Leif Peterson

Gold ETFs: What Went Wrong With Conventional Wisdom?

It's the gold carry trade, which keeps the price of gold down.

Here, multiple tonnes of gold are loaned daily by central banks which artificially show up as supply via bullion banks via the London bullion market -- while on the same day other central banks have paperwork showing that they own the gold that's listed for sale (simultaneously). This is not transparent - and IMF is supposed to be going public the end of the year. Getting this trickery out in the public is part of the $2000/oz that goldbugs are hedging on.

All Eyes on the U.S. Dollar

There is an incredible amount of growing yet unobserved unemployment. The huge losses in equity over the last month has resulted in multi-billion dollar losses in portfolios of many institutions with deep pockets, especially endowments, or gifts. Given this, many have already lost their jobs but don't know it -- jobs tied to existing projects that will come to an end. Without new project starts, the extra staff won't be needed when their projects come to an end. The lack of new projects translates to little employment growth. Little or no growth is *the* problem.

With slowing growth (of employment and revenue-->dividend yield), I wouldn't get too exited about the dollar or the markets right now. You'll need to stay in T-bills for quite while until this is over.

3 Things That Could Reverse the Dollar Rally

The dollar is way above its moving average, and as most know, the further it climbs the more it will fall. The points above are all well-taken, and you could also say what about the economy as a whole? Throw in Iraq, Afghanistan, Georgia, Poland's signature of the missile shield agreement, what's next for Ukraine, the election, oil? Markets are down 12-14% this year, so a catalyst is needed to get things back on track.

As a (former) gold bug, it seems that the sentiment during pullbacks is that no cares about gold. It's these times when gold bugs get the jitters -- when the expectation is that gold will sky rocket, but people are not buying. This is a definite case of deflation: After significant money pumping from monetary policy by the Fed, money is pulled back and people cut their expenses (high gas prices are killing families), and there is significantly less buying. The big money also jumps somewhere else. What I would like to know is where is the money going. Yesterday if you tracked MTU (Mitsubishi Bank-->huge loans to China), TSM (Taiwan Semiconductor), YUM (global foods), they were all down significantly. This rules out money jumping to several example global stocks, although more detailed analysis is probably warranted. Maybe those with a crystal ball know the answer.