Why The Gold Price Is Trendless - August 25
The answer lies is in opposing forces at work in the markets and economy. There are two very important drivers which we discuss in this article: real interest rates and the inflation/deflation tug of war.
In my opinion the US gold is largely gone and probably the gold supposedly stored at the NY Fed for other countries is also mostly gone. Sadly, it matters to very few people, and the world will continue to print many more paper and digital dollars, euros, pounds, and yen. Long live the value of paper, or so we should hope, since the inevitable reckoning and proper valuation of all paper assets, when it occurs, will be ugly, distressing, and dangerous.
Gold did NOT blow-off into a bubble high in 2011, all the drivers for higher gold prices are still valid, international demand is strong, supply will be reduced when the western central banks run out of gold or terminate “leasing” into the market, and US, EU and Japanese government expenses, “money printing” and bond monetization are out of control and accelerating.
On the myth that it is not important how much is printed, Jim Rickards says that the Fed’s safety net of printing has holes in it. If the money printing could go on indefinitely then you would be right and I would agree with you but it cannot go on indefinitely. The Fed could legally print more than the $4 trillion they’ve already created — $8 trillion, $12 trillion, $16 trillion. Some people say that they can do that — legally they can but they will destroy confidence at some point.
We need to see more in the way of all round strength in this sector before we can implement an aggressive acquisitions strategy and so we have the lion’s share of our portfolio in cash. However, allocating a small amount of your investment funds to the acquisition of a few good quality gold and silver stocks in order to have a one foot in the precious metals camp might not be a bad idea, but go very gently as these are dangerous times for gold bugs.
In the latest Investor’s Digest of Canada, Johny Embry, strategist at Sprott Asset Management, praises one of the latest precious metals book. Obviously, the book he refers to is “The Gold Cartel; Government Intervention in Gold, the Mega-Bubble in Paper and What this Means for your Future” written by Dimitri Speck.
Until last year destroyed gold’s multi-year bull reign, the expansion of the U.S. balance sheet and the price of gold over the past decade moved in near lockstep. From 1999 through 2012, the correlation coefficient of the rising price of gold to the Fed’s climbing assets was 0.95. Even with the tapering of the bond purchases that began in late 2013, the Fed’s balance sheet remains on an upward trajectory and much higher than the price of gold. This suggests we should see much higher prices.
Fire and Ice have little impact upon gold and silver. Gold and silver were money long before the unholy union of fractional reserve banking and government unleashed Fire and Ice upon our world through inflating paper currencies and deflating debt. It is time to protect our financial future with gold and silver – Fire and Ice resistant assets.
Ponzi-financing is the final stage in the bankers’ 300-year old ponzi scheme. An extreme deflationary collapse is about to take away all what credit created and the take-away will not be easy for those attached to the world that is passing away. The global economic collapse along with increasingly severe earth changes, e.g. record heat, record cold, earthquakes, drought, floods, etc., are the trigger events for a paradigm shift of cosmic proportions. The rebalancing of universal polarities is underway. A better world is coming.
Interlocking complicity produces a degree of stability as it helps maintain the status quo, which is very important to the powers-that-be. Interlocking complicity ensures that accountability, oversight, and ethical practices are low priorities, while payoffs and no-bid contracts will maintain their important role in government operations. Interlocking complicity ensures that little change will occur until it is forced upon us.
The ZIRP and QE are causing the retirement funds for many governments and corporations to be more underfunded each year. If your retirement comes from a government pension, it is less secure each year. It can’t remain underfunded forever. Corporate pension systems invest similarly. If your retirement comes from a corporate pension, it is less secure each year.
Apart from the fact that Mr. Faber did expect a formal confirmation of tapering, he said he was not surprised because “we are in QE unlimited.” He points out that the Fed is run by academics who never worked a single day of their life in a business. They don’t understand that if you print money, it benefits basically a handful of people maybe 3% or 5% of the population.
The focus on this imminent FOMC meeting is so hyper-intense that its impact should be considerable no matter what the Fed decides. The QE3 taper (or lack thereof), its size, and what the FOMC implies for future tapering will almost certainly spark sharp price reactions in the bond markets, currency markets, stock markets, and precious metals. All have moved violently this year on mere QE3-taper anticipation.
Marc Faber explains in this interview the consequences of tapering and the potential motives of the US Fed. First, however, he expresses his concerns about the stock market. He compares the situation in Asia with the one in the US. The Asian markets were up some 20% between the beginning of the year and May but came down sharply since. On the other hand, the S&P500 reached its peak on August 2nd. Meantime many emerging markets are down 50% since their 2009 highs. Where would asset allocators put their money in: the S&P (which is in the sky) or the emerging markets (which are in the dumps)? If a decision is made […]
I think the money trading by central banks is the problem and the expected debt growth, credit growth by governments and also on the household sector level and the unfunded liability. So, essentially, one of the solutions to the problem. When you look at gold, well, gold is very safe. It often has a high return in the long run, per se based provided and this is the proviso, the governments don’t take it away.