Did Your Mother Write An Article On Gold?

Five years after their 2011 highs, the prices of metals stocks, as well as the metals themselves, dropped to levels many never expected back in 2011.  And, as the market dropped deeper and deeper into the abyss, most market participants lost interest in the complex.

Week after week, those that remained staunchly bullish continued to call the bottom at every drop.  And, as those that followed this market know quite well, it was an exercise in futility.  But, it did bring to light the true lack of understanding analysts have about what drives the price of the shiny metals and the stocks of those that mine the same.

For years, analyst after analyst called bottom after bottom, and all we came away with was “another one bites the dust.”  (For those that do not trade the ETF’s, you will not likely understand the pun).  As analysts “dusted” themselves off, and continually declared “whoops,” many simply tailored back how much they wrote about the subject, and some even stopped altogether.  I mean, it is hard to write an analysis that proves to be wrong week after week for so many years.  So, one cannot blame them.  However, the result was that many who used to write about the metals have not been heard from for quite some time.

Yet, once we struck the bottom, another phenomenon emerged.  A whole new batch of writers and analysts have risen from the “dust,”(I can hear the groans) and we seem to have, again, developed a glut of writers and analysts in the metals complex as its strong rally has garnered quite a lot of attention.  It even made me call my mother and ask her if she has an intention on writing about the gold market.  I mean, everyone else now seems to be doing it. 

In fact, I read several comments to various articles which asked “who do we listen to with so many now writing about gold?”

You may be asking why I am writing about this current surge in the market in matters outside of metals pricing.  Well, it seems that the new crop of writers and analysts have taken the baton passed from those that bit the dust, and have resurrected the exact same “reasons” as to why the metals will rally.   Yes, they have resurrected the old and wrong ideas about China, India, Russia, interest rates, quantitative easing, safe haven, etc. causing gold to rally.  They have truly resurrected the same “analysis” and ideas which proved useless during the prior metals ice age.

While they may be new to the game, are you?

The question in my mind is how short are the memories of investors?  Will they forget their pain, and be willing to accept reasons which proved useless in the past? 

My expectation is that many will soon forget the pain of the past 5 years.  Many will be willing to place their blinders back over their eyes.  Many will again believe that these issues really matter as it relates to the direction of the metals.  But, there is a reason most lose money in the markets.  And, the lack of intellectual honesty, along with adherence to an erroneous belief system, blinds investors as to the true drivers of the market. 

Ben Franklin noted that “pain instructs.”  The question you have to ask yourself is if you learned from your pain, or, when you approach the fork in the road, will you allow yourself to be led down the painful path once more?