Be Wary of Both Gold's Allure and It's Demise
With Friday's "happy" jobs report, bonds and gold promptly fell into the dumpster. Setting bonds aside for now, let's take a quick look at gold. It's now approaching its lows for this four-year plus correction and driving it's holders crazy again. After exhibiting signs of life, hints that its 4-year bear market was ending, it began fading and flopping in the low 1100s, a slow sink over the last week or so, finally falling through 1100 to end the week at the spot price of 1089. So now we step back and look at both sides of gold's coin, as seen through the eyes of those caught in the spell of its allure as well as those calling for its demise.
It's allure continues to be trumpeted by the gold bugs; it's demise by those who have clearly soured on it. Rather than be tugged this way and that by these opposing forces, maybe we can see what's really been going on.
The facts as one can plainly see: From it's lows in the 1080s, gold bumped up against resistance at 1160. Finally it broke through. Remember that resistance, once breached, serves then as support. So after a run to the high 1100s, stoking the fires of the gold bugs' "refined" minds (get it - "refined"?), it dropped and bounced off of 1160 until - lo and behold, it reversed itself definitively last week, breaking through support, settling in the mid-1140s. That triggered the sour sorts who've either given up on gold, or who now believe gold has reached a permanent state of disrepute. From one of the latter, we spotted this observation about Venezuela's having reportedly sold as much as 80 tons of their gold last week (perhaps precipitating gold's dramatic drop through support?). Our sour pusses speculate - no, actually more than speculate, they authoritatively assert - that this sale of gold by the sovereign state of Venezuela is, in fact:
It may be that these sour pusses have, at some point or points in the past, spotted some pattern and developed a theory backed up by this pattern. If so, a search of their archived comments might yield this. One assumes that such a search will identify specific, persistent instances of sovereign governments selling gold when they need money in a more or less offhand manner; "Hmm, what shall we sell today to raise money needed to support our already bloated government needs? Ah, how about we sell that dead yellow metal we, for some reason, have stockpiled."
Such an attitude would belie the once-universally accepted fact that gold not only has served as money for thousands of years, but also continues to do so, especially when the fiat concoctions of various governments become worthless, as has been the case with Venezuela's government. If such other instances of government's behaving in this fashion exist, they're not apparent.
Additionally, it might be more reasonable to conclude that, because of the economic disaster perpetrated by Venezuela's Marxist government, they simply have nothing of any value to offer in exchange besides their gold. Such a view tells us what we already know about the nature of Marxist governments rather than what we might speculatively conclude about gold.
Then again, perhaps we simply don't have the brain cells required to spot the apparently clear pattern of rejection of gold as money as noted by the folks at the "Savant Report." On the other hand, perhaps any financial concern calling themselves a "savant" ("learned person, especially a distinguished scientist") ought to be seen with a skeptical eye.
And so we prefer to observe the price movements of gold these past weeks, without an overarching theory of a sea change in gold's status in the world. And the price movements have indicated a possible nudge over 1200 that simply did not materialize. Instead we find a possible reassertion of the bear market pattern that has dominated gold's price since it's highs in 2011. Our conclusion: Gold has a lot more to prove before we commit more of our hard-earned dollars to its potential rise from the ashes of its cyclical bear market within a secular bull.
It's allure continues to be trumpeted by the gold bugs; it's demise by those who have clearly soured on it. Rather than be tugged this way and that by these opposing forces, maybe we can see what's really been going on.
The facts as one can plainly see: From it's lows in the 1080s, gold bumped up against resistance at 1160. Finally it broke through. Remember that resistance, once breached, serves then as support. So after a run to the high 1100s, stoking the fires of the gold bugs' "refined" minds (get it - "refined"?), it dropped and bounced off of 1160 until - lo and behold, it reversed itself definitively last week, breaking through support, settling in the mid-1140s. That triggered the sour sorts who've either given up on gold, or who now believe gold has reached a permanent state of disrepute. From one of the latter, we spotted this observation about Venezuela's having reportedly sold as much as 80 tons of their gold last week (perhaps precipitating gold's dramatic drop through support?). Our sour pusses speculate - no, actually more than speculate, they authoritatively assert - that this sale of gold by the sovereign state of Venezuela is, in fact:
...confirming that gold is no longer valuable enough in foreign government’s minds to hold on to in tough times.Is that really a reasonable conclusion - that, not just the Venezuelan government, but "foreign governments (read: all foreign governments) find no special value in their gold holdings, that they indeed consider gold nothing more than one more thing to sell when they need money? On what do they base this assertion?
It may be that these sour pusses have, at some point or points in the past, spotted some pattern and developed a theory backed up by this pattern. If so, a search of their archived comments might yield this. One assumes that such a search will identify specific, persistent instances of sovereign governments selling gold when they need money in a more or less offhand manner; "Hmm, what shall we sell today to raise money needed to support our already bloated government needs? Ah, how about we sell that dead yellow metal we, for some reason, have stockpiled."
Such an attitude would belie the once-universally accepted fact that gold not only has served as money for thousands of years, but also continues to do so, especially when the fiat concoctions of various governments become worthless, as has been the case with Venezuela's government. If such other instances of government's behaving in this fashion exist, they're not apparent.
Additionally, it might be more reasonable to conclude that, because of the economic disaster perpetrated by Venezuela's Marxist government, they simply have nothing of any value to offer in exchange besides their gold. Such a view tells us what we already know about the nature of Marxist governments rather than what we might speculatively conclude about gold.
Then again, perhaps we simply don't have the brain cells required to spot the apparently clear pattern of rejection of gold as money as noted by the folks at the "Savant Report." On the other hand, perhaps any financial concern calling themselves a "savant" ("learned person, especially a distinguished scientist") ought to be seen with a skeptical eye.
And so we prefer to observe the price movements of gold these past weeks, without an overarching theory of a sea change in gold's status in the world. And the price movements have indicated a possible nudge over 1200 that simply did not materialize. Instead we find a possible reassertion of the bear market pattern that has dominated gold's price since it's highs in 2011. Our conclusion: Gold has a lot more to prove before we commit more of our hard-earned dollars to its potential rise from the ashes of its cyclical bear market within a secular bull.
Comments