Wednesday, January 4, 2012

Gold, silver and gold, all you can hold...

Market watch: Gold bugs’ unmerry Christmas

Santa brought the gold bugs quite a present last week. It was very big and extremely nasty...

From the previous Friday’s close to the low on Thursday, the CME February gold contract...plunged $82.10 or 5.1%...

The article, apart from comments about "radical gold bugs" is even in tone, but the commenterwebs are clogged with the usual gang of gold detractors yelling "I told you so!" at "gold bugs."

Look, I don't hoard gold, for a variety of reasons. And for some of the same reasons I'm not convinced that buying gold now is a good idea if you're looking to make money. But every single time the price backs off, anti-gold analysts and dilettantes come out of the woodwork to crow about how the bubble has burst, proving the gold bugs wrong, just like they predicted. And it's a kind of stupid that's hard to fathom.

First, it's totally out of proportion to the actual price situation. Anti-gold commentators have been insisting that precious metals are at the peak of a bubble ever since it started climbing at the start of the 21st century, since when the prices have climbed from $256 an ounce to a high of just under nineteen hundred dollars, with detractors yelling their tol'jya-sos at every pullback along the way. This "plunge" to the high fifteen hundreds may reasonably frighten recent investors who bought in the seventeen hundreds, but it still represents huge gains to the long term gold bugs at whom the taunting is usually aimed.

Second, these commentators fundamentally misunderstand the people they're taunting. An investor hoping to make money on gold is dismayed by a price drop. A hardcore gold bug is hedging against future economic catastrophe, in which gold will definitely be worth more than it is today. Even if that's three more depression-and-recovery cycles away, the gold bug will still win, because you never take a loss until you sell. Taunting a gold bug about a price decrease shows that you know nothing about the person you're mocking: to them, a price decrease isn't a disastrous loss of investment value; it's an opportunity to buy at a lower price.

This isn't a lump of coal in the gold bug's stocking. It's a post-Christmas clearance sale.


  1. Dollar-cost averaging! I don't invest in (or even have any) gold because I can't afford it, and I'm not sure than in a pinch or desperate situation you can eat it or trade for much. A gold coin and a gun will get you farther than a gold coin alone. They keep finding ancient coin-hordes in England, money that never got spent.

  2. DCA is probably mor efeasible with silver for most of us. ;)

    Not that I disagree: even absent a zombocalypse, high quality guns of common type bought used have an excellent reputation for holding their value.

  3. I'm hoping they let us keep the guns in CA, and if I'm camping out after The Big One I really don't want to have to use 'em.
    Maybe I should get a metal detector and start roaming British farmyards.