Seeking Alpha

Ugly week continues for the yellow metal

  • Gold continues its worst week in months, with a morning tumble bringing the metal lower by $15 per ounce to $1,242, a level not seen since January. For the week, gold is down about $50 per ounce, or 4%.
  • To review, gold began the year at about $1,200 per ounce and surged to nearly $1,400 in mid-March. Last year's low set in June and again in December was just below $1,200.
  • Pick your excuse: Lower Chinese demand, lessening tensions in Ukraine, calm in financial markets ...
  • GLD -1%
  • ETFs: GLD, IAU, SGOL, UGL, DGP, GLL, UGLD, DZZ, GLDI, DGL, DGZ, DGLD, AGOL, OUNZ, TBAR, UBG, GLDE, GYEN, GEUR, GLDS, GLDL, GGBP
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Comments (60)
  • Piso Mojado
    , contributor
    Comments (24) | Send Message
     
    Was that headline intended as a weak pun? :/
    30 May, 12:06 PM Reply Like
  • BrBss
    , contributor
    Comments (36) | Send Message
     
    Or perhaps his spell-checking skills are weak?
    30 May, 12:10 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (545) | Send Message
     
    Poorly played. I agree.
    30 May, 12:13 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2987) | Send Message
     
    At least you're not like Kitco where they pull reasoning out of a hat as to why gold does what it does. You actually link to opinions.
    30 May, 02:36 PM Reply Like
  • wapiti
    , contributor
    Comments (711) | Send Message
     
    How about greed in equities and no fear thanks to the Bernanke/Yellen put?
    30 May, 12:12 PM Reply Like
  • captainofindutry
    , contributor
    Comments (21) | Send Message
     
    First comes greed. Later the greed turns to fear as equities tank and the yellow metal shines again.
    30 May, 04:22 PM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    What greed in equities? What planet are you on, wapiti? There aren't enormous inflows into equities by mom and pop investors. Hasn't been for years. There's more fear than greed in buying equities after it's almost tripled in price from the 2009 lows.
    31 May, 12:42 PM Reply Like
  • John Grandits
    , contributor
    Comments (376) | Send Message
     
    if equities tank, similar to '08/'09 good chance gold will be taken down with it. absent another large stimulus program I'm not sure what will be the catalyst that drives it back towards 2000 oz, perhaps some larger geopolitical conflict or more fallout from LIBOR rigging, price fix manipulation
    31 May, 01:21 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8659) | Send Message
     
    It will be quite a while before we see gold at $2,000.

     

    A few years at least.
    1 Jun, 06:33 PM Reply Like
  • SanDiegoNonSurfer
    , contributor
    Comments (2809) | Send Message
     
    My guess: deflation fears.
    30 May, 12:13 PM Reply Like
  • David at Imperial Beach
    , contributor
    Comments (4267) | Send Message
     
    ...manipulation by TPTB.

     

    Clearly demand for physical metal is much higher than the western media has persuaded investors that it is. Q1 saw an imbalance of 26.4 tonnes in favor of demand over supply. Negative GOFO rates persisted up until only 10 days ago, confirming the shortage of physical metal. China, Russia, and India should all be ready to pounce on these lower prices and bump up physical demand even higher. Yet miners will have to start holding back production again at these prices.

     

    You'd think that stocks and bonds were reasonably priced or something, and that oil was back under $100 per barrel. Sorry, none of those things are true. Oh well, it will just make for a bigger spike upward when the manipulators finally lose control.
    30 May, 12:14 PM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    Stable global economy, stable currency rates, no inflation pressures with deflationary pressures in Europe, global credit markets behaving well, global budget deficits falling and no longer at dangerous levels, sound and stable global equity markets.

     

    All these are reasons gold has nowhere to go but down, but the gold bulls would have us believe the lower price is occurring because of manipulation. That's rich, LOL.

     

    The gold bulls are so emotionally invested in their end-of-the-world view and hyperinflation being around the corner (remember that was the argument in 2010 with QE, and then QE2, QE Infinity), that they can't see the forest from the trees.

