Sorry for the Frustration…Not Sorry for What I’ve Said

“… gold will be a bit late to the party” …. All the time that I have been following you (2 years) and going to the Metals Investor Forum, gold has been about to rocket off into the cosmos. Then last September gold has gone sideways; and now “…gold will be a bit late to the party”.

Not happy. Please explain.
Reader NM

In the last 2.5 years gold has done this:

Gold miners as a whole have done this, using the GDX as a proxy:

There really is no good proxy for junior gold explorers. The TSX Venture Composite Index used to be a reasonable representation but now, with virtual currencies and pot stocks and other tech items, it really isn’t any more. So I can’t show what juniors have done. I would say they’ve followed a similar pattern, albeit with smaller gains (explorers don’t enjoy the same leverage to a rising metal price as miners enjoy because they don’t actually produce, or often even have in the ground, any gold) and a lot more volatility stemming from results.

So my first response is that gold has done darn well.

My second response is that I do not ever see gold going like a rocket into the cosmos, and as such I certainly don’t say so. Others who take the stage at the Metals Investor Forum (MIF) perhaps do. I am not a gold bug. I don’t believe fiat currencies are going to explode; I don’t think all the mega money printing the central banks around the world are going will send gold to the moon. I don’t even own any physical, aside from a few pieces of jewelry.

I think history is being made as governments and central banks abandon long-held ideas (like that debts should ever be repaid) in favour of Modern Monetary Theory. And I don’t know how it will all play out. No one 3 does. And because of that, I think gold – a long standing safe haven of value – will play an important role in the coming years.

I try to convey the twists and turns in that process in my editorials. I try to caution when I see near term risk. I try to encourage when I see opportunity. I act on those forecasts myself (and my portfolio has multiplied threefold since I started The Maven Letter in 2015, for what it’s worth).

Don’t get me wrong: I share your frustration. I started a business based on the idea that metals would turn from bear to bull – and that was six years ago! As the charts above show, the premise has been correct, even if the scale of success has left all of us wanting more.

I want the gold market to take off tomorrow and not turn back. But I am a realist. Even well-established bull markets don’t simply go straight up. And gold is a complicated beast, its performance impacted by growth and inflation and confidence and the all-important bond market. So I watch those things and try to understand how they might influence gold in the near and medium term.

Last fall I swallowed my pride and sold a set of stocks I had entered in August because I realized that I’d let gold’s rapid rise from June to August get me overexcited. In that excitement, I let down my guard, letting myself neglect that even fully established gold bull markets take a step back for every two or three steps forward, whether because of macroeconomic shifts or straight seasonality. When gold started coming off its peak, I remembered. I sold at a loss (about 30% on average, if memory serves) and commented that I should have kept a more level head.

Since then, the gold market has been aggravating. Believe me, I know – I focus on it every day. But I still believe the fundamentals are in place for it to work well in the medium term. And because I hold that outlook, I have to try to predict the near term as well, because it’s whether we are at an interim peak or valley that helps determine when to move on opportunities.

It would be a heck of a lot easier to just stick with my medium-term confidence and say, always, that gold is about to go. But that would not be true or helpful.

So. I’m sorry for getting overexcited last August. I very much understand the frustration in having to wait, more, for the gangbuster gold bull market that we all want. But I am not sorry for conveying how and why my near-term outlook shifts, within a bullish medium-term perspective.

And finally: I know that gains got last year feel pretty distant. But they happened. We did well.

And we will again.