If they didn't warn, then don't listen

So every gold commentator has an opinion on gold's drop. My question is if they didn't warn you beforehand about the risk of a big drop, why pay attention to what they have to say about it after the fact? That is my response to Gordon's comment.

I find it particularly amusing that those who purport to have inside information on the physical market or contact with deeply embedded kingpins did not warn their readers that the market setup was weak, that central banks would not be buying aggressively on the dips and in increasing size at $x price. Yet their followers still think they are gurus.

I could say that they either knew and traded against you, or that their contacts are no good, or that their contacts knew but fed them wrong information (ie they are being played) because their contact knows they have a wide audience and wanted to trade against the guru's followers, or that they are just frauds and don't have any contacts and just make up those stories as it sounds a lot sexier than just saying "my opinion is". I think the most likely answer is just that the gold market is an opaque over-the-counter market where participants only have a view of (their) part of the market.

From my part of the market weeks before the crash the Perth Mint was getting a strong bid from bullion banks for our refining output as kilo bars into Asia. I only really watch those premiums as they are for tonnes at a time and we are about 10% of new mine production. So if you asked me I would have said the physical market was looking good.

So the drop was leveraged paper longs head-to-head against paper shorts. Yes the shorts don't have the gold, but obviously the longs don't have the cash either, otherwise they wouldn't have had any problem meeting margin calls and being ready to stand for delivery.

This is a case of the tide receding and finding out who is swimming naked. That is, we now know that when gold was $1900 it was composed of $1300 of strong hands and $600 of speculative weak money. That is the lesson to remember for next time gold has a run - ask yourself how much of the price is strong and how much speculative.

But why listen to me? I didn't warn you beforehand.