     

    The fundamentals for owning gold have disappeared. Bad fundamentals and now bad technical formation. What's really humorous is in the comments section of every article written about gold on SA, even though it's in a grinding bear market the comments are always skewed towards bullishness. The view is that gold inevitably must go up and it's a bargain. That's just laughable. The world has evolved and we are post-crisis. Gold is going down because the fundamentals have changed, and NOT BECAUSE OF MANIPULATION. Such a silly conspiracy theory.
    31 May, 08:38 AM Reply Like
  • Ninja Trader
    , contributor
    Comments (907) | Send Message
     
    Pretty good drugs there in Miami, eh fx? Saying there is no manipulation is like saying Obama will go down in history as our greatest president.
    31 May, 10:40 AM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    All markets are manipulated, Ninja. Tell me a market that isn't. You bulls sound like a bunch of crybabies, "waaaaah it's manipulation !!" Saying that manipulation is the reason for gold falling, and not the continued deflating of a 700% bubble move in 10 years, is like saying George W. Bush did anything right at all in his presidency.

     

    In point of fact, this is another reason gold continues to grind lower. Most of the negative impact of the Bush presidency (unpaid for wars, unpaid for tax cuts, once in a hundred year financial meltdown, runaway deficits as a result of all those above economically disastrous policies) is evaporating. Obama may be a mediocre president but his policies are not good for gold, unlike Bush's which were great for gold.
    31 May, 12:48 PM Reply Like
  • John Grandits
    , contributor
    Comments (376) | Send Message
     
    aside from a few sectors I don't think US stocks are aggressively priced, CAPE around 16 - 17 is towards the top end of the longer term range, but not excessive. if Q2 GDP shows decent YOY gain and the employment pictures continues to slowly improve it could push the S&P well north of 2000 in 2015.

     

    in regards to manipulation, I'm sure there's some unethical behavior with price setting, but it does not constitute a solid investment backdrop for higher gold prices.
    31 May, 01:28 PM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    Tax cuts create revenue they do not need to be "Paid for" they pay for themselves and create a surplus. Econ . 101
    31 May, 02:24 PM Reply Like
  • Cliff Hilton
    , contributor
    Comments (1735) | Send Message
     
    @Ninja Trader,

     

    He's not? He's the only president who gets his briefings from the local news. It's all those "underlings" who won't tell the boss what's going on. He claims he doesn't know anything. I believe that? Sure...

     

    Go gold!
    31 May, 08:00 PM Reply Like
  • june1234
    , contributor
    Comments (2641) | Send Message
     
    Are the unpaid $18 trillion deficit and the $1 trillion annual deficit included in your calculations?
    1 Jun, 03:44 AM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    "Tax cuts create revenue they do not need to be "Paid for" they pay for themselves and create a surplus. Econ . 101"

     

    And I have oceanfront property in Kansas to sell you, CoinsK. You need to actually learn Econ 101 instead of spouting propaganda.

     

    Undisputed Fact: The Bush tax cuts were responsible for 48% of the accumulated deficits from 2001-2005, when deficits rose significantly, according to the non-partisan Congressional Budget Office.

     

    The Bush Tax Cuts were a MASSIVE drain on tax revenues, and did not grow jobs as promised. It was incredibly flawed economic policy, essentially a massive transfer of money from the US Treasury to the Top 1%, resulting in enormous deficits for the rest of Americans to pay for. Of course, blowing up deficits was great for gold, so gold rallied throughout those Bush years.

     

    Here's the proof: The new CBO data show that changes in law enacted since January 2001 increased the deficit by $539 billion in 2005. In the absence of such legislation, the nation would have a surplus this year. Tax cuts account for nearly half — 48 percent — of this $539 billion in increased costs. [1] Increases in program spending make up the other 52 percent and have been primarily concentrated in defense, homeland security, and international affairs.

     

    http://bit.ly/z9zLHp
    1 Jun, 09:21 AM Reply Like
  • jj1937
    , contributor
    Comments (1530) | Send Message
     
    No inflation. Stable global economy. Stable currency.

     

    What planet are you on? Are you swallowing the propaganda?
    1 Jun, 11:14 AM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    FX, trying to improve the economy by raising taxes is like trying to raise a bucket over your head while standing in it.It's not possible.

