I hate writing these bearish gold articles, I really do, but I feel obligated because of all the negative comments I get from the emotional gold bugs. I'll write an article that turns out to be pretty accurate, and yet I'll get mauled in the comments. This creates a situation where I can either be silenced by my critics, and do a disservice to the non-emotional gold bugs that want serious analysis on gold, or I can keep publishing my analysis and let the readers read the comments as evidence of how just wrong and misguided the gold bullies really are. They provide a permanent record of consistently wrong calls going on over 2 years now. Gold peaked around $2,000, and has pretty much followed the classic pattern of a burst bubble ever sense then. That opinion may not be popular, I won't get invited to any of Peter Schiff's cocktail parties, but it has been dead on for the last 2 years, and will likely continue into the future. I'm not writing articles to make friends with the gold bugs, I'm writing articles to provide analysis for objective people considering buying gold as an investment.
I've written many bearish articles on gold warning investors that the path of least resistance in gold is down. Recently gold had a rally, and I warned investors not to buy into the "dead cat bounce." Unfortunately I had written so many bearish articles on gold by that time that it was relegated to the Netherworld of the Instablog. I recently followed up that Instablog posting with "The Gold Dead Cat Bounce is Dying" and "The Gold Dead Cat Bounce is Dying Again." Today, Yahoo has a video out titled "Another Gold Rally Bites the Dust," that pretty much makes the points I've made in all my previous articles.
Key Points from the Video:
1) The recent gold rally is dying, and breaking the short-term uptrend that started at in early July.
2) The recent gold rally was based upon an "safety" trade, which has faded. Safety trades are unlikely to reverse long-term trends. They provide short-term pops.
3) Gold suffers by comparison, and as stability returns to the markets, gold will fall further. The opportunity cost of holding non-yielding gold increases as other options perform better.
4) Emotions drive gold, but emotions aren't the basis of a solid investment strategy. Emotions are temporary and volatile.
5) It doesn't help gold to have analysts calling it a "stupid yellow metal," and highlighting how many nasty e-mails or Twitter responses they get for expressing their views. This emotional aspect and predictable vitriol from gold enthusiasts makes analyzing gold unique, and unfortunatly it prevents serious discussion on this topic. I experience the same vitriol when I write about the "green economy."
In conclusion; emotions and attacking people that publish bearish articles on gold isn't enough to sustain a long-term rally in the metal. Gold is simply in a post-bubble bear market, and gold investors should expect a series of bear market rallies, but they should use them as opportunities to exit their positions not to add to them. All the pillars that have supported the gold bull market are proving to have been made out of sand, and it is highly unlikely another 2008 Black Swan event will drive gold/SPDR Gold Trust (NYSEARCA:GLD) or silver/iShares Silver Trust (NYSEARCA:SLV) back to new highs anytime soon. Gold is simply yesterday's news, and the market's attention is shifting elsewhere. That opinion may not make me friends with the gold bugs, but it has been right for over 2 years, and I see nothing to make me think it won't continue to be right going forward.
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.