Yesterday I sat down with someone who has been very successful in their business and with investing.
We discussed the recent take down in gold and I pointed to the hundreds of tons of paper that was used to smash the paper gold price on Comex.
This person told me that he invested in the gold sector after QE3, but soon took all his funds out. He told me that he felt uneasy about investing in gold, because it was not responding how he expected - like after QE1 and QE2.
I pointed out that was because the gold price was being manipulated, to which he replied along these lines.
"When I invest, I invest to make money. I don't invest to fight the good fight. I don't invest to take on the bad guys. I don't invest to go on some sort of moral crusade and risk becoming a martyr to the market in the process.
Have a look at what has happened to every investor in gold who has insisted that the gold price should be higher, that gold shares in particular should be much higher than they are compared to the gold price.
These investors, many who have kept buying, are now losing a fortune. They persisted in their views, insisted they were right and ignored the voice of the market.
I always listen to the market."
So I now ask, "Is the gold bull over?"
Is it just possible that the manic price rise in gold and parabolic rise in gold equities has been effectively suppressed by manipulation in the paper markets?
The 1968 - 1980 gold bull, where gold rose from US$35 to US$880, did not face the opposition that this bull market has. Volker himself admitted his error was to let the gold price run and not actively suppress it.
Gold does not need to fall back to US$250 like it did from that bull, 20 years later, for this gold bull market to be over. A fall to the US$800 to US$1000 area, with gold staying there, will do it imo.
So is it possible that this decade long gold bull market is over?
If you listen to the market then the answer is "Yes. It is possible." In case folks haven't noticed, have a look at a chart of the US dollar. It is now threatening to enter a bull market.
I'd say at this stage, without much confidence, that there's a 33% chance that this gold bull market is over.
Of course this may just be a very nasty correction in gold as the bullish factors for gold appear to be still in place. It can be argued that current US dollar strength is a reflection of the myriad of problems in Euroland which are not going away plus Japanese QE which should all be bullish for gold - that gold price strength is not solely determined by the USA as gold is an international currency, and that gold can rally at times when the US dollar is also rallying.
Indeed that would be the dream scenario for gold investors here - a weakening Aussie dollar against the US dollar combined with a rising US dollar gold price.
However, I do keep in mind that if this is the beginning of the end for the gold bull market, then by the time it is obvious to everyone that the gold bull market is over, folks' gold equity investments will be worth just what all those once booming uranium producers, emerging uranium producers and uranium juniors are now worth - next to nothing imo.
