Gleeful over Gold

Observant people could have found reason for suspecting something was going wrong in real estate during the time from 2005 to 2007 without being aware of the extremely loose or even nonexistent underwriting standards being used by many lenders or noticing  the bubbles in home prices in many markets around the country simply by surfing through late night cable TV channels and counting the number of programs on getting rich flipping real estate.  In a similar way the recent years’ abundance of TV advertisements for getting rich by buying gold and silver could have functioned as a warning of trouble coming in the precious metals markets.

Now that gold and silver have fallen a good bit from their recent highs,  many in the financial media, particularly those with ties to and affinities for the financial and political establishments, have been fairly joyfully proclaiming the death of gold and depicting the so-called gold bugs as fools and paranoiacs who do not know what they are doing.  On the surface this is an odd phenomenon. Prices of assets fluctuate with different things being attractively or unattractively priced at different times. There have been bear markets and bubbles in various  classes of assets. Precious metals do not differ from stocks, bonds, or real estate in that respect. Yet most of these people did not write or talk about foolish stock bugs when the indexes had huge declines in price twice in the last dozen years. Nor do they usually talk about foolish bond bugs of the present day piling into assets with little or no upside potential, prices artificially propped up by government actions,  and an almost guaranteed negative after-inflation return.  

It is worth thinking about why the general tone is so different with respect to the precious metals.  My guess is that it is in large part because purchasing precious metals,  at least by implication and often by explicit conclusion, shows a lack of trust in the government, its currency, and its partners in the financial establishment. It is natural for many in Washington and Manhattan to find such mistrust both déclassé and threatening, and perhaps even infuriating.