     

    Remember the 1993 Clinton tax hikes. Those took the top income tax rate to 39.6%, where President Obama wants it to return. But in 1995, President Clinton admitted he had raised taxes too much. Indeed, those tax hikes only raised a third of the amount the Treasury Department had predicted.

     

    The fact remains that taxes cost jobs which cost revenue.If there was any truth to the false premise of higher taxes being good for an economy why not tax 100 % of the income that exists?
    JFK put it this way : “The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital from static to more dynamic situations, the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential growth of the economy.”
    Furthermore. regardless of how much is collected in taxes at the point of a gun if necessary ,the government ALWAYS spends MORE. Please explain that? So since taxing is counter productive clearly ,it only stands to reason that less taxes are better for the economy and certainly for business and individuals. The power to tax is the power to destroy.Taxes take money from people that would spend it ,and kill the velocity of money . Here are 7 reasons why the idea of taxing more is a ridiculously faulty notion.History proves it.
    http://bit.ly/1kYTF2W
    1 Jun, 02:19 PM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    CoinsK, when George H.W. Bush raised taxes after his "read my lips" pledge not to, the deficits fell. When Bill Clinton raised taxes, deficits fell. The economy did not fall apart. Tax brackets have gone up since the 2012 election as the Bush tax cuts expired and deficits have fallen.

     

    We did not go into recession. The idea that tax cuts make the economy soar and tax rises make the economy collapse doesn't have much evidence to support that theory.

     

    I'm not arguing that raising taxes will improve the economy, fyi. However, it's simply propaganda that the economy rises and falls with changes in tax rates up or down.

     

    Why does the government spend more? Partly due to population growth every year in the country. Partly due to irresponsible growth in defense spending and unnecessary wars, and Congress refusing to shut down defense programs that the Pentagon says they no longer want to continue, just to name a few reasons.
    2 Jun, 07:59 AM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    "Remember the 1993 Clinton tax hikes. Those took the top income tax rate to 39.6%, where President Obama wants it to return. But in 1995, President Clinton admitted he had raised taxes too much. Indeed, those tax hikes only raised a third of the amount the Treasury Department had predicted."
    --------------
    Please show a link to that assertion that the Clinton tax hikes only raised 1/3 of the predicted revenues.
    2 Jun, 08:00 AM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    Your partly right ,Ron Paul got it completely right. But He also is known for saying that taxes are the tool of the oligarchy that rules over us the serfs.

     

    http://onforb.es/SqiSp3

     

    " Clinton campaign manager James Carville and Democratic pollster and Clinton advisor Stanley Greenberg write the increase in the top tax rate to 39.6% “produced the one period of shared prosperity in this past era (since 1980).”

     

    While this myth is now a central part of liberal Democratic folklore, it is contradicted by the political disaster and poor economic results that followed the tax increase. The real lesson of the Clinton Presidency is the way back to prosperity lies not through increased taxes on “the rich,” but through tax and regulatory reform and a return to a rules based monetary policy that produces a strong and stable dollar.

     

    The 1993 Clinton tax increase raised the top two income tax rates to 36% and 39.6%, with the top rate hitting joint returns with incomes above $250,000 ($400,000 in 2012 dollars). In addition, it removed the cap on the 2.9% Medicare payroll tax, raised the corporate tax rate to 35% from 34%, increased the taxable portion of Social Security benefits, and imposed a 4.3 cent per gallon increase in transportation fuel taxes.

     

    If these tax increases were good for the middle class, then they should have been popular. Yet, in the 1994 elections, the Democratic Party suffered historic losses. Even though Senate Majority Leader George Mitchell had declared the unpopular HillaryCare dead in September of that year, the Republican Party gained 54 seats in the House and 8 seats in the Senate to win control of both the House and the Senate for the first time since 1952.

     

    Second, Messrs. Carville and Greenberg are contradicted by their former boss. Speaking at a fund raiser in 1995, President Clinton said: ”Probably there are people in this room still mad at me at that budget because you think I raised your taxes too much. It might surprise you to know that I think I raised them too much, too.”

