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Fool’s Gold: End Of An Era

Related ETFs: GLD | GDX | SPY

There’s a whole lot of that going on in gold circles: people getting the boot and making way for turnaround specialists to come in and clean up business. The gold miner industry is awash in panic: The bellwether ETF in the space, the Market Vectors Gold Miners fund (GDX | A-54), is down 66.4 percent since gold’s peak in 2011, and down 54.49 percent just in 2013.

That collapse is driven by very real work being done in the gold miner space to deal with the collapsing gold prices. Anglo American, for instance, brought in a new CEO to help make huge cuts, effect write-downs and position the company for a longer-term business.

In some sense, that’s all healthier than bubble economics. But that’s small solace to any investor who’s actually ridden Anglo American, PHYS, GDX or GLD to the ground these past few years.

Of course, the question any rational investor should ask is, What’s next? And that’s where it becomes very difficult to read the news. In most rational sectors of the global economy, analysts are analysts.

You read the reports from agricultural experts or retail-stock experts, and they generally call things as they see them. In the precious metals space, nearly every article you get off any kind of Google search will always be telling you why “Now is the time!”

It’s important to remember that gold—and the entire gold investment economy—is unique. Gold, by itself, is useless and valueless. It has value only because it’s scarce, and then only because enough people believe its scarcity can make it a useful medium of representing value and making transactions. Gold is, essentially, an idea that people assign value to. Lots of folks believe? It goes up. Crisis of faith? It tanks.

Which makes it surprisingly similar to that other highly volatile source of questionable stored-value: Bitcoin.

Maybe that’s where Sprott’s next adventure will take him. I’ll be camped firmly on the sidelines with a bowl of popcorn.

At the time this article was written, the author held no positions in the securities mentioned. Contact Dave Nadig at




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