“I don’t care if you are Einstein…..It’s impossible to forecast for a week from now and a year from now.” ~ Peter Munk

“Nobody really understands gold prices…..And I don’t pretend to really understand them either.” ~ Alan Greenspan

“I don’t think anybody has a very good model of what makes gold prices go up or down,” ~ Janet Yellen

“It’s tough because fundamentals don’t rule the market,” ~ Jeff Sica (President – Sica Wealth Management)

There is a common theme to all of these quotes, most market observers believe the gold market is inherently irrational. Well I have news for them: They’re right!

The gold market is driven by the most important fundamentals of all, supply & demand. Supply & demand of investors (human beings) who are always motivated by two emotions: Fear and greed. Fear and greed are not necessarily ‘rational’ emotions, however, they are the two most important ‘fundamentals’ of all financial markets. The problem is that just as Fed Chair Janet Yellen discerned, there isn’t an effective way to model these fundamental human emotions.

And yes, Peter Munk is right, Einstein couldn’t predict gold prices just as Sir Isaac Newton failed miserably as a speculator during the South Sea Bubble.

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