Gold and Silver – The Worst Investment of the Millennium?

0
319

For at least a decade precious metals evangelists have blasted every media outlet that the end of the world is coming and that gold and silver are one’s only protection from economic ruin. For years they have single-mindedly recommended Gold, Silver and Mining Stocks as the only investment option without ever considering mainstream investments such as equities and bonds. Well, two years since the great precious metals collapse and many of the gold and silver lemmings have been totally wiped out.

Gold

Since it’s high at $1920, gold has fallen by over 35% to below 1200 earlier this year. How’s that for a safe-haven?

Image

Silver

Is silver any better? Nope. In fact, silver has fallen by well over 60% from it’s high of $49 to under $20! no safe-haven there either.

Image

Mining Stocks

The HUI index has also performed abysmally since it’s euphoric highs:

Image

What about other investments?

As this chart shows, other investments such as US equities have outperformed the precious metals significantly over the last few years:

Image

What do the experts say?

So, is the collapse over for gold and silver? The experts don’t seem to think so:

Our forecast, medium term—meaning by 2015—is that gold is going down toward $1,000 an ounce, so from current levels, another 25-30 percent correction could occur.

– Nouriel Roubini, Economist and Gold Expert

Gold hit the channel upper limit at $1,347 where it formed a daily key reversal

– Stephanie Aymes, Analyst at Societe Generale

Conclusion

For years, goldbugs and silverbugs touted their market as a ‘safe-haven’ and a hedge against tail risks. In reality, the tail risk has turned out to be gold, silver and mining stocks themselves. Over the last two years we have seen gold and silver plunge from their highs, decimating portfolios and destroying careers and retirement plans in the process. I wonder if goldbugs and silverbugs will ever apologize to their followers, who have suffered such huge losses in these markets? This tragic event calls for modesty from the gold and silver community, and an admission that equities, not gold, remain the number one asset class for building and preserving wealth over the long term.

1 COMMENT

  1. First!
    See, I would never do that under normal conditions, but this is the kind of comment that this blog deserves.
    Rock on, MDB!

  2. MDB,

    Let me be the first gold investor to “man up” and apologize. I’m sorry. We were wrong and you were right. Any intelligent person can no longer ignore the facts.

    I suppose my question now is what stock or ETF would you recommend to ride this bullish market in equities?

    • AAPL & FB all the way, baby!… you might also consider HLF, GRPN, NFLX or similar… southern european sovereigns are also a safe bet… happy hunting!… BTFT, Bitchez!… 😉

    • > I suppose my question now is what stock or ETF would
      > you recommend to ride this bullish market in equities?

      Walmart would be a great stock for a long-term investment.

      They have successfully managed to remove the mom-and-pop stores from all localities where they have placed a super-store. Now that their competition has been conquered, Walmart can only be a success story.

  3. It’s good to see MDB has taken his humor to his very own blog. Well done MDB. Looking forward to moar of your insightful analysis.

  4. Hey MDB, who accredits your writers? Wait…..you are the only writer. Hey MDB, who “accredits” your peerless trolling?

    C’mon, I said your trolling is peerless….are you going to delete this comment as well?

  5. Time doesn’t play into your thesis? Gold has gone from $260 in March 2001 to $1320 today. That’s roughly 15% compounded annually. What other asset/security has done that? If one was smart enough to sell it at the top in the summer of 2011, they’d have realized an annual compounding of 22%.

    It’s easy to espouse the positives/negatives of a stance when there’s no consideration for timing. Hopefully your readers understand that, Inevitably, it doesn’t matter what you buy/sell but rather when you buy/sell it.

    • I couldn’t agree more with you Sally. The precious metals market is all about supply and demand. You have to know the right time to get in and when to cash out. Period!

    • Anyone who bought PMs or an ETF (GLD) in this decade would be very disappointed. Gold is off its high by over 20% and silver cannot even claim 50% of its high. If the Trend is my Friend, then I must short PMs as the Trend is negative for PM prices.

      Although, there might be some good opportunities waiting for investors willing to take on the huge risk of a mining stock. But a rational investor should stay away from PMs altogether.

      As the economy improves, PM prices should fall further.

  6. Everyone should have known silver was an invitation to get blowtorched just based upon how stupid the silverbugs were. People that classless and idiotic are destined to be bagholders.

    Just think, only a couple years ago, we were hearing insane stuff like how silver would be “$60 by next week” or “$42 by the end of the week” during a massive plunge.

    Shameless silver pumpers created so many bagholder lemmings…they should be embarrassed

    • Trav, If you studied the market and saw the market manipulation, it would tell you that it goes against the laws of supply and demand. The banks have to suppress the dollar to cover their assets. I’ll take gold or silver before the dollar anyday. Even idiots like yourself know which has been valued longer. Read a book. Daaa.

