I live for these moments.
When I start getting spam comments that indicate fear (for gold investors) and schadenfreude (for gold permabears), I know that some kind of important turning point is near. These sort of heuristics make my life easier. My roommates can attest that when gold drops in price, my reaction is to do a really quick dance, followed by an enthusiastic cheer. Then I go back to living my life. People judge others by themselves, so they assume I am feeling the same panic they are. Well what makes me able to buy when no one else has eyes to see is that I don’t get emotional to the point of self-destruction about these things. I connect the dots, but I also know what the hell a dot is in the first place.
What you are witnessing now is gold permabears taking center stage with their impressive display of sophistry. They talk about the end of QE, or the U.S. economy improving, or this and that to explain gold’s fall. They display their ignorance every time they speak. QE is significant to the extent that it drives perception in the short run. The primary driver of gold was not the Fed’s direct purchase of bonds. In the first place, whose bonds were they buying? If it is a foreigner’s bonds, then guess what? We just exported inflation. What about real estate purchases of foreign investors that increase the money supply? Does that not create inflation? What about the fact that Europe is deflating to oblivion? Does that not create deflation in gold? What about the mandatory dollar rally that is occurring as we speak? Deflationary for gold, yes? There are countless countervailing forces at work here, and QE is about #14 on the list of importance. I’m not even joking; this is far more nuanced than people realize.
Whatever you want to call it: guts, chutzpah, brashness- not many people have it at these turning points. Gold is most likely headed lower, but 3 years from now there will be a lot of pain and tears because people didn’t buy at $1200. This is starting to look a lot like 2011 in domestic real estate when it was the most obvious bottom I’ve seen in my life, yet I could get only about 3% of people to agree with me. Well those people doubled their money in 2 years. This is the exact same thing, and in 3 years you’ll see why some investors always make money and others should just hide their money under the bed.