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Robert Wagner
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Professional Credentials: The reports that I write are my personal research and opinions. They are not associated with any firm or organization, and are not intended to be taken as investment recommendations or advice. They combine my passions of economics, finance, writing and education, and... More
  • Gold Bug Bullies No Longer Rule The Financial Neighborhood 0 comments
    Jul 3, 2013 10:32 AM

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    One of the most unfortunate things I've experienced in my financial career is the treatment I and others get from reporting honest analysis on gold and other precious metals. There is an emotional aspect to gold that makes it unlike any other investment, and the die hard supporters called the "gold bugs" often spew venomous attacks not only on the analysis, but on the analyst as well. The gold bugs have been especially critical of Ben Bernanke, and routinely appear on financial news shows to level their baseless and unfare ad-hominon attacks on a man that has few opportunities to defend himself.

    The unfortunate result has been a distorting of the public's understanding of monetary policy, the entrenchment and reinforcement of monetary and financial myths, over demand by a unjustifiably fearful cable TV watching public, some pretty bad public policy and new financial instruments and worst a self censorship of financial analysts that hold bearish views on gold.

    That however is changing, and as this quote highlights how the gold bears are no longer willing to allow the bullies to keep them silent.

    Sentiment has dramatically shifted on the precious metals. The gold bugs have gone silent or are desperately trying to re-frame their pitches. Meanwhile, the bears have gotten loud, and people previously claiming neutrality -- in no small part out of fear of wrath from the gold bug crew -- now feel free to pile on.

    That quote however highlights how damaging the uncivil behavior the gold bugs has been. Analysts should not fear expressing their opinions, and the financial community suffers when they do. Gold bears that are now emerging from hibernation should have been screaming at gold's peak back in 2011, but they remained silent, mostly out of fear. Doubt that claim? Simply find a gold bear today in the financial press, and try to find an article bearish about gold published by them back in 2011 or 2012. I doubt you will find many. Simply read the comment sections of any of my articles bearish on gold to understand why so many analysts simply avoid the topic. Inviting the wrath of the gold bugs simply isn't worth the cost.

    Gold bug bullying and their uncivil emotional behavior is so common place that it is openly dicussed in the financial press. Facts are, there are many perspectives on gold, and they all can't be right, and they all can't be right all the time. People have the right to think gold is a currency, but those that disagree have a right to their opinion. People can think QE-finity will cause hyper-inflation and the collapse of the US dollar, but those that disagree have a right to their opinion. People can think gold is going to the moon or even infinity, but those who think those claims are pure nonsense have a right to their opinion as well. The facts are people in the financial press should feel comfortable making their case, and not fear retribution of the angry emotional gold bugs. Whether or not gold is a currency is relevant to its investment value anyway so why even bring it up? What an ounce of gold bought back in the roman era is also irrelevant to its current investment value, so why bring it up? If that is the kind of analysis that is important to a gold bug, great, just don't force your views on everyone else, and bully those that may require analysis a bit more focused on valuing it in today's market as an investment.

    As the Ron Paul video linked above highlights, the gold argument is nothing new. It has been debated in the United States since our founding. Most ironic however is that George Washington didn't side with the gold bugs Jefferson and Madison, he sided with the paper money Hamilton and his Central Bank model. Ron Paul and his followers would be well served to study our history, especially the history of our central banking system. Ron Paul is simply on the wrong side of history, and wrong on his post-2011 prediction of gold prices.

    If people doubt the political ideology underpinnings of the gold bugs, one simply needs to visit the website of one of the gold bug leaders, Peter Schiff. On the very first page of his Europacific website he outlines his vision of a global economy no longer "dominated" by the US Dollar. When I was in high school Russia was going to dominate the global economy, then in college the "Rising Sun" of Japan was going to dominate the global economy, now China and the other BRICs are going to dominate the global economy. The theory of the demise of the US Dollar and economy has been debunked 3 times within my adult life time. I bet the ice age I was promised in high school will return to the headlines before Mr Shiff is proven correct.

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    In conclusion, one of the major pillars of sand that was supporting the price of gold was that analysts were intimidated into silence. The silence however seems to be ending, and gold bears are now expressing their views. Unfortunately for the owners of gold, they are two years late to the party. It would have been nice back in 2011 at the peak to hear these arguments, but I guess better late than never. My expectation is that the correction in gold will have a sobering effect on the gold market, and people will start to ask the questions they failed to ask during gold's bull market. Hopefully gold investors will take the time to understand why QE-finity didn't result in gold going to the moon or inflation, why the US dollar appreciated instead of depreciated post-2008 and why the gold bugs were so confident in their theory even as gold was in free fall. I'm pretty confident now that investors are getting both bullish and bearish arguments to study, that once both sides are analyzed, gold will be reaching pre-QE levels of under $1,000 before it reaches the moon. The bears simply have the far better argument, and the price of gold is confirming that.

    Disclaimer: This article is not an investment recommendation. Any analysis presented in this article is illustrative in nature, is based on an incomplete set of information and has limitations to its accuracy, and is not meant to be relied upon for investment decisions. Please consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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