     

    During the first four years of his Presidency, real GDP growth average 3.2%, respectable relative to today’s economy, but disappointing coming as it did following just one year of recovery from the 1991 recession, the end of the Cold War and the reduction in consumer price inflation below 3% for the first time (with the single exception of 1986) since 1965."
    2 Jun, 03:13 PM Reply Like
  • leopardtrader
    , contributor
    Comments (1156) | Send Message
     
    Here is my view on why Gold prices could suffer in the medium to long term http://bit.ly/NOWMxM
    30 May, 12:35 PM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    So far Leopard it appears your plan is working.
    30 May, 06:06 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (764) | Send Message
     
    The S&P is up more than 50% since the start of 2012, with GLD down more than 20% over that period; been a tough two and a half years...
    30 May, 12:40 PM Reply Like
  • WHN_fan
    , contributor
    Comments (134) | Send Message
     
    Any one that says there's no inflation is kidding themselves. Hard assets are where I'm investing my money. I've done well this year on nickel stocks (RNX.v/Ni.v) and actively buying Westhaven http://bit.ly/LBSYcN . They announced a nickel discovery in March and it looks pretty good. Most importantly the guys running the company are top notch. President is Canadian Mining Hall of Fame and won the Prospector of the year in 1999. The team has many famous discoveries their names.
    30 May, 03:27 PM Reply Like
  • rubber duck
    , contributor
    Comments (194) | Send Message
     
    For Average Joe, keep buying physical. When the house of cards collapses it will be the biggest wealth transfer the world has seen.
    30 May, 04:53 PM Reply Like
  • John Grandits
    , contributor
    Comments (376) | Send Message
     
    people have been referring to the 'house of cards,' kicking the can down the road, etc for 5+ yrs...and yet it continues to remain standing. perhaps not on the best foundation, but if the Fed can manage to extricate itself from a $4+ trillion balance sheet it may prove to be on the of the most well engineered, crafted responses to a financial crisis in modern times. i too remain skeptical/cautious, but if any country/central bank can succeed in this endeavourer I'd bet on the U.S.
    31 May, 01:43 PM Reply Like
  • rubber duck
    , contributor
    Comments (194) | Send Message
     
    Economic collapse or a slow grind to austerity, either is possible, but I'm more so referring to the 100 or so individual claims/leases to every once of gold in circulation. The physical market is tight, the paper market is not, obviously.
    31 May, 09:11 PM Reply Like
  • John Grandits
    , contributor
    Comments (376) | Send Message
     
    another crisis type event could be triggered by a failure in the rehypothecation system where layer upon layer of claims are placed on the same asset. prob one of the more 'out of left field' scenarios, but it's not we don't know that gets us into trouble.
    1 Jun, 01:17 AM Reply Like
  • Nettligent
    , contributor
    Comments (1351) | Send Message
     
    Gold prices and gold papers continue to drop for the rest of 2014.
    30 May, 05:46 PM Reply Like
  • Doc's Trading
    , contributor
    Comments (1348) | Send Message
     
    GLD..... Advise accumulation here @ 120 level. Start with 50% of what you intend to buy.... If stock violates today's Friday reversal accumulate all the way down to 114 though I seriously doubt she will go much lower. Stock will act as contrarian to stocks.

     

    Expect a wave I (one) of five to begin to the upside within two weeks from today
    Base has been completed.

     

    As of now I have not picked a stop price to sell....

     

    I expect to write my first full article on recommending gold very soon.
    more later......
    30 May, 06:21 PM Reply Like
  • Just Some Guy
    , contributor
    Comments (558) | Send Message
     
    The chart screams it's going lower but the only why's I can come up with are ugly and uglier. Roughly the same reasons that bonds keep "going up", if that's what we call it: market manipulation, the big players are piling into it and leaving quiet little gold behind ... for now.

     

    I'm going to start nibbling on this early next week, and if it goes MUCH lower (like below $1,000) I'm going in more than ever before. I still assume that within ten years, one way or another, it will be $5,000/oz. OTOH a loaf of bread may be $4,000 so I might want to invest in bread. We live in interesting times.
    30 May, 07:38 PM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    Dream on with the hyperinflation nonsense, Just Some Guy. We are not Zimbabwe or the Weimar Republic here. Gold will be $600/oz 10 years from now, more likely.

