Bring on the Gold Correction

Is this the end for the bull market in gold? Everybody says so. The New York Times:

…in Pocatello, Idaho, the tiny golden treasure of Jon Norstog has dwindled, too. A $29,000 investment that Mr Norstog made in 2011 is now worth about $17,000, a loss of 42 percent.

“I thought if worst came to worst and the government brought down the world economy, I would still have something that was worth something,” Mr Norstog, 67, says of his foray into gold.

Gold, pride of Croesus and store of wealth since time immemorial, has turned out to be a very bad investment of late. A mere two years after its price raced to a nominal high, gold is sinking — fast. Its price has fallen 17 percent since late 2011. Wednesday was another bad day for gold: the price of bullion dropped $28 to $1,558 an ounce.

And this was before gold tumbled on Friday.

We can barely stop laughing.

This sad sack ‘investor’ thought he would make money by putting $29,000 into gold stocks.

Ha ha ha…wrong on all counts. He thought gold was an ‘investment’… he thought an amateur speculator could make money in gold stocks… and The New York Times thought he was an investor.

And now, The New York Times thinks gold is going down. Why? Let’s let the NYT tell us:

Now, things are looking up for the economy and, as a result, down for gold. On top of that, concern that the loose monetary policy at Federal Reserve might set off inflation — a prospect that drove investors to gold — have so far proved to be unfounded.

And so Wall Street is growing increasingly bearish on gold, an investment that banks and others had deftly marketed to the masses only a few years ago,

Ha ha…do you remember Wall Street deftly marketing gold a few years ago? Show us the ads! Give us the brokers’ phone logs! Prove it!

The fact is, the masses never got anywhere near gold. Not even close. Most people have never seen a gold coin… and few are as reckless as the aforementioned Mr Norstog. Most are even more reckless! They’ll wait for gold to hit $2,000… or $3,000 before they buy.

Which is why we’re nowhere close to the top. Wall Street never marketed gold, deftly…or any other way. Not even in its usual greedy, heavy handed fashion. And the masses never bought it.

Just the opposite. As the price of gold rose, we saw ads in the paper soliciting people to SELL gold. The masses held gold parties… in which they sold their golden heirlooms at preposterously low prices.

And about those reports telling us that money printing by central banks would cause trouble…they have ‘so far proven unfounded’. Well stay tuned!

And get this. More good news:

On Wednesday, Goldman Sachs became the latest big bank to predict further declines, forecasting that the price of gold would sink to $1,390 within a year, down 11 percent from where it traded on Wednesday. Société Générale of France last week issued a report titled, “The End of the Gold Era,” which said the price should fall to $1,375 by the end of the year and could keep falling for years.

Why good news? Because the more bearish on gold Wall Street becomes, the more the rubes and pumpkins sell. The more they sell…the cheaper it is for the smart money to buy.

Yes, dear reader, we hope Goldman and SocGen are right. We’d like to see the gold price crash down around $1,300… or lower.

First, because this would mark a real correction in the bull market. It’s been going on for 12 years without a serious correction. Not a healthy situation. We’d like to get the correction out of the way…shaking out the Johnnies-come-lately and the two-bit speculators. Then, the final stage in the bull market could begin.

Second, because it gives us a chance to buy more. Because no matter what noise you hear in the press or in the street, central bankers are far more reckless than Mr Norstog.

The monetary authorities are convinced that they can revive sluggish economies by printing money…and they’ll continue printing until all Hell breaks loose.

Then, when the dust settles…when pounds, pesos, yen, euros and dollars have all been beaten and bruised…there will be one money still standing tall. That will be gold.

Bill Bonner
for Markets and Money 

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Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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