Felix Salmon

Gold: The Glenn Beck indicator

By Felix Salmon
December 7, 2009

Ken Vogel’s very good article on the rip-off gold merchants sliming their way around the broadcast punditosphere never attempts to guesstimate the total amount of money that’s changing hands here. But it’s clear that the gold bubble is bringing out some most unsavory profiteers, who are signing up right-wing talk show hosts as spokesmen and selling not bullion but coins, which they can mark up to basically whatever they like.

What I’m wondering here is how much all this eschatologolical rhetoric is affecting the actual gold price. Certainly it attracts buyers:

Peter Epstein, president of Merit Financial Services, which advertises on Beck’s show, says gold retailers expect favorable coverage from commentators on whose shows they pay to advertise. “You pay anybody on any network and they say what you pay them to say,” said Epstein. “They’re bought and sold.”

Beck, who through a publicist declined to comment for this story, addressed the Media Matters allegation on his Thursday show, saying “So, I shouldn’t make money?” And he made the point that he touted gold before he became a Goldline endorser, and urges viewers to study and pray before investing in it…

“I could care less what people think of him,” Merit’s Epstein said of Beck. “We advertise on Fox because it makes the phone ring.”

If a large number of people are buying gold coins after listening to the likes of Glenn Beck, you can be sure that even more are buying GLD. And eventually demand for gold coins is itself likely to show up in a higher gold price. But this trend is going to have to run itself out sooner or later: you only load up on gold once, after which your only options are to hold or to sell.

I’m not calling a top to the gold market just because it’s fallen for two days in a row following Friday’s job report. But I’m getting that feeling you get when your cab driver starts talking about buying calls on dot-com stocks, or your house cleaner turns out to have bought three single-family homes in Florida. The likes of Ron Paul have been riding this train for a long time. But now that pretty much every single right-wing pundit has jumped on board, I can’t believe it has much further to go.

(HT: Drum)

One comment so far | RSS Comments RSS

Many of these folks are also complaining about Al Gore’s environmental investments, and love to note that every time he advocates some anti-carbon policy he’s “talking his book”; I think it’s more true of both Gore and these conservative gold bugs that they’ve put their money where their mouths are. Not that one needs cliches to describe this; they have long-standing beliefs that influence both their advocacy and their investments, and that’s not necessarily a bad thing.

As for the feelings of gold vertigo expressed in the last paragraph, I have to concur there. These things do always seem to run farther and longer than I expect them to, though.

GLD is a play on tail risk, to some extent, and physical gold — most reasonably in bullion form, but even to some degree in overpriced forms — is a play on far worse tail risk — if you really think there’s a meaningful probability that our new communist overlords are going to confiscate anything you can’t hide in the woods, durable precious goods that you can hide in the woods become a hedge on that. You can’t eat gold, though; in some ways, this is the same hyper risk aversion that you’ve criticized from two and three years ago, and while it’s prudent to look out for tail risk, it’s also prudent to recognize that you’re simply never going to get rid of all of it. If 1% of the US population is moving to physical gold, then hundreds of people with gold buried in their back yards are going to be killed in car accidents in the next few years.

Posted by dWj | Report as abusive

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/