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Gold Market Rhyming
You know the old saying, history never repeats, but it rhymes? Well, we’ve got a bit of rhyming going on in the markets these days. Firstly, let’s look at the following article on gold from the New York Times…
‘Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.
‘The rout says a lot about consumer confidence in the worldwide recovery. The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold’s allure.
‘Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course. The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators’ dreams into a nightmare.’
With thanks to Peter Schiff for digging out this gem, we should point out the article was from 1976, written just a few days after gold completed its mid-1970s correction from nearly US$200 to US$100 an ounce.
The similarities with today’s mainstream commentary on gold are striking. We obviously don’t know if gold bottomed last week or whether there’s more downside to come. But we do know that gold is a very popular investment to rubbish right now.
Financial journalists, like hedge fund traders, find it easy to go with the momentum. When you don’t understand something, you let the price action do the talking, or the informing. So if gold has declined by nearly 40% over the last two years then it must be a bad investment, right?
Read the rest of this article at The Daily Reckoning
