Gold Q&A from Readers

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Gary Christenson - Deviant Investor

Based on questions, opinions, and rants from several websites, these are some typical questions and my answers:

Q: “Gold has been going down since August of 2011. It is clearly in a bear market, so why tell me it will go up?”
A: Yes, gold has fallen about 40% from its high, but why assume that means it will continue falling? It looks to me like a 40% correction in a long-term bull market.

***

Q: “If gold were in a bull market, it would be going up but gold is clearly going down, so why do you think gold is in a bull market?”
A: I probably can’t convince you, but these are the facts as I see them:

  • Gold was selling for about $42 in 1971 when the national debt was about $398 Billion, not the $17.5 Trillion ($17,500 Billion) it is now. Gasoline was selling for about $0.36 per gallon and most prices for food, energy, housing, and automobiles were similarly inexpensive compared to today. That looks like a long-term bull market in quantity of debt and a bull market in the prices for food, energy, and gold. It looks like a bear market in the value of the dollar and most other paper currencies. Be happy you don’t have your life savings in Argentinian Pesos.
  • All markets correct. The NASDAQ 100 dropped from about 1,480 in July of 1998 to about 1,060 in three months. However, by early 2000 it had surged to over 4,800. Crude oil prices, T-Bonds, the S&P, and most markets rally, fall, and rally again. Gold will rally and then correct again and again.
  • Gold in 1980 was in a bubble as was the NASDAQ in 2000. The charts, ratios, and timing for gold currently look like a correction, not the aftermath of a bubble.
  • The Federal Reserve and most central banks are monetizing debt or, as it is often called, “printing money.” Do you think they are doing this because our economies, which are drowning in debt, are healthy? Do you think this won’t result in some nasty inflation? When people realize that central banks and governments are NOT supporting their currencies, they will buy even more gold and hard assets as they see their savings being trashed by the “printing” and the inevitable inflation.
  • Do you think printing many $Trillions to support failing banks and bad derivatives is a signal that “all is well” or a sign of desperation? Central banker desperation supports gold prices.

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Q: “I bought gold near the high in 2011 and I’m tired of waiting for it to go up! I should have bought the S&P instead and I’d be far better off.”
A: As of today, you are correct. Timing is important! Buying near the top in any market usually means losses or long waits. But the relevant question is not what you should have done back then, but what will you do now? Wait, throw in the towel, buy high and sell low, or what? Financial TV will encourage you to buy stocks, as they always do. Maybe you should, but I encourage you to give our bankers and governments time to create another crisis which will almost certainly increase the price of gold more than the S&P.

***

Q: “Why are you always harping on gold? I shorted the NASDAQ in early 2000, covered a few points off the bottom, sold my house at the peak in 2006, and bought stocks in early 2009. I’m probably far better off than you broken-record gold bugs. Get a life and find a new topic to rant about.”
A: Good for you! Very few people were that successful and timed the markets that well. Regardless, gold is undervalued now, unlike in August of 2011, and is a good buy in my opinion. Maybe you can do better in selected bio-tech stocks, but gold has no counter-party risk, a long history as real money, and is insurance against failing monetary systems and political uncertainty. Will bio-tech stocks protect you from banker fraud, bail-ins, currency devaluations, and inflation?

***

Q: “I see nothing but trouble in the financial and political world. I see potential war in the Middle-East, in the Ukraine, in the South China Sea, and maybe elsewhere. I see morons in high places doing silly things. I see bankers printing their currencies to excess, as in uncharted territory excess, and I can’t see how this will end well for anyone, even the upper 1% of the political and financial elite. I want to buy gold and hunker down, but I also know that gold prices are manipulated, controlled, and capped, so why should I buy gold?”
A: I think it is important to remember that the powers-that-be (PTB) have been mismanaging the world for a long time, we are still here, the sun still shines, and gold has retained its value for several millennia. If the manipulation were overwhelmingly powerful, why is gold selling for about $1,300 instead of $300 like it was 12 years ago? The answer is, in my opinion, that the PTB know the dollar is going down and gold is going up, probably a long way up, but the PTB want to manage the dollar’s devaluation, not let the devaluation get out of hand, and they need to keep the game of financial musical chairs playing while they “get theirs.” Buy gold and ignore the daily, weekly, and monthly shenanigans in the markets.

***

Q: “I think silver is a better value than gold. I think gold is going up and silver is going up even more. I’m selling my gold and buying silver. What do you think of that plan?”
A: I think, as of today, silver will appreciate much more than gold and so you are probably correct. But things change, and I like the safety and security of gold also. Balance is good.

