November was a tough month for gold on any short-term chart. I had to back all the way up the two year chart before any perspective started to materialize. If I didn’t know better looking at the charts, I’d be tempted to think gold prices were leveling off.
Over the last 30 days gold started out near $1,700, ran up almost to $1,800 near the beginning of the month, and have been on a long, steady decline to below $1,690 ever since.
You have to go back to the 2, 5, and 10 year charts to find a pattern quite like this, which was, somewhat ominously, 2008-2009. That was a time gold prices had sharp peaks in both directions overlaid by a general downward trend.
If we are in another 2008-esque downward trend, spurred by investors fleeing to liquidity, then I have some really good news for gold investors because 2009-2010 saw gold prices go from the $700s to the $1,100s and to $1,400 by the start of 2011.
The question we’re all trying to answer is will history repeat itself? I’m not seeing any reason, short of global economic collapse, why gold would not resume a general upward trajectory.
The other question to ask is where else the money would go? Equities markets are the same ripoff they’ve become over the last 30 years, so no help there. Real estate might be firming up in 2012, but there’s no reason to think prices will recover anytime soon, if ever.
Part of the sudden reality check in prices has come from the collective realization that we can’t keep living on credit. We can’t continue to live in debt as individuals, or collectively through government. The whole underlying notion of debt as money is starting to be seen for the fraud it’s always been and people in general are starting to understand the difference between efficiency and sustainability; the most efficient economic models are not always the most sustainable.
The qualities that make gold attractive to investors are still as relevant today as they’ve been at any time in history. The best part of owning gold comes with the bonus that the portion of your wealth you keep in gold knocks Wall Street on the bottom line and lets you laugh at the Federal Reserve.
Try as they might, big banks and brokerage houses can’t find ways to nickel and dime your gold stash and the Fed can print all the money they want and it just makes your gold worth more.