Gold investors can make the long term case for the yellow metal as loud and often as they want, but the market price is the final arbiter investing success. By that objective measure the barbaric metal has had a tough run over the last 18 months.
Since peaking near $1,900 in early September 2011, gold has fallen more than 20%. Over the same period the S&P 500 is up more than 40%. Even for patient investors, that type of spread in performance is cause for concern if not outright panic.
Peter Schiff, outspoken author of The Real Crash and head of Euro Pacific Capital, says the euphoria has been well and truly beaten out of gold. "I've never seen such negative sentiment since I've been buying it," he says in the attached video. It's that negativity that Schiff thinks will provide a wall of worry for gold prices to climb in the coming months.
The move from gold to stocks is, in Schiff's words, based on a false narrative. "People think the U.S. economy is recovering." It's an illusion based on quantitative easing and inflation. When reality hits, as Schiff and other hawks think it must, stocks will crumble and the real value of gold will be realized.
"The fundamentals have never been better," Schiff concludes. He's absolutely right in terms of the money-printing happening at Central Banks around the world. As the BOJ's recent actions demonstrate the pace of currency debasement is accelerating if anything. That's the bullish case for gold and it's a strong one.
The gold bears would counter that the environment for gold can't possibly get better yet the price per ounce is stuck in a holding pattern, at best. What once was a hedge is now more correlated with equities than central bank activity. At some point the money printing will end. If the bottom hasn't fallen out of the global paper money system. If and when that happens the case for storing physical gold will be weakened considerably.
Those are the two sides of the bull versus bear gold debate. Which side are you on? Let us know in the comment section below or send me a Tweet @Jeffmacke