It’s 1929 for Goldbugs

The Wall Street Journal documents some very dire facts about the utter capitulation and panic among gold “investors” we’re witnessing.

The last time gold hit a record, after controlling for inflation, was 1980. It has never been back in inflation-adjusted terms and, at Friday’s close, was 57% below its 1980 peak. The Dow Jones Industrial Average, also adjusted for inflation, last hit a record on May 19. At Friday’s close it was 3.7% off that level.

Gold-mining companies have suffered more. The NYSE Arca Gold Bugs Index, which contains big gold producers, finished Friday down 82% from its 2011 high, near a 13-year low.

A 35-year bear market in real terms and a 1929-esque 80% crash for the sector. And to think – gold was supposed to be the thing that you were buying to protect your portfolio! With friends like this, who needs enemies.

It’s quite a turn of events from four years ago, when the mania for precious metals was nearing its peak. Back then, the New Gold Rush was on and the commentary you’d hear and read mostly revolved around how much more you could get of the stuff and what the best way to “play it” was. Commentary like this was everywhere and it was hard to ignore it.

Fast-forward a few years and it’s the exact opposite.

Now you can’t find anyone who wants to say anything positive about their gold exposure. Except the true believers or the product salesmen whose job it is to “remain constructive.”

I’m reminded of the Big Head Todd and the Monsters’ song lyrics, “Rise and fall, turn the wheel ’cause all life is – is really just a circle.” 

Turns out the “safe asset” was every bit as prone to the greed n’ fear cycle as the stock market. Especially after it became the plaything of regular stock market investors.

It doesn’t matter what you own, you’re not special and you’re never exempt from the circle.