The call that killed Nick Goodwin, gold guru

One time gold guru Nick Goodwin - his reputation came to a sticky end in late 2005 when he called a bullion bust that never happened

December 1, 2005

For two decades I’ve had the pleasure of working with leading technical analysts and gold commentators Nick Goodwin (pictured left) and Issy Bacher. Both have retained their reputations because of consistency – being right more often than wrong.

In all those years, I cannot recall a single period when their views were as diametrically opposed as they are right now. The gents are today on opposite limbs of the golden tree. Depending on what happens next, one’s reputation will be further enhanced; the other’s will be in tatters.

Judging by his comments on my radio show last night, Goodwin appears to have acquired fur, nails and a sore head. He personifies the pessimists, claiming the recent surge in bullion and gold share prices is the final flurry before the bear trend take hold.

Goodwin says investors who have been lured into gold shares should grab whatever they can get for the stocks and, like him, consider hibernating. By any analysis, he reckons, gold shares are hugely overvalued.

He believes the recent run in the JSE Gold Index is a mirror of August 2003 when it moved from 2000 to 2800: “I said that it was a recovery in a bear phase, and I was right. This is probably the last recovery in a bear phase. The shares are going to turn down and go lower.”

Adds Goodwin: “I know I’m the only bear in town, but I’ve been around for 30 years and I haven’t fallen in love with gold. You’ve got to be very, very careful about falling in love with gold, because gold is a prostitute, and it will not fall in love with you.”

You can’t nail your colours more comprehensively than that. Except, of course, if you’re Issy Bacher who earlier this week predicted the current pullback from $500 an ounce will be followed by an explosion which will see share prices double or even treble.

Interestingly, the fundamentals analysts – those who base their forecasts on demand and supply rather than chart movements – appear to be supporting Bacher’s standpoint.

Also on my radio show last night, Paul Walker of GFMS argued that at $500 an ounce “people are voting with their feet……They’re moving into a metal that they believe gives them a degree of economic security that other asset classes don’t.”

Walker’s team of researchers rely heavily on seeing for themselves what’s happening at the coal face: “We’ve travelled to, at last count, about 45 countries in the last 18 months. If you want to know what’s going on in these markets, you have to be out there, and you have to speak to the people who are doing the business.”

In a gentle swipe at Goodwin, he added: ” A desk-based analyst, be it in Johannesburg, London or New York, simply cannot know what’s going on. For all the changes in the gold market over the last 10 or 15 years, it’s still a relatively opaque market.”

Nick Goodwin is used to being labeled an oddball but more often than not in the past, he was the one smiling (and richer) when the final numbers were tallied. One concern for his followers, though, is that Goodwin badly missed the recent surge in gold share prices.

In July, Goodwin called a drop in the JSE Gold Index from 1770 down to between 1100 and 1300. Instead of losing that 25% or so, share prices went the other way, rising on average by 33% in four months. Any trader who followed the guru won’t have been impressed.

For the moment, neither Goodwin nor Bacher will be overly concerned. The gold price is hovering around $493, a level both would be comfortable with – Goodwin, because it is lower than the recent peak; Bacher because he did predict a pullback before the promised explosion.

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