Enjoy Your Retirement, Bob the Jeweler

A few years ago, when gold was trading around $1900 per troy ounce, I found myself in a highly regarded jewelry store near me to pick up an old, nice watch I had them fix (with some gold in it). The nice gentleman behind the counter, we'll call him Bob, began to chat me up.

One thing led to another, and he broached the topic of the market price of gold.

He asked if I had any physical holdings besides the watch, and I played along and told him that I had a little bit. He then noted that gold had been trading around the same price for a long time and that it was probably a top, implying stiff resistance at $2,000. He was professional but also assertive in his idea that gold had topped out, and that I should sell my holdings. 

He slid a business card across the top of the display case to me, which had the name of a reputable coin store I had already frequented. He told me that although he, himself, was on the cusp of retirement if I needed to sell my gold I should contact them for a fair price. 

I walked out of the jewelry store that day thoroughly convinced more than ever that gold would hit my long-term target of $5,000 per troy ounce.

Did Bob the jeweler get a piece of the action from the coin store? It sure seemed like it. Was he related to them by blood or marriage? Also possible. 

Either way, gold seemed nowhere close to a major top at the time. With all due to respect to Bob, I flatly disagreed with him. 

Fast-forward to today and we finally have seen gold exceed $5,000 per troy ounce (currently above $5,100 as I write this). I did sell some precious miners in my trading account over the last few sessions.

However, from a long-term perspective I still do not view this action as a long-term top. I have revised up from gold target to $10,000 per troy ounce in light of the continued maniacal fiscal and monetary policies inside the Beltway--Mind you, it is one thing to be reticent about austerity. But it is quite another to pour gasoline on inflationary pressures, light a cigarette, and laugh as you flick the ashes at the gas. 

Will there be terrifying shakeouts and hard rug-pulls? Absolutely. And we might even see one as soon as this week, given all of the events scheduled (FOMC, earnings, government shutdown deadline, Japan issues, etc.). 

But on a multi-year basis the idea that precious metals and miners are at the peak of a bubble seems a bit too easy of an ending for all of the bad actors who created the myriad of issues the developed economies are now facing.