Now that we’ve got your attention, a wee disclaimer. This prognostication was written while we were under the influence of Gold Bug Fever, an epidemic that is spreading like wildfire among the crowd of gold bugs who frequent gold websites dominated by the hype artists.
If you’ve melted down your wife’s jewelry, just in case your hunch on Skyharbour Resources (TSXV:SYH) doesn’t pan out, you have the fever.
When it comes to yarn- spinning, nobody can outdo a connoisseur of gold – as a cheerful chap named David Walsh proved a few years back. Remember him, the CEO of fiction, fantasy and Bre-X Minerals?
But even the memory of David Walsh hasn’t dampened the enthusiasm of gold bugs such as Mr. T, who describes himself as “merely a messenger of truth” in pumping gold at one of the most popular sites (www.321gold.com' target='_new'>www.321gold.com).
Mr. T pegs the “true price” of gold at $3,533 US, quite a revelation considering the yellow metal was recently trading in the $420 range.
Mr. T bases his presumption on the popular theory that gold is a form of currency and says he “intends to bash it into everyone’s skulls that fiat money (money that a government has declared as legal tender) is evil and must be defeated.”
Many precious pundits are breathlessly forecasting gold to vault to $1,000, citing key fundamentals such as the fact that gold historically trades for the price of a nice suit, which is now about $1,000.
Imagine that – Henry Singer controlling the price of gold. And you thought U.S. Fed Reserve boss Alan Greenspan had clout.
So, according to the tub- thumpers, gold should be trading at the price of a Henry Singer suit by, say, next Tuesday but, if not, then the Tuesday after that.
These people are no dimwits. They know they will never run out of Tuesdays.
The gold gurus don’t discourage easily. For example, renowned Canadian gold analyst John Ing forecast gold to hit $510 US in 2003. When it pooped out at $410 last year, Ing, president of Maison Placements, simply changed calendars. Now his target is for $510 in ’04, which means all gold has to do is climb a measly $90 in the next two months.
John Embry, Canada’s most revered gold bug, capable of single-handedly driving up penny stocks within a few seconds of mentioning a name he likes, has reiterated a forecast of $1,000 in recent years while pitching gold stocks on ROB-TV’s Market Call program. But the manager of Sprott Precious Minerals Fund has wisely refused to be pinned down with a target date.
Embry, of Sprott Asset Management, alleges that the gold bullion market is being manipulated by governments and central banks.
Gold bugs tend to run in herds at sites such as www.321gold.com' target='_new'>www.321gold.com and www.kitco-gold.com, concocting half-baked theories and lovely charts to show how the U.S. dollar is doomed to a life under a new alias such as the American peso, and how gold is all that’s left to save us from an inevitable global financial apocalypse.
Of course, every time the gold-hype machine reaches a crescendo and knee-jerk market traders feverishly pile into gold stocks, the shares go into the tank and many day traders become bartenders.
Then, in the aftermath of another one of those mind-numbing downward spikes of gold stocks, someone such as Richard Russell, editor of the popular Dow Theory Letters since 1958, will quickly bawl out boneheaded traders for shortsightedness.
Buy gold, harps Russell, and don’t even think about selling.
Writing about his vision for the future, Russell says: “The stock market may have collapsed, the (U.S.) dollar may be in smithereens, your house may have been destroyed by termites, your spouse may have left you – but your gold will still be wealth.”
Then, you turn on the radio where investment author Doug Casey is preaching about the virtues of junior gold stocks on the Money Talks program.
In three to four years, ventures Casey, junior mining stocks “will be hotter than the Internet stocks back in the nineties.” And some folks will take that to the bank, believing that if Casey was right once – he correctly predicted the precious metals boom in his 1979 best-seller Crisis Investing – he will be right again.
Richard Daughty, another regular contributor of ghoulish economic prognostications at 321gold.com, points out that the U.S. Fed is expanding its money supply at the same rate as in the 1920s, “which led to the Great Depression!”
“So if you want to have a Halloween costume that is guaranteed to scare the hell out of me,” muses Daughty, “then come dressed as the money supply.”
If you find yourself feverishly melting down your gold-plated bowling trophies, you may need an analyst – one with a more conservative view and a track record to back it.
Victoria’s Martin Murenbeeld is one of the most respected gold analysts, and his view of gold’s outlook, although bullish, threw some cold water on the gold bugs in his address to the Denver Gold Forum recently.
Murenbeeld, of M. Murenbeeld & Associates (www.murenbeeld.com), provided a forecast for 2005 of an average gold price of $430 US with a 30-per-cent probability of it averaging as high as $470.
Gazing at the big picture, gold has lived up to some of the hype, having climbed 70 per cent since it began its run from the $250 range three years ago.
Of course, what the gold bugs usually don’t tell you is that gold has had its lunch handed to it by another commodity. Oil, without a hype machine and without gold’s violent whiplash corrections, has skyrocketed by about 275 per cent to the $55 US range over the same three-year span in which gold has risen 70 per cent, something that not even Peter Linder, the chronically bullish manager of the DeltaOne Capital Management energy fund, could see coming.
Hey, gold bugs. Take THAT to the bank.
* FEVERISH WORDS: “Buy high and never sell.”
– the rallying cry of the gold bug.
(Gyle Konotopetz can be reached at gyle@businessedge.ca)