RSS FeedRSS

I came across a headline in Seeking Alpha declaring “gold and silver are not a safe haven,” and for a moment I thought I might get some insight into the mindset behind gold coin phobia.

August 05, 2011 – I came across a headline in Seeking Alpha declaring “gold and silver are not a safe haven,” and for a moment I thought I might get some insight into the mindset behind gold coin phobia. I should have know better.

“The last time (Q3 2008) the markets headed for a crash, in fact, gold dropped 30% peak to trough,” the author says. Compared to other assets, that drop was puny. “Since then, gold has almost doubled,” the author continues, in seeming self-contradiction. But wait, “in the world of asset bubbles, the bigger the bubble the harder the fall.” Apparently in this author’s mind resuming a decade long trend after a brief setback constitutes the mother of all bubbles.

“No matter how you look at it, there is no safety in a crowded trade,” he says. Very true, and crowded trade is where bubbles really do form. But gold trade is about as crowded as Antarctica, accounting for only a miniscule fraction of total global financial assets.

Hyperinflation? “That story has come and gone and the evidence clearly says no,” he confidently tells us. And what magic bullet has been shot into its heart? Let’s see, there’s The Deal, but only one in five Americans got buffaloed by that nonsense (perhaps the author is one who did). And now, having kicked the can well past elections, our illustrious Congress turned off the lights and headed home.

The politicians are back on the campaign trail, spin doctors in tow, trying to convince their constituents that everything’s under control and not caring one iota about actually turning things around. If our leaders don’t start taking the threat of hyperinflation seriously, they will soon find themselves powerless to prevent it.

The author adds one last mind bending bit of logic in defense of his thesis: Gold cannot be a safe haven because it “has no yield and no principal protection.” QED. If we choose to disregard gold’s stellar capital gains and ignore the fact that the yield on paper assets is running negative adjusted for inflation, then perhaps we can concede his first point. But no principal protection? How many centuries of proven wealth preservation does the author need as evidence to the contrary?

“If you are not selling, you are not listening,” the author says. “If you are not buying gold coins,” I rebut, “then you must be blind as well as deaf.”

Kevin Johnson

Senior Staff Writer – GoldCoin.net

Get Your Complementary Award Winning Guides Below

 Publish Real Money Magazine

 Publish Gold Investment Magazine

 Publish IRA 401K Kit Magazine

 Real Money Magazine

captcha