The gold market of 2011-2013: How to survive the gold bug misery years

You might as well call 2011 to 2013 the misery years for gold investors.

Between September 2011’s gold price high of over $1,900/ounce, to today’s spot gold price of $1,310/ounce, the yellow metal has fallen over 30%. Not only has the price fallen, but the last two years have seen the market lose its clear bullish trend in a sequence of range-trading and chops down. This has been quite a different time to buy gold than the preceding years.

Even though the gold investment market had got too hot and speculative in the run up to the summer of 2011, with 40% price rises in a few months, the experience since then has been extremely challenging for gold bugs.

Sentiment in the market has reached apocalyptic lows and all the while gold bugs have been victim to accusations of falling in love with their investment positions, flat-earth mentalities and generally holding a useless asset whose day is done.

Experiencing some doubt about your worldview and appreciation of gold during such a correction is only natural. It will have been an even more doubt fuelled existence for those who bought gold in the heady summer of 2011 and are sitting on unrealized losses.

This is the most pressure on gold investors’ positions and mentalities in over a decade.

It’s been a tough, emotionally scarring and counter-intuitive ride.

But how can gold bugs deal with this nightmare?

Re-thinking your gold investment position

During times like these your investment thesis is challenged more than ever.

But, so it should be.

Falling in love with an investment position is an expensive error to make and investors have to appreciate that every asset class has its time in the sun. Bull markets and bear markets ebb and flow in mysterious rhythms that we’ll likely never fully understand.

We also have to remind ourselves that retail investors all too often exhibit tendencies of selling winners too early and holding onto losers too long, in the hope/conviction that they’ll come good eventually.

So us gold bugs have been swallowing some pride, moderating our swagger after 11 years of gold price rises, quieting our taunting of gold bears and pausing for some deep reflection.

Most gold bugs’ heads will have been spinning with questions such as the below:

Is the gold bull market truly over?

Is the case for gold busted now?

Have central bankers solved the GFC with their turbo-charged printing presses?

Are deficits and debt loads shrinking?

Is the demand to buy gold, real physical gold, diminishing?

Was our logic and rationing simply flawed?

You’ve probably had your own questions too. Either way, the burden of proof has shifted to us gold bugs to justify our positions and any on-going gold buying.

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