     

    Aren't you aware that the global risk is towards deflation in the world?

     

    Europe Deflation Risk Seen by 74% in Global Investor Poll by Bloomberg
    May 12, 2014

     

    http://bloom.bg/1puvsEZ
    31 May, 12:52 PM Reply Like
  • John Grandits
    , contributor
    Comments (376) | Send Message
     
    good comment fxdude. when people start referring to hyperinflation and compare the U.S. to Weimar, Zimbabwe, Eastern Europe, Argentina, etc. their reaching, relying on sensationalism to make their pt and invoke fear. what are the resemblances between those economies and the U.S. that merits such comparisons?
    31 May, 01:50 PM Reply Like
  • vinhvo66@yahoo.com
    , contributor
    Comments (28) | Send Message
     
    @ Just Some Guy, I am waiting to buy more physical gold when it hits $1000s. I wish that the gasoline prices would drop back to $1.00/gallon like back in the 90s. I do not know why my utility bills keep climbing up every year while my wages are still flat.
    1 Jun, 01:44 AM Reply Like
  • dealraker
    , contributor
    Comments (718) | Send Message
     
    Rob McEwen says gold is going to $5000 by 2010.

     

    Whoops, that's already passed hasn't it?

     

    Well, he is nice looking, smart, and he gets no pay.

     

    Buy MUX!
    31 May, 07:34 AM Reply Like
  • Rick Husband
    , contributor
    Comments (46) | Send Message
     
    Time to begin nibbling perhaps. In last weeks Barrons, there was an interview of economist Pomboy. Not the best outlook for the US economy, but she is a bull on gold and Treasuries due to continued monetary accommodation. The US government is incapable of any kind of fiscal policy, let alone a good one, so everything falls to the Fed, which can only lower yields. It can, through QE, play for a small wealth effect among market participants by creating bubbles in risk asset markets, but can't do that forever, as markets correct, and we are overdue for one now. Then perhaps we see some run to gold. Going back to Pomboy, she appears to be in the camp that say the Fed will be forced to tinker to the end of the decade, which means continued debasement of the dollar. That can only be good for gold in my opinion.
    31 May, 11:28 AM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    @RickHusband.

     

    Your points suggest we are still in crisis mode. We aren't, we exited crisis mode in 2012, when the European banking system was able to come back from the brink and recapitalize. QE was supposed to be the driver for gold the past few years, and guess what? Gold fell 35%. Yes, the outlook for the US economy is not great, but nor is it poor. Expect 2-3% GDP growth, but at the same time deficits have narrowed significantly. The dollar won't be debased with deficits as a percentage of GDP back at normal levels. And while we still have deficits, the trajectory is what matters and that is improving consistently now.

     

    None of this is good for gold, and any nibbling now will be regretted when gold is challenging $800/oz. Gold bulls seem to somehow have amnesia that it had a 700% run from 2001 to 2011. Those were parabolic, bubble-like returns. And yes, it was a bubble unquestionably. Bubbles only work as long as there are rising prices, and then it gets very ugly for years, even decades. Just like gold was in 1980. That was a 20 year bear market. Buying it here is like buying Nasdaq about 9 months after the dot.com crash. Look out below in gold. It's got an anchor tied around it's neck for years, and that anchor is improving economic fundamentals in a non-inflationary environment.
    31 May, 12:37 PM Reply Like
  • Rick Husband
    , contributor
    Comments (46) | Send Message
     
    fxdudeinmia,
    We are still in financial crisis. I think definitionally, you got to read "This Time it is Different" by Reinheart and Rogoff. The consumer is still repairing his/her balance sheet. The average crisis, as they define it, lasts 8 to 10 years statistically. They built a historical database. Even the PIMCO boys came out after the 2008 debacle saying the "new normal" was 2% to 3% nominal gdp growth, your numbers proclaiming total recovery. Before the debacle Gross used to opine that nothing works in the US unless we are at 5% nominal gdp growth. Sounds like you are an apologist for Obama's administration which constantly proclaims that recovery is now. Hell, we are treading water and the severe weather last winter set us back. W will become the Herbert Hoover of the 21st century. This will only go away slowly. But that has nothing to do with gold.

