Rules of Being a Gold Bug

[Nutmeg Coin]

This looks like a stereotype to me, are there really people who believe these "gold bug" rules?

 

"The reaction to Gold’s crash has produced some astonishing rationalizations. The refusal to acknowledge basic trading facts leads us to recognize that Gold bugs and traders have very specific rules that they MUST follow. These social conventions look less like a debate about asset classes and more like a religious cult.

 

"The advocates for any sort of investing thesis have their rules, metrics, heuristics and biases. Here are the rules we teased out for the Gold Trade:

 

 

 

The Rules of Goldbuggery

 

1. Gold is a Currency: This is rule number 1. It is not a decorative or industrial metal, it is a permanent store of value, as dictated by Greeks in Lydia around 700 B.C. And, it shall be ever thus.

 

2. The price of gold cannot fall, it can only be manipulated lower: When gold’s price falls, it is an unnatural act. It can only occur as the result of an international cabal of Central Bankers and politicians. Its a conspiracy, and we know who the guilty parties are.

 

3. If the price of gold is rising, it is doing so despite enormous and desperate efforts by manipulators to prevent the rise: This is the corollary to the prior Rule of Gold manipulation. Gold runs up despite the overwhelming opposition to it.

 

4. The world MUST return to the Gold Standard one day: It is inevitable that we will return to a Gold Standard. We all know this to be true. When we compare the size of the money supply to past amounts when there was a Gold Standard, we can derive prices of Gold in the $7,000, $10,000 even $15,000. Hence, we know its cheap even at $2,000.

 

5. Central Bankers are printing money relentlessly, and this can only drive Gold prices higher: NOTE: You must ignore, for the moment, that Gold has not gone higher for the past 2 years as Central Banks around the world have ramped up QE. This only means that ultimately, Gold will go much much higher.

 

6. Gold works whether the economy is good or bad: When we have a red hot economy, Gold is your hedge against inflation. When we have a bad economy, Gold is a safe harbor against collapse. It is a one way trade that never fails!

 

7. Gold will survive after the world economy crumbles: Gold is the ultimate currency, as it has a value that will survive even after the whole world tumbles around you. Get yourself some gold coins and a Glock and you will be just fine when the whole world goes to mess. We welcome the era envisioned in the movie Mad Max.

 

8. Never admit that Gold is essentially a sucker’s bet: Never discuss how in the last century, gold has run up only be to trounced in repeated massive sell offs (always blame rule #2 for this). Do not discuss how this has happened in 1915-20, 1941, 1947, 1951-66, 1974-76 1981, 1983-85, 1987-2000 and 2008.

 

9. Gold is a rejection of government, and their control of fiat money and finance: There are no printing presses that produce gold, it is finite, natural and God created. How much we scrape out of the ground each year is limited, and the only variable to the old equation. (Just ignore Man’s natural tendency to organize into to City-States over the past 12,000 years).

 

10. All Gold discussions must contain ominous macro forecasts: Your description of why Gold is going higher must consist of spurious correlations, unprovable predictions, and a guarded expectation of bad things in the future. Avoid empirical data at all costs.

 

11. Gold is always rallying in one currency or another: Sure, it may be down 30% in Dollars, the reserve currency it is priced in, but you can always find a currency falling faster than it does and claim you own it in that denomination. Last week, it was up in Japanese Yen. This week, it is up in Zimbabwe dollars.

 

12. China & India know the value of Gold; the Western world does not: The massive buying of gold by consumers in Chindia reflects the culture, intelligence and investing savvy of the people in these countries. The West doesn’t get it, and it is their loss.

 

"Bonus rule: Never admit Gold might be falling because it trades on human emotions and psychology and has no intrinsic value whatsoever.

 

 

 

"The enormous amounts of dollars involved in the Gold trade has attracted all manner of charlatans and frauds to the Gold trade. Although this list can help you separate the true believers from the criminals, time has proven them to be both are enormous money losers."

http://www.ritholtz.com/blog/2013/04/the-10-rules-of-goldbuggery/

 

What about other investments, real estate and stocks and bonds, shouldn't there be similar rules on those?

[Mr. Smith Guesser]

I'm sure there are some people who believe all this. However, you have to remember that all of these messages are also pushed by bullion dealers and stock promoters to make sales.

 

 

[World Colonial]

I know one poster on another forum who probably believes most of those statements. Otherwise, I consider it a strawman.

[newprepper]

are there really people who believe these "gold bug" rules

 

The better question is "Are there really people who DON'T believe the rules?

[DaveG]

I think the author of that column was having some fun at the expense of "Gold Bugs" and meant the "rules" to be taken "tongue-in-cheek."

[RWB]

Rule #1: Don't think rationally...it's bad for gold selling business. Just a bunch of silliness.....

[wdrob]

That was a very entertaining read.

 

I think we have all encountered the religious like followers of those rules on various forums as well as a the most persistent sellers of gold, peddling their metals far above the current spot prices, who specifically target a particular segment of seniors that don't even know what a spot price is.

 

 

 

[RWB]

"...that don't even know what a spot price is."

 

Uhmmmm -- is that 'how much is that doggy in the window?'

[BillJones]

It is an interesting read, but it has a distinct lack was economic wisdom, especially the part where it is inevitable that we return to The Gold Standard. Inflation is the way of the world, and the only way a nation's currency is significantly revalued upward is if that nation does it, like the Germans had to do in the 1920s, and the French chose to do in the early 1960s.

[Mr. Smith Guesser]

I think of this stuff as just entertainment. The facts are boring. The truth is stale. If media reported on the facts, no one would care or watch. I refer you to Mr. Fred Astaire:

[asdfgh]

The only thing in the above list that is true is number 1. Gold is a currency.

 

If this was not true then no government would hold gold. They hold gold just like they hold other

currencies. They trade the gold just like they trade currencies. There can be manipulation in the currency market and is all the time. When the dollar starts to fall the treasury buys up debt to prop

it up. So I don't see gold manipulation any differently. Goverments and banks buy and swap against it

all the time.

 

The recent drop in gold prices is due to the strong dollar. The US economy is doing well compared to

the rest of the world. Only if Europe and Asia improve significantly and at the same time the US economy falters will you see higher gold prices.

 

Just my opinion....

[Conder101]

The only thing in the above list that is true is number 1. Gold is a currency.

 

If this was not true then no government would hold gold. They hold gold just like they hold other

currencies.

Gold is a commodity The government also holds Platinum, diamonds,some drugs and also apparently ammunition. They don't hold silver. I wouldn't be surprised if they have stockpiles of some other non-perishable commodities as well.

[asdfgh]

The other item you mentioned are strategic stockpiles. They also hold cromimiun, titanium, and other hard to get metals/items. They sold off the silver stockpile thru the silver eagle program as it was declared to be a commodity with no strategic use. England sold off their gold holdings in the 1980's and now consider it one of their biggest blunders.