Given the profoundly bearish sentiment that has gripped so many participants in the resource sector, particularly gold investors, we decided to poll the chief editors at Casey Research regarding the current sell-off. We recognize the severity of the situation and want readers to know we’re taking it very seriously.
We also want readers to know that the “Casey consensus” is not a single view imposed on all, but the result of a constant conversation we have among ourselves, questioning our own premises, making sure we don’t ignore new data if and when it contradicts our expectations. This is why some of the thoughts below will seem less positive than others; we see this sort of open discourse as a good and healthy thing for out business.
Without further ado, then, here are the thoughts of the principal members of the Casey Brain Trust (click on the names to read bios).
David Galland, Managing Director (The Casey Report): Of course, gold and silver being taken to the woodshed (or is it the gallows?) at a time when some central banks around the world have committed themselves to the wanton printing of currency units, while others have committed themselves to aggressive purchases of gold, makes no sense at all. It “should” be going up by $100 an ounce, not the opposite.
But when it comes to any investment market, there are no absolutes. Clearly, there are powerful interests aligned against gold right now. And I’m not referring to government suppression schemes which may or may not lurk in the shadows. Instead, I refer to institutional money managers who are loaded to the eyeballs with cash and itching for a return. That gold is a relatively small market – certainly against stocks and bonds – makes it fairly easy to push around. That institutional traders invariably keep at least one eye on technical indicators has, in my opinion, led to something of a self-fulfilling prophecy, resulting in this latest move downward.
So is gold in the woodshed or on the gallows, waiting for the final blow? While the market may currently be ignoring the fundamentals, the fundamentals exist nonetheless; and no amount of hoping they be otherwise is going to change the basic setup. And that setup is simply government debt that can’t be paid, with more being piled up every day in the tens of billions, an active currency war, and the wholesale debasement of the major currencies. The precious metals should be owned primarily as an insurance policy, and like an insurance policy pretty much tucked into a drawer and forgotten about. As Doug Casey likes to point out, there are also times that the precious metals (and related investments) are also good speculations. Given the speed and severity of the latest pullback, I think we could see a reverse of sentiment sooner than would otherwise be the case. So maybe that’s a good speculation. Personally, I’m going to hold my fire until and unless gold gets oversold below $1,500 – at which point I suspect the temptation to buy more will become hard to resist.