The Exchange : Why Gold Investors are Pessimistic … or are they?

Why Gold Investors are Pessimistic … or are they?

As a coin and bullion dealer and hard money advocate, I've been accused on more than one occasion of being a pessimist.  In fact, individuals have gone so far as to state that I would like to see a complete meltdown of the financial and monetary markets, which would force us to re-adopt the gold standard.  While I would like nothing more than to see us go back to the gold standard, and the Fed's powers reigned in, I'm in favor and supportive of a strong jobs market and healthy growing economy.  However, much like most gold investors, I consider myself a realist, and when viewing the fundamental and structural weakness in the economy, and the fact that we're experiencing an asset based recovery due to the Fed's intervention, as opposed to a fundamental improvement in our economy, I can't but help think, much like most gold investors, that trouble lies ahead.  So why are gold investors considered pessimistic you ask?  Below are three reasons why I believe that we are labeled as such and some insight as to our true motivation.

Bad News is Good News

Unlike most asset classes and investment opportunities, bad news is oftentimes considered good news for gold and silver investors.  The most recent example was the disappointing jobs data from December.  Most economists and financial experts predicted job growth in excess of 200,000 jobs.  Rather, only 74,000 new jobs were created, which was well below most forecasts.  In fact, this was the worst jobs growth report in nearly three years.  As a result, the dollar weakened and there was speculation that the Fed would continue its loose monetary policies, which was positive for precious metals.  Obviously, gold investors are thrilled when they see their investment rise in value.  Unfortunately, it's typically at the expense of a poor or underperforming economy.  Therefore, the assumption can be made that we're not excited when the economy underperforms but rather are happy to see our investments doing well.


I would be lying if I didn't admit that there's a feeling of vindication associated with making a correct prediction - even if it's simply being correct on a short term forecast.  This is oftentimes where individuals get the wrong impression of gold investors.  As mentioned, above, we're not excited when individuals lose their jobs, that only 74,000 new jobs were created in December or that over 300,000 people dropped out of the workforce.  Rather, we believe that the Fed's expansionary monetary policies, deficit spending, and record level debt and annual deficits are merely a band aid, and that these efforts will only provide short term benefits.  We're already beginning to see the short term benefits subside, and in fact, the Fed has publicly stated that they see the benefits of their bond buying program waning.  While it's possible that there are some individuals that have misplaced motivation, assume, unless you know for certain, that the gold investor you know is more excited about being vindicated rather than being excited about poor economic reports.

Fundamental Change

As mentioned above, nearly everyone in the hard money camp is in favor of major overhauls of our monetary system, which would go a long ways in providing a strong foundation for long term growth, a lower unemployment rate and less volatility in the market.  It appears as though booms and busts are occurring more frequently, and that recoveries, following recessions, have been weaker and unsustainable.  Ron Paul, former Texas Congressman, and a presidential candidate in the 2008 and 2012 elections, has probably done more than any other politician to bring to light the fundamental issues plaguing our economy and how to fix them.  He wasn't taken as a serious candidate in the 2008 elections, but when many of his predictions were realized following the stock market crash of 2008, he began to gain a steady following and has been instrumental in helping to enact change.  While the Federal Reserve still has carte blanche when it comes to the monetary policies of the United States, there's been a push toward increased transparency, including requests for audits, which is a step in the right direction.  The slow, but inevitable signs of change are a factor that motivates many gold coin investors to stay the course. 


In summary, while gold investors may appear to be pessimistic on the surface, that's typically anything but the case.  Rather, we don't view bad news as necessarily good news, but rather, the inevitable consequences of certain economic and monetary policies.  Additionally, because gold investors are heavily criticized for their "fanaticism," there's oftentimes a feeling of vindication that results from making accurate forecasts; even if the forecast is short term in nature.  Lastly, and most importantly, gold investors are typically advocates of change and truly desire for a healthy and more stable economy.  Headway is slowly being made in the way of transparency and the importance of investing in gold, but we still have a ways to go before any major fundamental changes are made.

Tony Davis is the owner of Atlanta Gold and Coin Buyers, a full service Atlanta based coin and bullion dealer specializing in buying, selling and appraising coins and coin collections of all types and sizes.

Written by Tony Davis at 00:00
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