Gold awareness

I’ve been musing lately on something in last Thursday’s DR:

“Yes, gold is finally in the news. People are catching on. Our Dear Readers have been buying gold since it was at $300. But now, everyone is getting in. Is it time to get out?”

I won’t presume to answer the question.  But I will say that that while gold is indeed in the news, it is only up to a point.

This issue turned up around the same time last week on a message board for TV news professionals that I still troll once in a while even though I’m no longer in TV news, and my professionalism was usually open to question.  A poster opened a thread asking why, with gold approaching the 1980 highs, local news wasn’t covering gold the way it did in 1980.  That is, why is gold mentioned on the broadcast networks and CNBC, but there aren’t stories on local newscasts about people lined up around the block to sell their gold jewelry?

I resisted the temptation to offer up the snarky answer, “Because people aren’t lined up around the block to sell their gold jewelry.”  But therein lies an important truth about “gold awareness” and where we are in the current bull-market cycle in precious metals.

Simply put, gold is nowhere on the radar of Joe Average right now.  And for Joe Investor watching CNBC, it might be on the radar, but only as ground clutter.  Suggest protecting his wealth by buying gold, or goosing his portfolio with some well-chosen mining shares, and he’ll look at you as if you have two heads.

And perhaps that’s understandable.  Gold’s had a terrific run-up in recent years… but in current dollars those 1980 highs translate to nearly $2200 today.

Joe Investor won’t sit up and take notice until at least $1000.  And Joe Average, perhaps $2000.

The day will come.  Joe Average will indeed line up to sell the family’s gold jewelry, and local TV newscasts will indeed do stories about it.  That might well signal the mania stage of the bull market, when it’s time to consider bailing out.  And confirmation will come when Joe Investor watching CNBC starts piling into junior mining shares the way he piled into dot-coms in 1999.

But we’re a long way away.  Plenty of time for patient investors to profit.

The Daily Reckoning