Friday, November 19, 2010

The Gold Hater Admits: "I Was 100% Wrong on Gold"

As we all know, it takes a big man to admit a big mistake. But it really takes a first class journalist seeking truth and getting it out to his readers to blare a bold headline declaring a mistake. Joe "The Gold Hater" Weisenthal has done just that. Here's his headline:
Why I Was 100% Wrong On Gold

He continues:
"The gold hater."

That's what Robert Wenzel of EconomicPolicyJournal calls me, and a lot of commenters here feel the same way because over time I've voiced skepticism about the role of gold in a modern monetary system, and I don't have a blood-curdling hatred for the Fed.

Of course, the recent slide notwithstanding, it's been a steady march higher for the yellow metal, and full-on gold bulls have been rewarded handsomely (Disclosure: I own some of the GLD ETF).

And to be fair, the gold bulls have had an excellent line of logic on their side: As the world's biggest economies get mired in deflation, the pressure increases on central banks to expand the money supply, with *spit* fiat currency in the world, the appeal of a 5000-year old form of "hard" money only grows.

Add in huge demand from the developing world, diminished supplies, low carrying costs, and voila, gold should go up. And it has!

So where did I go wrong? After all, all those pro-gold arguments make a fair amount of sense.

The problem is, I misunderstood the real nature of the real way the precious metal is trading. It's a high-beta stock.
But Joe, you can't rest with just saying gold is acting like a high beta stock. You have to explain why. And for that you have to go back to the Fed's money printing.

You can read the rest of Joe's comment here.


  1. Still 100% wrong. Gold is money. Try again, Gold Hater.

  2. I know the comparison is phrased in the form, "trading *like* a high beta stock", but this looks a bit foolish when you look at the actual betas of GLD and SLV. If SLV were in the S&P 500, it would be in the lowest 5% at 0.39. Gold? The absolute lowest at 0.06.