***

Q: “I think aliens are to blame for all the ills in the world today. What do you think?”
A: I think not.

***

Q: “You doom and gloom types have been wrong for years. The S&P is at an all-time high, gold is off 40%, silver is down nearly 60%, and the Fed will support the stock market with a Greenspan/Bernanke/Yellen “put.” Why are you still talking about gold and silver when stocks are clearly the place to be?”
A: You might be correct, but what I see is a QE supported stock market that is over-bought on a daily, weekly, and monthly basis and ripe for a correction. Maybe it will and maybe it won’t. I also see gold off nearly 40% and silver off nearly 60% from their highs and ready to rally. I see irresponsible political, economic, and monetary policies creating more debt, “printing money,” increasing deficits, and “kicking the can” into a very dicey future that might include a derivative crash, depression, or world war. Do you trust world leaders to play nice and do what is good for their people or to do what is good for the upper 0.1% that run the show? Righto! That’s why the stock market might go up a little more, but gold and silver will double or triple in several years.

***

Q: “China is buying all the gold they can find and the western central banks and governments are selling. Is this wise for the western world?”
A: It is certainly wise for China. In my opinion it might be sensible in the short term if you are a western central banker or a European or American government leader afraid of a currency crash. It is certainly not a good idea for the western world in the long term. Selling western gold seems like eating our seed corn. We might not starve today, but our future will become increasingly bleak. Good luck to the western world! We will need it and more.

***

Q: “I’m putting my trust in God and my money in 3 month Treasuries. I think you should also. Go ahead, admit it, you are a bit jealous.”
A: I’ll pass on the Treasuries. I’m not jealous. I put my faith and trust in God and Gold. It works for many people.

***

For more academic and enlightening analysis, you might find value in:

Nick Giambruno Timing the Collapse
Alasdair Macleod: Renewed estimates of Chinese gold demand
Bill Bonner: Civilization Will Not Survive

As George Bernard Shaw said:

“You have to choose between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the government. And, with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold.”

GE Christenson
aka Deviant Investor

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8 thoughts on “Gold Q&A from Readers


    • Yes. In GOTS we trust.
      For those who don’t know what GOTS is:

      Get Out of The System – the advice from Jim Sinclair. Specifically, he advocates:

      From Jim Sinclair:

      1. Your equities are held in certificate form.
      2. You have no Federal income tax favored retirement funds.
      3. You have no CDs and investments in bonds.
      4. You have modest money deposited among selected BRICs countries.
      5. You store your own precious metals.
      6. You have no mortgage obligations.
      7. You keep cash on hand for 6 months expenses.
      8. You have no consumer debt at all.
      9. You have a small hobby farm for protein and veggies outside of where you are living with no mortgage debt, set up green.
      10. You have a gas, diesel or electric car with high fuel mileage for the farm.
      11. You have a generator with large fuel capacity for the farm.

      GE Christenson
      aka Deviant Investor


  1. The gold price (measured in US dollars) has been falling for 20 years from the 1980 peak to the 2000 bottom. In fact, in inflation (well, CPI) adjusted terms, it is still way below the 1980 peak, but let’s concentrate on these 2 decades only. Wasn’t there any money printing during that time? Didn’t the overall US debt increase during these 2 decades? Wasn’t there inflation?

    It always cracks me up when you broken-record gold bugs try to invent flawed “fundamental” arguments to support your “always buy and never sell gold” position. Did you tell your readers to sell gold in 2011 because it was about to “correct”? If not, why should they listen to you now? It doesn’t matter whether gold continues up now or not – even a broken clock is right twice a day. If you cannot reliably predict both the upside and the downside, you are not worth listening to.

    Fundamentals don’t matter. For every fundamental argument, there is an equal and opposite fundamental argument. The markets can remain irrational much longer than you can remain solvent and you can lose your shirt waiting for the price to do what your “fundamentals” tell you it ought to do.

    Markets are not moved by fundamentals. They are moved by psychology and the (not necessarily correct) PERCEPTION of what the fundamentals are. The best tool to use when trading is technical analysis – because it helps distill the noise and tell us what the psychological state of the trading crowds currently is. It can’t see the future, either – but it can much more clearly tell us what the present state is, so that we can make much more reliable forecasts about the future.

    Since 2011 gold has been in a full-blown bear market. Claiming anything else is self-delusion at best. Was it in a bubble before? Maybe in a mini-bubble, like oil was a few years ago. This bear market was NECESSARY to relieve the over-bullish pressure. We had the same cyclical bear market smack in the middle of the long-term gold bull in the 70s.

