SPDR Gold Trust (ETF) (GLD), iShares Silver Trust (ETF) (SLV): Two Holes in the Goldbug Thesis

No catalysts

The second problem for gold bulls is that there aren’t any near-term catalysts that could drive precious metal prices higher.

The Fed is likely to taper its bond buying program, possibly by the end of the year, after a rash of positive economic reports. Gross domestic product grew 2.5% during the first quarter and consumer spending posted a nice 3.2% gain. The economy also generated 165,000 jobs in April bringing the unemployment rate down to 7.5%.

These numbers suggest the end of pedal-to-the-metal monetary policy. At the moment no one is looking for the Fed to increase its stimulus measures.

This creates a pretty dismal picture for the bulls. No new stimulus means no catalyst to justify higher metal prices.

Foolish bottom line

But perhaps the biggest problem with goldbugs is that their investment decisions are driven by ideology rather than facts. To question their thesis is to question their entire worldview. This is not a appropriate mindset for investing.

The article 2 Holes in the Goldbug Thesis originally appeared on Fool.com.

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