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Bring on the Gold Correction

Is this the end for the bull market in gold? Everybody says so. The New York Times:

…in Pocatello, Idaho, the tiny golden treasure of Jon Norstog has dwindled, too. A $29,000 investment that Mr Norstog made in 2011 is now worth about $17,000, a loss of 42 percent.

“I thought if worst came to worst and the government brought down the world economy, I would still have something that was worth something,” Mr Norstog, 67, says of his foray into gold.

Gold, pride of Croesus and store of wealth since time immemorial, has turned out to be a very bad investment of late. A mere two years after its price raced to a nominal high, gold is sinking — fast. Its price has fallen 17 percent since late 2011. Wednesday was another bad day for gold: the price of bullion dropped $28 to $1,558 an ounce.

And this was before gold tumbled on Friday.

We can barely stop laughing.

This sad sack ‘investor’ thought he would make money by putting $29,000 into gold stocks.

Ha ha ha…wrong on all counts. He thought gold was an ‘investment’… he thought an amateur speculator could make money in gold stocks… and The New York Times thought he was an investor.

And now, The New York Times thinks gold is going down. Why? Let’s let the NYT tell us:

Now, things are looking up for the economy and, as a result, down for gold. On top of that, concern that the loose monetary policy at Federal Reserve might set off inflation — a prospect that drove investors to gold — have so far proved to be unfounded.

And so Wall Street is growing increasingly bearish on gold, an investment that banks and others had deftly marketed to the masses only a few years ago,

Ha ha…do you remember Wall Street deftly marketing gold a few years ago? Show us the ads! Give us the brokers’ phone logs! Prove it!

The fact is, the masses never got anywhere near gold. Not even close. Most people have never seen a gold coin… and few are as reckless as the aforementioned Mr Norstog. Most are even more reckless! They’ll wait for gold to hit $2,000… or $3,000 before they buy.

Which is why we’re nowhere close to the top. Wall Street never marketed gold, deftly…or any other way. Not even in its usual greedy, heavy handed fashion. And the masses never bought it.

Just the opposite. As the price of gold rose, we saw ads in the paper soliciting people to SELL gold. The masses held gold parties… in which they sold their golden heirlooms at preposterously low prices.

And about those reports telling us that money printing by central banks would cause trouble…they have ‘so far proven unfounded’. Well stay tuned!

And get this. More good news:

On Wednesday, Goldman Sachs became the latest big bank to predict further declines, forecasting that the price of gold would sink to $1,390 within a year, down 11 percent from where it traded on Wednesday. Société Générale of France last week issued a report titled, “The End of the Gold Era,” which said the price should fall to $1,375 by the end of the year and could keep falling for years.

Why good news? Because the more bearish on gold Wall Street becomes, the more the rubes and pumpkins sell. The more they sell…the cheaper it is for the smart money to buy.

Yes, dear reader, we hope Goldman and SocGen are right. We’d like to see the gold price crash down around $1,300… or lower.

First, because this would mark a real correction in the bull market. It’s been going on for 12 years without a serious correction. Not a healthy situation. We’d like to get the correction out of the way…shaking out the Johnnies-come-lately and the two-bit speculators. Then, the final stage in the bull market could begin.

Second, because it gives us a chance to buy more. Because no matter what noise you hear in the press or in the street, central bankers are far more reckless than Mr Norstog.

The monetary authorities are convinced that they can revive sluggish economies by printing money…and they’ll continue printing until all Hell breaks loose.

Then, when the dust settles…when pounds, pesos, yen, euros and dollars have all been beaten and bruised…there will be one money still standing tall. That will be gold.

Regards,
Bill Bonner
for The Daily Reckoning Australia 

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Bill Bonner
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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7 Comments

  1. slewie the pi-rat says:

    if you look at a gold chart, the very tippy-top price, ever, has a spooky correspondence with the date that the Swiss National Banksters pegged the euro, committing near-INFINITE PRINTING to maintain the peg.
    gold peaks.

    now, Japan! the banksters blew up the carry trade! the volatility (wag) in the “markets” caused by the tail (Yen) damn near KILLED the dog (gold)!

    this is the hari-carry gold trade.
    you heard it here, first.

  2. justin king says:

    The bankers (oligarchs) have made a good run at it, but how many times can they do it without looking obvious ?? – GATA and other orgs should move on this HARD.

  3. justin king says:

    PaulCraigRoberts.org has 2 recent essays on the gold move. One idea being that the bankers have actually shot themselves in the foot by giving China and others the new low price to quickly buy. Not to mention the bankers buying bullion for themselves at a sweet rate.

  4. Phil says:

    Went in to ABC Bullion in Sydney today. Waited 2 hrs in line to get in, then waited another half hour to be seen to. Asked the lady how things were going, she said they had not had anybody selling. As a mere observation, during that time I was there – 70% Indian, 25% Asian, 5% white.

  5. Jeff says:

    On Friday whistle-blower on the criminal activity suppressing PMs said 500tons of PAPER gold was sold Friday and on Monday 155tons sold in 1 hour. Unprecedented, but the physical demand is on fire and that’s what counts. Also he said LBMA was facing a default on delivery of physical so they took the market down. He said in effect bailing out the bullion banks. Bill Haynes said the demand for physical in US is 50:1. Demand is so strong wholesalers had to close as they were unable to keep up. Also stopped selling one ounce silver coins, demand is out to 6 weeks for supply. Agreed Bill Bonner, last man standing will be Gold and Silver bullion outside the system. kingworldnews.com for awesome articles from people in the know. Also the great Jim Sinclair’s site jsmineset.com Why, because the naysayers bears shills in the media are out there creating false and misleading opinion on the metals. What a buying opportunity for good quality gold miners and physical.

  6. slewie the pi-rat says:

    Jeff sez: someone (unclear) “…said LBMA was facing a default on delivery of physical so they took the market down. He said in effect bailing out the bullion banks.”

    yup, but let’s get with the NEW PARADIGM, Jeff:
    the bullion banksters “bailed in” some of their Au “liabilities”. L0L!!!
    there!
    fixed it!

  7. Grayza says:

    Buy gold at elevated prices now while you still can – Tee Hee, Tee Hee Hee! You guys dont seem to grasp the concept of deflation do you? QE aint creating inflation. I think thats what caused the big moves recently. Investors are waking up to the coming deflationary bust!

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