NEW YORK ( TheStreet) -- Falling Gold (GLD) and Silver (SLV) prices should not come as a shocker, unless maybe you haven't paid attention to real inflation, or the lack thereof. I know gold bugs continuously point their collective finger at the central banks of the world and declare, like Paul Revere riding through the night: "Inflation is coming; inflation is coming!"
Unfortunately for the gold perma-bulls, they haven't figured out that although central banks may be the most influential gold-price influence, central banks are only one of many. Outside of central banks, energy prices impact inflation the most.
Many market watchers argue energy is a bigger influence than the printing presses, and I can buy into that argument. I will touch on energy again, but let's stick to the central banks for a moment.
Gold bugs have a point about the central bankers. The
Federal Reserve and the European Central Bank are inflating their fiat currencies relative to goods and services. The term "relative" is key because if other macroeconomic influences have a greater deflationary impact relative to bankers, the net result is a lower price of gold.
However, simply reviewing the money-supply growth (in an information vacuum) and reaching a conclusion that the price of gold will continue to increase, is purely tunnel vision. There is so much more that makes up the price of gold, and each factor must be given its proper weight. Gold investors have a whopping case of the confirmation-bias flu. I wrote about it in several articles. In Don't Walk, Run Away From Gold, Silver, I warned that metals didn't have a favorable risk-to-reward ratio. I warned that gold buyers were ignoring the downside warning signs while giving too much weight to bullish indications. More recently, I wrote about miners in How Far Down Can the Miners Go? and my timing was obviously perfect. The article was published shortly before the open of one of the strongest moves higher by Allied Nevada Gold (ANV - Get Report) in a long time. Allied was trading lower before metals took their momentous dive, and I considered Allied Nevada Gold to be a value buy there.