gold and scare the weak minded.
“It’s not that I don’t nod in agreement when gold bugs rant about why their metal holds a special value now. The dollar is in deep trouble as the U.S. sinks deeper into debt. Will Portugal and Spain be the next Ireland on the bailout boulevard? Ben Bernanke may not be able to put a dent in U.S. unemployment or the intractable housing crisis.”
They never miss a chance to call gold buyers as ‘bugs,’ i.e., nuts. Notice how he mentions the case for gold to make it seem like they are rational. Yet they don’t and can’t refute the case for gold.
“And yes, I also know the argument on how gold is nowhere near its inflation-adjusted equivalent of its high in January, 1980. According to the Leuthold Group, gold will have to hit $2,400 an ounce to match the $850 high mark it hit in 1980 in real terms. That doesn’t mean it will, of course.”
Oh, of course! Of course it doesn’t mean it will. But it will.
“Yet the back story of the world’s financial insecurity isn’t necessarily about gold being the last or only store of value. It just may be the most popular red herring at the moment.
One flaw in the “gold can still climb to $2,000? The argument is that the last boom was due to the hyperinflation of the 1970s and early ’80s. Everyone who is leery of the U.S. debt flooding the bond market is right to suspect that a new version of stagflation (no growth, higher prices) may be upon us.”
Red herring argument? How is it a red herring argument. How is the fact that gold is the best store of value a red herring? It isn’t and he can’t prove that it is. A red herring argument attempts to divert the debate to something else in order to win the argument. Clearly that’s not the case here and just because they toss out ‘red herring’ doesn’t mean that it is. In fact, their claim of a ‘red herring’ argument is in itself a red herring argument! Notice also how the author calls gold the ‘sun metal’ and buyers ‘conquistadors.’ Nothing like conjuring up imagery from ancient history to slant gold as being an archaic ‘dead’ metal. He’d rather physical gold buyers instead purchase paper products. Yep…paper is always far more reliable and ‘safe’ than physical gold. Sure.
“Is there an unholy alliance here between a false threat of inflation and irrational exuberance? I think so. I smell a strong aroma of the dot-com mania.”
Funny stuff! False threat of inflation? How is it false if they’re printing up trillions and trillions in Monopoly® money? The writer can’t prove it’s false. He just says it is in the hopes that the reader will nod his head in agreement. Gold is compared with just another mania like the dot-coms. Well, lessee…the internet bubble lasted a decade or so. Gold has been the last, best store of value nearly since human civilization began. Yeah, gold is just a current fashion trend is all…lol. I’m smelling a strong aroma too and it’s coming directly from this article.
“As for gold, if you’re a real nervous Nellie, maybe you’ll want to invest directly in the metal through coins (Maple Leafs or Pandas are handsome collectibles that I own) or bullion.
Just keep in mind that gold doesn’t pay any dividends, is not directly linked to corporate earnings and has no intrinsic value. And when the hyperinflation fervor goes away, gold will be about as exciting as its less glamorous cousin: lead.”
How many times have I heard CNBC (mouthpiece for GE and the banksters) chastise their few viewers who own gold as being ” ‘fraidy cats” or “fear mongers?” Somehow if you don’t agree with Fed policy you’re a tin-foil hat wearing, gun-toting, bomb shelter-living Chicken Little. And they’re right to an extent. The end of fiat debt currency won’t be easy or pretty.
How many times have we heard ‘gold doesn’t pay dividends’ or ‘gold is just another commodity like lead.’ They ALWAYS trot out these tired argumentative chestnuts. Gold is not an investment per se. It’s a STORE OF VALUE. ‘Investments’ can go to zero. Gold never has and never will be zero. Gold is not a commodity. It has very little industrial uses (unlike silver). Gold is money. REAL MONEY that can’t be printed out of thin air!
One thing that he didn’t mention that many other commentators do: “You can’t eat gold.” Implying gold is worthless because you can’t eat it. I read this all the time on message boards. You can’t eat oil or clothes or cars, either. But the point is gold has little real use as a commodity. That’s why so much of it that has been mined throughout history remains above ground. There is actually more silver above ground than gold. Forget about gold having some other intrinsic use other than money. Gold is the ultimate money. Period.
When you read this column, remember the immortal words uttered by Bob Pisani on CNBC (the mouthpiece for GE and central banks) when gold was trading under $400. “Trust me folks, gold is going nowhere.”
As long as Keynesian debt fiat currency is printed to infinity, gold is going nowhere but up.