I love James Bond flicks, preferably from the Sean Connery era. “Goldfinger” is one of my favorites. I am often reminded by the classic scene in which a captive James Bond is seconds away from being charred by a laser.
James Bond: “Do you expect me to talk?”
Goldfinger: “No, Mr. Bond — I expect you to die!”
Quintessential 007: Ridiculous stunts and jams, sports cars, beautiful women and a dastardly, almost clownish villain — in this case, one whose plan was to poison the U.S. gold supply at Fort Knox to create global financial chaos. His endgame? Simply to drive up the value of his own gold holdings.
Frankly, it sounds like walking around the block to get across the street. But hey, it’s a James Bond movie.
Since the financial crisis of 2008, the global villain that seemed destined to wreak havoc wasn’t a fat guy who liked to cheat at golf. The perceived villain was hard-core, runaway, Weimar/Zimbabwe-style global hyperinflationcaused by central bank quantitative easing programs.
However, that scary train hasn’t arrived at the station yet in the U.S. based on the continued tepid economic and employment growth. There are modest signs of recovery. The country is doing better than it was four years ago, but things aren’t exactly galloping.
Back in February, I gave a bear case for gold. Since then, gold has been beaten like the proverbial rented mule.
Shares of the SPDR Gold Trust (ETF) (NYSE:GLD) have plunged more than 20% and are off nearly 30% from their 52-week high. A buying opportunity? Hardly. I’m sticking with my bearish stance.
In fact, the price of gold will probably fall further before it goes back up.
The End Of The World Has Been Postponed
When it comes to investing, fear is often a primary driver. Most individual gold investors are driven by fear. Most institutional gold investors use it purely as exposure to an asset class. But the man on the street buying shares of GLD or South African Krugerrands is frightened of something: runaway inflation,currency devaluation, government overreach and societal collapse. It’s always good to think about survival, but it’s a terrible investing theme.
Domestically, things are improving. The unemployment rate is shrinking slowly. It currently sits at 7.6%, down from 10% at the deepest part of the crisis recession. Is it great? No. But it’s a considerable improvement. One positive consequence: The slower that businesses are to hire new workers, the slower the money will flow. Inflation will remain tame.