Given its ancient history as money and jewelry, its religious connotations, the fact that it is both beautiful and laborious to dig out of the ground, process and store, gold is an asset that promotes strong and often emotional views and so it is the perfect central figure for this thought exercise.
I want to be careful in criticizing fellow market participants because as a lowly human myself, I am subject to the same pitfalls as anyone else. But being an advocate of the sound reasons for owning gold, even through a violent bear market, I have learned a lot over the last few years about how many market participants think. That includes myself, which I will address first.
I have learned that I am able to compartmentalize my ideals, biases and beliefs in service to simply being in alignment with what is going on in the greater financial sphere (e.g. the bubble in governmental credit/debt as a stimulant for asset market appreciation), regardless of whether or not I agree with its origins or believe in its sustainability. I have only firmed on the idea that I am a manager as opposed to promoter of my most closely held beliefs. Inflationary monetary policy is working exactly (I would assume) as officials have intended as the right assets, equities, have been rising on this cycle.
As part of that management and compartmentalization process, I have kept the idea that gold is long-term and eternal monetary insurance and not an asset to game or speculate upon. This view is unchanged from when Biiwii.com and NFTRH warned about the speculative blow offs most notably in silver, but soon to follow, also in gold. I state clearly that I for one had no idea how bad the ensuing reaction would eventually become (and made no predictions thereof), but also as a manager I did not need to know. Part of management is discipline and the tools of discipline are parameters and indicators.
So I have been able to function well with the idea that gold is insurance and in this phase a payout from insurance has not been needed. It's a concept everybody is familiar with; you pay your Homeowners' insurance every year and hope that those premiums remain dead money. That is a healthy way to view gold. When the effects of official financial wrongdoing do crop up again, you suddenly place value on that insurance premium. It's not rocket science. These concepts are as old as the hills but they are critical to adhering to healthy behaviors within the gold market.
Promotion of Ideology
Which leads to the unhealthy stuff. Even back when when I was bullish not only on gold's value proposition, but also its price, I used to try to include words about value and long-term reasons for holding gold. That is because even in the first phase of its bull market being a gold bull was akin to being at war (an ideological one). In a war you get killed if you are not 100% buttoned down in your defensive postures.
Defensive posture in this case was the above noted view of the actual metal as insurance, a long-term holding of value, which fluctuates over various market price cycles and investor confidence cycles. Another defensive posture is to tune out wrong-headed ideas long-since proven to be illegitimate, like buying oil and copper and silver and gold and other 'natural resources' as protection against the evils of inflation. Finally, the most defensive posture possible is probably the most difficult to attain; remembering and respecting but not being controlled by your beliefs.
I have watched certain entities not change their tune when it comes to using the usual hooks to pull in readers, followers, subscribers, customers, etc. (i.e. humans). Apparently there are tried and true methods that work on the maximum number of marks, that is, people. These usually involve establishing an easy to understand narrative, promoting it through thick and thin and when things get rough, accenting its 'us against them' and/or 'you are one of the few who really understand' components.
What it actually is though, is b/s. Fear, greed and even religion and political agenda can be used as tools for tending the gold herd. Recently we noted one entity going on about "so much money" it has made in 'resources' (seen the CRB lately?) and how in-the-know investors are going to get rich in the coming Asteroids and Nanotech booms; after the next big run up in resources, of course. This garbage, which I'll not identify (it was posted at Biiwii, readers may recall) here was actually packaged in a mocked up interview/infomercial with a commodity and resources guru of prominence. NFTRH has had several subscribers over the years note to me that they were refugees from this entity.
A more personal instance happened last week. I often selectively reproduce posts at various LinkedIn groups that I feel are relevant to the groups' agendas. A Biiwii 'guest' post about governmental debt expansion was sent to a group formed to talk about Austrian Economics. "What does this have to do with Austrian economics?" responded one disgruntled member. Apparently, to the letter of the law he is expecting an inflationary 'Crack Up Boom' and any talk of a deflationary debt unwind simply will not do. <insert here obligatory joke about 'Crack' use>.
I moved on from the group-thinking group. Like the political war of cartoons that will array in the United States over the next 1.5 years, it seems all too many supposed investors are aligned to their caricatures and speech balloons. And the real pros who work the crowd know this all too well. They also know that gold, with ancient historical, religious and 'good vs. evil' mythologies all rolled up into it, is well suited for the old 'Heart Strings' play.
Friends Like These? Tune Them Out
You don't need friends in this realm. You need your own two feet and you need to stand on them. Your 'friends' are often trying to sell you something, or sell you on something. I am trying to sell you something too. With this simple post I am trying to sell you on deprogramming and understanding all aspects of your investor-self. With NFTRH I am trying to sell you on letting me do the work of deprogramming, managing and macro positioning. But there is only one thing that people really need in the investment world and it is internal confidence born of education and perspective; their own perspective, not confidence bought or consumed from someone else.
Getting back to gold, I would be wary of those telling you how bearish or bullish gold is and realize that gold as a monetary 'asset', just is. It just was when it was rising from 600 to 1900 and it just was when it was dropping from 1900 to 1100. It is the value assignment toward insurance during a time of high investor confidence that changed. Gold did not change.
The best part is that when you have your 'insurance vs. speculation' or 'value vs. asset price' ducks in a row then you can go forth and speculate - in any market, including the gold sector - to 'make some coin' as casino patrons like to say. But the bedrock idea is to understand what is value and what is price speculation. That takes management, not only of assets, but also of one's own psych profile. Only an individual can manage her own psych profile and ideology.
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