Information and commentary from Burton S. Blumert [send him mail], dealer in bullion and rare coins since 1959, and publisher of LewRockwell.com.
a glittering rally, the gold market sputtered this week
and took an ugly turn.
minute I buy something, the price always goes down," a
new gold buyer complained.
less than 24 months the price of an ounce of gold went
from $253 to $380, an amazing increase of about 50%.
In the last few trading days, the price fell sharply
to $353 — a drop of 8%.
of the yellow metal’s new fans and some old ones as well
were stunned. Everything pointed to "onward and
upward" for the gold price. The increases were so
plausible: the weakness of the US Dollar, the collapsing
equity markets all over the world and the sickening plunge
could the price of gold come down so sharply, so quickly?
North tried to explain people’s reaction to market disappointments
with what he called, "The Confirmation Blues." It
goes something like this:
order to purchase their first ounce of gold, the new
customer has to overcome a lifetime of convention. This
requires a fresh view of history; adopting new gurus,
a revamping of their family’s attitude toward savings.
And, the recognition that failed government policy is
usually the root of many of the problems.
the new customer purchases that ounce of gold he is voting, "No." No,
to stocks and bonds. No, to paper money, No, to just
an element of courage here and the new buyer NEEDS the
market to confirm that he made the right decision. If
the market goes up, all doubts disappear. The sharper
the increase, the greater the confirmation.
it doesn’t always work out that way. Instead of going
up and confirming, the price drops, leading to "The
Confirmation Blues." It’s not just losing dollars,
it’s an attack on self-worth.
could suffer the Confirmation Blues in any investment
area, but because gold is so counter cultural, so "out
of the main stream," suffering the Gold Confirmation
Blues is the most virulent form of the virus.
is no easy antidote to the Blues. If the market is slow
to recover, eventually the pain dulls. "If you hang
by the neck long enough you get used to it," to
quote Southern wisdom. Better yet, when the price goes
up about 5% over cost, immunity builds. Bouts with the
Blues became less frequent and painful.
the meanwhile, I respectfully offer some band-aids to
help you deal with the Blues. (I generally charge $4
an hour for this counseling, but, I waive the hourly
fee for LRC readers.)
an aside, a customer I had known for years asked if I
would appraise a box of foreign coins and at what cost.
My response was the little joke about $4 an hour. To
which he responded, "It won’t take an hour." I
told him not to worry, that I would pro-rate.
guess he was telling me the value of my time.
watch the price every minute.
in mind that the King doesn’t like gold, never has,
never will. Remember that the King is a powerful
enemy to the gold market and lower gold prices can
often be placed at his door. (See my
article on this topic.)
the US gold is traded at the Comex, a futures market.
This means that all trades are heavily leveraged.
It doesn’t matter what the commodity, technical factors
like "open interest" and "short squeezes" become
key elements in price changes. When trading is leveraged,
the buyer of 100 ounces of gold, for example, puts
up a fraction of the total value. This leads to speculation
and exaggerated price moves both up and down.
panic. Well, panic if you must, but don’t sell anything
while you’re panicked.
in mind that you have bought "insurance" with
your gold. In a way, if gold is a fever thermometer
telling us how sick we are, we don’t need $1000 an
ounce gold. This kind of thinking leads to sound
all of the above fails and the gold price really worries
you, call me and I will hold your hand. Unless I’m more
worried than you. Then you can hold my hand.
Burton S. Blumert
[send him mail]
The Camino Company
800-982-7070 800-348-8001 650-348-3000
851 Burlway, Suite 202
Burlingame, California 94010
Hours: 8:30am — 4:30pm, California time
However, Burt answers his emails in the middle of the night.
We do our best to make sure that the information on this page is correct and up-to-date, but since we depend on others to supply it, we cannot guarantee it against error.