2001 – A Gold Odyssey

by Michael J. Kosares

“Adjusted for the 1980 inflation measure the gold price is approaching its bear market low of 2001. In fact, gold is now below the 1975 price when it became legal to own it again! . . . . . . . .Don’t worry about the current rangebound price. Buying now represents tremendous value and tremendous protection against the next economic crisis.” – Jeff Clark/Casey Research

 2001 – A Gold Odyssey

A healthy skepticism.
Insight.
Belief.
Courage.

Those were the four characteristics almost all gold investors had in common in 2001.  I can tell you that from personal experience as we helped a good many become gold owners in those times and listened carefully to what they had to say.  Gold was stuck under $300 per ounce.  Anti-gold rhetoric was all the rage in the mainstream financial media. The general public was high on stocks and apathetic about gold ownership.  Stocks would rise forever, they thought, and gold would never rise again.  The prevailing psychology in those years, though, was fertile ground for the contrarians and true-believers who took advantage of it by accumulating gold at what turned out to be bargain basement prices – many in large quantities.

They understood that the economy and financial markets were not all they were cracked up to be. (A healthy skepticism)  They understood the inviolable law that markets cycle. (Insight) They understood gold’s role in the long-term portfolio. (Belief) They acted on that belief despite much opposition and criticism. (Courage)

Years later, when the financial markets reversed and finally went into the tank, none in this group were heard to mumble excuses, like “We didn’t see it coming” or complained that “they were not warned.” They saw it coming.  They acted.  When it was all over, few acknowledged this group’s vision.  In turn, it stayed quiet, kept its own counsel.  A good many invested enough to preserve their wealth while some some invested enough to, in fact, become very wealthy – even though their intentions for the most part were merely to preserve what they already had.

It seems we have come back to the place where we began. There are really only two kinds of people in the world when it comes to facing the potential for economic calamity, and I think most of us are aware of these psychological opposites.  There are those who believe that the authorities are in full control of the situation and that all will end well, and then there are those, the more cautious among us, who hedge the opposite outcome. The first group will always hold the second with disdain, and the second will always see the first as lacking in common sense.

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Benjamin Franklin once said that ‘Experience keeps a dear school, but fools will learn in no other, and scarce in that. . .’ A wise man, Mr. Franklin. . . .Kipling penned his own warning along these lines:  “[T]he Dog returns to his Vomit and the Sow returns to her Mire, [a]nd the burnt Fool’s bandaged finger goes wabbling back to the Fire.”*

Speaking of “the Fire”, let me conclude with an Ed Stein cartoon published here at USAGOLD just after the 2008 debacle. If nothing else, it serves as a gentle reminder.  Queen Elizabeth at the time had asked a group of economists at the London School of Economics “Why did nobody see it coming?”  As mentioned earlier, some did see it coming.

* See The Gods of the Copybook Headings, Rudyard Kipling, Kipling Society, UK introduced to me by Chris Powell what seems too many years ago. (And also posted in full here with an interesting interpretation.)

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A little USAGOLD history. . . . Pictured are News & Views hard copies from 1999 just before gold began its secular bull market. News & Views was Review & Outlook’s popular predecessor at a time when gold-based publications were few and far between. The “Big Breakout” headlined in the November, 1999 issue refers to a price jump from $260 to $330 per ounce.  Your editor sees a good many similarities between that period and now.