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Since I was determined to be strict, I stuck to the month day I’d begun with, and took a first reading at November 22. By that date, gold had risen a mere five bucks from Stansberry’s starting point, to $1,731, a percentage too small to bother with. And by the time transaction costs – notably stiff for precious metals – were taken into the equation, that was no time for trying to take profits.
But just four days later, gold hit its ceiling, jumping 19 bucks. Then it fell. And, it didn’t merely wilt, while the market took a breather. Despite some volatility, a new trend had begun. Was this the bursting of the most recent gold bubble? Hey, you can see it yourself:
I looked, but didn’t find, anything from Porter Stansberry to explain. He’d moved on to fresh fields, I assumed. There was nothing I detected telling his followers to bail, or any commentary on the tricky times ahead. Indeed, on 12 December 2012, an online interview was published in which he said he was hanging on to the metal:
TGR: When do you suppose the gold price will start climbing again?
PS: I don’t have any timetable. I can just tell you that I haven’t sold any of my gold and I won’t until there is a gold-backed, well-financed national currency that offers me a reasonable yield for the risk I take to finance the government.
Later, tracking the month-date I’d picked – the twenty-second – I got the following figures to measure the trend:
| October 22 | 1,726.75 |
| November 22 | 1,731.00 |
| December 21 | 1,651.50 |
| January 22 | 1,690.50 |
| February 22 | 1,575.50 |
| March 22 | 1,606.75 |
| April 22 | 1,424.50 |
That’s a pretty whopping drop, albeit with late special circumstances. My time-frame had captured quite a moment. On Friday April 12 2013, gold abruptly fell 4%, officially taking the market into bear territory, and on the following Monday, it plummeted 9.35%, the sharpest one-day decline since February 1983.
“We’ve traded gold for nearly four decades,” the New York Times quoted Dennis Gartman, an influential gold investor. “And we’ve never … ever… EVER… seen anything like what we’ve witnessed in the past two trading sessions,”
Gold 2013: the big short?
Some pundits sought to explain the collapse with the usual gold yadda yadda that people have gushed for 200 years. Far from entering a hyperinflationary phase (as Stansberry had notoriously trumpeted with a notorious “end of America” scenario of late 2010), there was a real possibility of prices starting to fall. Not good for the gold store-of-wealth scenario. There again, rumours circulated that Cyprus was selling its bullion. That could be a reason, some thought.
But the real explanation was what looked like a series of massive shorts – and by somebody with serious dosh. Even to come up with, say, the 5% needed to accomplish such highly-geared trades, you would need deep pockets – and nerves of steel. On the Friday alone, some 400 tonnes of future gold was dumped. And even the Bank of England only holds 300.
This was the view most assiduously promoted by Ross Norman of bullion brokers Sharps Pixley. “The gold futures markets opened in New York on Friday 12th April to a monumental 3.4 million ounces (100 tonnes) of gold selling of the June futures contract (see below) in what proved to be only an opening shot,” he told investors. “Two hours later the initial selling, rumoured to have been routed through Merrill Lynch’s floor team, by a rather more significant blast when the floor was hit by a further 10 million ounces of selling (300 tonnes) over the following 30 minutes of trading.
“This was clearly not a case of disappointed longs leaving the market,” he argued. “The selling was timed for optimal impact with New York at its most liquid, while key overseas gold markets including London were open and able feel the impact.”
In other words: a campaign had been mounted against the price. The aim was to try to trigger a “cascade” of selling. This would push gold hoarders past their stop-loss points, driving the market price yet lower. Then, on this account, the shorter would eventually take winnings. It was “shock and awe,” Norman said.
As I write, it’s too soon to know if the stunt worked. But Porter Stansberry can’t be criticised, surely? This was all beyond the ken of even the sharpest investment tipster. No reason for cold feet here.
Well, yes, I think he can be criticised. Not for failing to spot the fall, but at least for failing to call the top of the bubble. If he had just kept quiet, on the grounds that he wasn’t sure, then that would be okay, if not his way.
In fact, he persisted, calling a related “buy”, not two weeks before the April tumble. This time, in an Agora bulletin called the Growth Stock Wire, on March 30 2013, he appeared with an article called “A very unusual situation in gold stocks” claiming that the metal’s miners were seriously undervalued.
But, of course, two weeks later their stock prices tanked, just like the shiny stuff they dig from the ground.
Stansberry and silver
So now let’s turn to the other side of his October tip. The full heading of his article was this:
“Why You Must Buy Gold, or Even Better, Silver, Now”
That’s the next stage in my audit of Porter’s prediction. Did the junior metal bring better news?