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Thursday, December 29, 2011


Dec 29th, 2011

One more time, gold is a commodity.

It is not magic, ever-rising-value metal. It was never going to not drop as a tradeable element.

Someone tell both Ron Paul and Glenn Beck to shut up for a minute and consider just how much damage their fear-mongering has likely caused. Think about it. Using convenient alarmism, they elevated the paranoia and distrust of our "fiat currency" to heights previously only seen in John Birch Society meetings. And people reacted.

How many Americans liquidated other, more stable assets to put it all into gold? How many people bought gold in September of this year and are now being wiped out?

Go to MoneyWeek. Here's what the situation looks like over the last month.

David Frum has his own chart from MoneyWeek (it's interactive and you should go check it out). He is seriously appalled:

"The price of gold dropped $31 an ounce yesterday. Gold has dropped $400 since the summer. Gold still shows gains over one year ago. And of course people who bought gold at the prices that prevailed before 2008 can claim profits of 50% or better on their investment. (NB: The best returns have flowed to large-scale investors who eschewed physical gold in favor of futures. And as always, coins are for suckers.)

Further declines look likely. Gold sales have plunged in India, the world’s largest market for gold jewelry. The rupee has steeply declined against the dollar, raising the cost of gold to Indian customers. Traders are speculating that India’s gold imports could tumble by possibly half.

Gold is a uniquely strange asset, because so many people in the gold market buy gold as a matter of ideology and identity. Cocoa, copper, or cotton trade as commodities. Gold trades as a way to make a statement. That’s simply not a sensible way to invest. A great many Americans are paying a steep price – and may pay a much steeper price yet – for allowing hucksters and ideologues to sway their economic judgment."

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