Why Gold Has a LONG Way to Go

By Jeff Clark, Casey’s Gold & Resource Report

A couple weeks ago, I had my TV tuned to a business show that loves to give predictions ‎on the markets and the economy. On that day, one of the program’s regular guests ‎declared it was time to “short” gold, that it had reached its top, and that the precious ‎metals bull market was over. I’ll try to be nice in my rebuttal.‎

So, what was his reasoning: technical analysis of wave counts? falling demand? a telling ‎ratio? sun spots? No, he noted that upscale department store Harrods in London began ‎selling gold bullion and coins “over the counter,” ergo, the top was in. Nice try, “Bert,” ‎but this is amateurish. You really shouldn’t be playing with the big boys if that’s the basis ‎of your call.‎

Yes, gold will someday put in a top, and since the gold price is largely determined by ‎psychology, the end of the bull run will be marked by behavioral types of signals. But ‎calling a top in gold now is like declaring that WWII was over because the Allies won a ‎small skirmish in early 1942. To have made such a statement, based on a small, isolated ‎event, ignored the greater forces that had yet to play out and would have made any ‎journalist or military strategist look foolish indeed. ‎

And here’s why Bert looks equally silly today…‎

If the top were in, we’d be in the midst of an all-out Mania. Are we? Do you get the ‎impression there’s a rush into gold by the greater public right now? Are headlines blazing ‎the covers of major magazines pronouncing gold as the new investment king? Has Wall ‎Street gone gaga over gold and silver? I ask because these are the true signs that a trend ‎has entered its final blow-off top and would signal it’s time to get out. ‎

I decided to put Bert’s prognostication to the test, and I invite you to play along.‎

First, I struck up casual conversations with my friends, neighbors, relatives, ‎acquaintances, my wife’s co-workers – heck, even my seatmates on airplanes – angling to ‎learn how much gold they were hoarding, about the killing they were making in gold ‎stocks, and how they were getting rich from all their precious metal investments. (In ‎fairness, I had to exclude my dad, who is an award-winning gold panner, but he’s the ‎only one.)‎

I found no one – not one person – who is actively investing in anything gold or silver, let ‎alone rushing to buy or hoard the stuff. I had two people who confided that they did own ‎gold, but in both cases it was inherited. A few were curious how they would go about ‎doing such a thing, and fewer asked if I thought they should. Most everyone looked at me ‎blankly when I asked; they didn’t seem to know what I was talking about. When I got a ‎reaction like that, it was pointless to ask about gold stocks. Of the handful I did ask, most ‎had never heard of Barrick Gold, the world’s largest gold producer. ‎

Now ask yourself the same thing: how many of your family, friends, neighbors, and co-‎workers are buying gold and silver coins? Are any of them giving you hot stock tips ‎about a fantastic gold producer, or telling you about the latest gold discovery made by a ‎company in China? Have any fellow investors told you they’re dumping their brokers ‎because they can select gold stocks better on their own? Anyone telling you they’re going ‎to night school to learn the gold mining business?‎

Next, I surveyed a large sampling of print media looking for some of these signals that ‎Bert surely had spotted. Over the past couple weeks, not one of the major business ‎magazines I reviewed had anything on the cover about gold or silver. Further, there were ‎no articles on precious metals, such as the best ways to buy or store all this gold everyone ‎is buying. ‎

One magazine ran an article about ways to prepare for inflation, and gold wasn’t even ‎mentioned! I did see an ad from the U.S. Mint in another, along with a couple small ads ‎in the back that said they had the best prices on bullion (right beside the teasers for ‎buying a Russian wife), but that was it. Even the portfolio allocation models ‎recommended in the articles I read made no specific mention of precious metals (one ‎recommended a “resource” fund, but their discussion of it was centered around energy ‎investments). ‎

Other than the articles you seek out, how many mainstream magazines do you see ‎extolling the virtues of gold and silver on their cover? How many bestsellers are ‎prominently displayed at your nearest bookstore that scream at you to buy gold stocks? ‎Are you getting fed up with all the junk mail you get about gold and silver?‎

Last, I went out of my way to look for stories on gold and silver on TV and radio. About ‎all I could find were the same ads that popped up after last year’s Super Bowl ‎commercial by Cash4Gold. A couple programs quote metals prices, and I was able to find ‎another that actually used the word “gold” in a sentence. It might just be me, Bert, but I ‎can’t find any news anchors talking about the latest gold discovery or that “must own” ‎gold stock. No in-depth special reports from investigative journalists on the hot Canadian ‎junior mining sector. Nothing on my radio about the best ways to store all the silver every ‎smart investor has been buying.‎

How about you – are you feeling bombarded by TV and radio ads and segments on ‎precious metals? Do you have the clear impression gold and silver are the hot new ‎investing trend around the world? Are you Tivo-ing certain TV shows because of all the ‎great info they provide about picking the next great gold stock? ‎

If we were in a Mania, Bert, all of this would be happening. But it’s not. Those who buy ‎gold coins in the U.S. are still largely viewed as members of a fringe group. There is no ‎public discussion on gold, no insider tips on the latest hot gold stock, no special reports ‎on how to store all the bullion you’ve collected. The psychology isn’t on our side yet. ‎One signal does not a Mania make.‎
Last and perhaps most important, Bert, are you sure the dollar is done falling? You’re ‎absolutely convinced we won’t see price inflation? Our current debt load won’t pose any ‎future problems? No more worries about foreigners buying all that debt? Obama and ‎Bernanke really have saved the day?  ‎

Bert, send me your shorted gold positions, I’ll buy them from you. And although the gold ‎price could see a correction in the near term, and several more along its journey to “the ‎top,” remember that battle in early1942 and all that had yet to occur before the war was ‎over. ‎

And one more thing: when you finally become breathless to buy gold stocks, I just might ‎be ready to sell them to you.‎

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