That’s No Bull

Senior precious metals analyst John Nadler has recently and repeatedly said that gold is not in a bull market:

We will repeat that which should be obvious, in case you have doubts about where this writer stands: Gold is NOT in a bull market. The dollar is in a bear market.

Kitco

No word on why he thinks the two are mutually exclusive in this case. Let’s turn to a gold price chart I found at Kitco’s own website (his employer) to make sure that we are looking at the same information that Mr. Nadler has: The above chart is a fact, and it is also the chart of something in a bull market. One of the biggest problems with modern journalism has been that we keep having events interpreted to us instead of simply being told the facts. Despite what we may want to believe, historical data represent facts – not opinions.

To believe that the above chart does not show gold in a bull market, we must try to redefine what a bull market means. Nadler contends that the price history of gold is simply a dollar in a bear market and he tacks on several requirements for a bull market that he insists should be met for a bull market in gold regardless of what has actually happened to its price:

• Demand should outstrip supply
• The stock market must be falling
• High inflation numbers
• Gold increasing in all currencies

This is essentially, not merely an arrogant position, but an insane one. It isn’t our place to construct arbitrary preconditions on assets and tell them when they should increase in price – at best we can try to reflect accurately upon what has happened. Even so, his fourth condition has been satisfied, and gold is now busting records in various currencies.

His belief that demand is not outstripping supply is also flawed. Price is determined by supply and demand. If the price is rising, it is insane to say that supply exceeds demand. If that were so, the supply of gold available at lower prices would have contained gold’s rise. Nadler’s mistake is assuming that gold is a commodity and not a currency. Since gold isn’t used up like oil or steel, examining it as if it is a commodity necessarily leads to false conclusions about supply and demand.

Whether we have high consumer price inflation now is irrelevant to whether the market believes we will have high inflation in the future. All signs are flashing a giant neon YES for the moment, and until that changes, the markets will price various assets accordingly, regardless of what the official government statistics project or report.

The very idea that gold can’t be in a bull market because the stock market is going up betrays so much ignorance that it is nearly unfathomable. For one, when measured in a collapsing currency, stocks and gold always move up together. For another, the stock market itself is far below it’s recent highs. At this point, one begins to wonder why a stock market that has stagnated for 10 long years while the dollar depreciated means that gold can’t be in a bull market because the stock market isn’t falling. Hmm.

Today’s article from Nadler compares people buying gold to people buying stocks in 2007, and he derides the talk radio listening public for being gullible enough to fall to radio advertisements pushing the yellow metal.

It’s very true that gold may move up and down in price, but as long as we are talking about price in federal reserve notes, transferring wealth to tangible assets will remain the only sane move available to most investors. Quite simply, all assets appear cheap when the alternative is holding pieces of paper with numbers printed on them.