      • A dollar is a unit of currency which can be invested for a profit. PMs simply gather dust and silver tarnishes!

        But coins are fun to play with. The gold bugs and silver freaks call this “stacking”. These guys are often anti-social types who will stack and restack their coins during the evening and over entire weekends.

        As far as the law of supply and demand goes, tons and tons and tons of new PMs are mined every year. Supply is not dwindling!

        Demand seems somewhat limited by the minimal purchasing power of gold bugs and silver freaks. These guys don’t usually have a large income. They cannot even afford to pay their parents any rent to live in the basement.

    • ‘silver liberation army’… LOL! – blythe eats silverbuggers for breakfast, lunch, dinner, & supper, *every day of the week*!!… – keeps it *all* down, too!… every last mouthful… 😉

    • Hi Trav! I figured you would like an update on our good friend TMosley…..

      Last I heard, Johns Hopkins was naming an entire wing of its hospital after him. A few months ago, as silver plunged below $20 and TMosley was falling on his face several times a day, frustrated surgeons at Johns Hopkins decided to attempt a radical new procedure to save Mosley’s face from repeated self-destruction. The New England Journal of Medicine (August 2013) is reporting that a team of plastic and maxillofacial surgeons implanted a tightly coiled spring — much like a woodpecker — in the cartilage of his nose. While Mosley continues to fall on his face in virtually every precious metals discussion, the damage to his face has been greatly reduced.

      TMosley recently commented, “this new coil in my nose has been a god-send! While I’m certain the Comex will default this afternoon and that an industrial panic in the silver market is imminent, it’s finally nice to know that I’ve got this tightly wound coil in my nose in case it doesn’t.”

      Take care!
      Max Fischer
      QuantumMcRib@gmail.com

  7. I was a firm believer in holding physical gold, as something that could not be easily Corzined. But this brilliant article has convinced me that only a Froot-Loop would do something like that. So I hereby announce that I’m selling all of mine. All that the ex-wife didn’t take, that is. On her way to that unfortunate boating accident. Which I had NOTHING to do with. And there’s been no evidence that’s admissible in a court of law during either the police investigation or the meddling by the private detective her family hired. But I’m digressing…

    I have decided to sell my Koalas, etc. for $1,000 an ounce. I want to do it now before the price drops any lower. I hope I can find some greater fool to suck up that deal. I got an e-mail from someone named Gordon Brown last week saying he represented people who could take it off my hands. I don’t know why he’d be writing from a Nigerian country code, though.

    • Bukko, I am so glad to hear that you are recovering from your PM affliction. Try to sell all PMs as fast as you can, before the prices fall much further!

      Gordon Brown is most likely in Nigeria to monitor his many investments. Nigeria seems to be booming. I have received several tips by email about investing there myself.

      That reminds me, I need to get down there and check on my plantations. I can’t wait to walk under all those african palm trees which I purchased shares in!

      BTW, what is Palm Oil used for anyways?

  8. We should listen to the experts on Tv and in the government when they tell us that gold is backed by nothing. It is not a safe investment and should be prohibited. At least the dollar is backed by the Federal Reserve. Gold is stupid.

    • Gold and silver are even worse than “stupid”!

      Gold Bugs and Silver Freaks display symptoms of mental-health problems. Their “faith” in an ancient relic is equivalent to the “faith” of those right-wing religious nuts.

      But then again, gold bugs and silver freaks are usually far-right extremists. You are correct. PMs need to be prohibited or at least the purchase of such should be controlled like with guns.

      I sure hope the NSA and DHS are keeping tabs on these nutcases!

  9. An almost hysterical antagonism toward the paper standard is one issue which unites libertarians of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of keynesian economics — that paper and economic freedom are inseparable, that the paper standard is an instrument of Keynesian economics and that each implies and requires the other.This is the shabby secret of the liberatrians tirades against paper. Deficit spending is simply a scheme for the production of wealth. Paper stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard. Im getting some things mixed up here is my old article:

    http://constitution.org/mon/greenspan_gold.htm

  10. Picking a precise time span where gold and silver went down against a stock market propped by QE and using that for your charts and future prediction of performance isn’t very thorough analysis…
    Weak sauce.

  11. Low debt-to=Equity, free cashflow positive miners like IMG selling for half book value?
    Backwardation in the GOFO showing all the way out to 6 months?
    Buy low sell high?
    MDB…I was leary of PM’s until this article…but your my favorite fade!

    Thanx!!

  12. Well now what do we have here… gold, silver, and the miners taking off just as MDB confirms their demise… lol!

    Looking forward to the public apology to all those you influenced to sell before they lose everything… what is it they say about karma again?

    • Minor recovery in PM price before complete collapse.

      Who has been more wrong, PM bulls (self-interested, mind you) touting “gold to $5000, silver to $250” or educated economists such as Roubini who predict further price collapse to $1000?