Is gold a bubble or a new normal?

Harry S Truman said that he wanted a one-armed economic adviser because then he never have to listen to the adviser say, "But on the other hand..."

And so it seems to be with gold. On the bubble side, Dennis Gartman:

Dennis personally sold a lot of his gold in the course of the last 54 hours, and actually states that he wishes he sold everything. Dennis says that the way this market has traded, the manner in which the public got aligned with it and came into the gold market, the manner in which you had all signs replicating periods in the past when other markets made their tops, the fact that the SPDR Gold ETF (NYSE:GLD), became a more greater capitalized event than was the SPDR S&P 500 ETF (NYSE:SPY) — more value — you get at market tops.

Gartman feels we’re in a period of low growth and low inflation. that is not the right recipe for gold. He thinks the public was sold a very false supposed safe harbor in gold, and this is going to be a painful down move. Quote, “we have a lot further to go.”

On the "new normal" side, Tim Seymour:

Even counting the 2008-9 recession and the more recent downturn, emerging markets (NYSE:EEM) generated annualized performance of 18% a year since 2003.

Compare that to the S&P 500 (NYSE:SPY), which has delivered 5% a year over the same period: not terrible, but not great.

Meanwhile, it turns out that gold (NYSE:GLD) has surged an annualized 23% since 2003, with less volatility.

This is not just a bubble run for gold. It has been a structural shift in the way the world’s markets work and the way global risk is managed.

Yer pays yer nickel and ya takes yer chances. For the record, I am not invested in gold in any way.

Update: Another perspective:

Of particular concern is that the general public probably got into the gold trade during the later innings. “The public owns gold at high prices – and now any rally will be met with sellers,” Gartman says. He also thinks big hedge funds will be damaged by the sharp decline. Hedge funds who say they are long in a position if they hold it longer that 15 minutes stand to lose huge amounts of money in gold and that too could generate liquidation pressure.

I suspect this is true - members of the general public who heeded the incessant advertiements to buy gold now probably have, as a class, gotten into that market too late to avoid taking either small or negative gains when the selloff begins (if indeed a selloff does begin, of course).

People who invested in physical gold rather than gold funds or trusts will be cut up particularly rough because it will be very difficult for them to liquidate quickly. It will be a buyers market and you should expect to be offered no more than two-thirds of the spot price at the time you sell, maybe less.