    Has the long-term bull market in gold ended in 2011? Probably not. I don’t know. I don’t care. A much more important question is: has the bear market that started in 2011 reached its end? My technical analysis tells me that it most likely has, although there is still a remote possibility for a lower low (e.g., to $1050).

    So, in the relatively near future, gold is indeed more likely to go up. Of course, you will be telling your readers to buy all the way up. Eventually, it will reach a rather obvious top, like it did in 2011. Of course, you won’t tell your readers to sell. Then it will start moving down – and you’ll be telling your readers to keep buying those wonderful “buying opportunities”.

    Sigh, I wish I was smart enough to spot the moonshot coffee was about to make… Or Bitcoin, before its bubble burst. But you can’t catch every up move – not even every moonshot. Just pointing out that there were, there are and there will be always other opportunities – not just gold. You have to be open-minded and on the lookout for them, if you want to prosper financially. And it is very important to get out at the first signs of a top instead of holding through a bear market.


    • Thank you for your rant. You have added to the confusion. I will only address a few of your comments.

      1) Yes there was inflation between 1980 and 2000. So what? You seem to imply that if there is inflation then gold must go up. I disagree.

      2) “Broken-record gold bugs” and on and on. Rational investors buy and sell. Buy only people do exist in the gold world, the stock world, and other places, but it does not seem sensible to me. I try to be rational.

      3) “Fundamentals don’t matter.” I disagree. This is about as sensible as saying “deficits don’t matter.” They do matter.

      4) Technical analysis is something we seem to agree on – it is a good tool, but it is only one of several tools available.

      5) So does it matter if you call gold from 2011 to now a bear market, or I call it a correction in an ongoing bull market? Either way, it went down. We agree that in the short term gold is likely to go up. In my opinion the short term is several, perhaps many, years. You might be thinking months but I am thinking more years of rally.

      6) And then will come a correction, as it always does. And then some will say “never sell” and some will say “sell” and I will attempt to be rational and sell at some point where the technicals, fundamentals, and sentiment suggest I should sell.

      7) And I will probably express my opinion about selling, just as I do about buying.

      Thanks for your comments.

      GE Christenson
      aka Deviant Investor


      • 1) I am not implying anything like this. In fact, I got the impression that this was what YOU were implying. That increased inflation necessary results in higher gold price. I am glad you disagree with such a statement. Now that we’ve got that settled, could you please avoid pointing to inflation and money-printing as an argument that gold should go up? Thanks.

        2) So, you DO tell your readers to sell gold? Please point me to an article of yours where you did so.

        3) Markets are driven by psychology and perception. Fundamentals don’t matter, until the crowd decides that they do. Deficits don’t matter until the crowd decides that they do. This is an objective, observable fact. Open your eyes and see it.

        5) Yes, it does matter to me. When people call bear markets “corrections” it implies that they are trying to talk down the severity of the decline. That they are not being objective. That they have an agenda to sell you something – i.e., the thing that was in a bear market. How long will the upside continue? I don’t have a clue. Technical analysis doesn’t predict the future – it only lets you see the present more clearly. When the top forms, I expect technical analysis to help me see it.

        6) Everything is a correction to you… Was the 1980-2000 bear market in gold also a “correction”?


        • 1) Inflation this year does not absolutely mean gold will go up this year. Inflation in general means gold will go up in general. It probably won’t be linear or logical. Do you remember 10 cent coffee and $42 gold? I do. Prices went up. I will not quit pointing to inflation and money-printing as an argument – since they do – eventually – cause gold to rise. There are other factors besides inflation and money printing that cause gold to rise. Back to 10 cent coffee. Seen any lately? Seen any $42 gold? Do you think inflation in 10 cent coffee, massive increases in the money supply, massive increases in debt, and inflation in the price of gold were DISCONNECTED? You do? Really? Don’t bother to tell me your “reasoning.”

          2) Well, since I was not writing a blog in 1980 nor in 2011, I did not tell any readers to sell gold then. Next time we get a bubble rally, I probably will.

          3) “Fundamentals don’t matter” is your statement and it is nonsense. I see it – unfortunate that you don’t.

          And more etc etc etc. Thanks for you comments even if I think you are about 90% off base. Regardless, whatever works for you – is what you should pursue. I hope you do. Good luck with your world view.

          Cheers,

          GE Christenson
          aka Deviant Investor


  2. After reading recent rants about metals from your readers I’m going to buy more gold on any dips. This looks like a classic bottom, and your readers just confirmed it. Thanks.


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