     

    One other issue you raise is the deficit as a % of gdp. Here you are correct. Because the government cannot agree on borrow and spend, which either party will do when in full power, slow tax revenue growth will eventually overtake government expenditure, like it did in the Clinton administration. But all that does is stop the hemorrhaging, and does nothing about 17 T of debt and does not help us when Treasury notes turn over. But that is neither here nor there. We are worried about gold.

     

    All the Fed did was slow down the rate with which it is debasing our currency. I'm not an expert in the gold market, to be sure, and at least I admit it, but nothing appears to have fundamentally changed from before. Maybe gold got ahead of itself, maybe not. But we and the dollar are no emerald city in the sky. Gold is only a hedge; a % of our portfolios. I also like natural gas. I guess I don't see $800 oil like don't a nice $800 suit.

     

    31 May, 05:36 PM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    @RickHusband.

     

    You have a great misperception when you assert we are still in financial crisis mode. It's easy to think that when there are still many Americans unemployed and financially stressed out, and ill-prepared with their savings for retirement. Nonetheless, it is still a misperception.

     

    The Federal Reserve of St. Louis supplies a chart that is called the St. Louis Fed Financial Stress Index. It is a comprehensive measure of the risks in the economy, and whether or not we are in crisis or heading that way. That stress index has been falling for the past few years, and is showing no upticks at all lately. You can view that here:

     

    http://bit.ly/UO7THn

     

    You can see just how comprehensive the list of data that the St Louis Fed culls into generating this index here:

     

    http://bit.ly/1iIbSxz

     

    The reason I like empirical data is it takes opinion and bias out, and you are left with an objective view of the actual facts. You may view me as an apologist for Obama. I disagree. I am just a seeker of the truth and facts. Empirical data is what I look for to base my opinions.

     

    And to address your other points, we do not have a debt crisis in the USA despite having $18 T in debt, because the debt servicing costs are not onerous. The amount of money the USA pays in interest payments is not extraordinarily different now than it was in 1988 when Reagan was leaving office, and 2001 post-9/11. This debt never really has to be paid back, but it does have to be serviced. The risk is if interest rates would move back up to levels of the 1990's and mid 2000's when the Fed was overly tight due to the housing/credit bubble. In a world of deflationary pressures, Chinese growth maturing, US growth in a new normal of 2-3% without housing being a huge driver of GDP going forward as demographics work against the housing market, there's just little risk of interest rates moving up much from these levels. Therefore, no debt servicing crisis and without that, no debt crisis. Not that it's not an issue, but it's certainly not a crisis.

     

    And Reinhart and Rogoff data was debunked, in case you hadn't heard. Lots of mathemetical errors and omissions in their work. You can read about that here: http://nyr.kr/1iIbSxA
    1 Jun, 09:41 AM Reply Like
  • Rick Husband
    , contributor
    Comments (46) | Send Message
     
    fxdudeinmia,

     

    Obama needs you in the press room. All is good. There is no unemployment, underemployment, no debt problem, and we are all dancing in the park. However, your stress index does not mean all is well; is about safety flight, not an indicator of financial health. I agree such would correlate to gold spikes, but such is not a sole indicator of gold which you seem to be arguing. Nothing you discussed touches upon my thesis, which is the ongoing debasement of the currency will keep gold moving up over time. That is one thing that has not changed in the gold story. It is not just fever pitch, saber rattling that send foreigners to Treasuries or gold. Every time the Fed debases, gold, oil and other hard commodities go up.

     

    Going back to the subpar growth, consumers can no longer use their mortgages as an ATM through a bubble created by the Fed that I'm sorry they are still reeling from. No one disputes the growing wealth gap. There are also some demographic trends that contribute the lower multiplier such as the aging of America, as posited by Harry Dent ("The Great Depression Ahead" and earlier books), a marketer, who shows study after study on the dramatically changed consumption habits of seniors, as the boomer wave washes ashore. And your non-technical article on Reinhart and Rogoff ignores the fact that econometric model building, especially over the time period they covered, can only predict direction of the numbers. I read the book, not a review in the New Yorker. I think these Princeton economists properly qualified themselves, gave us good historical perspective on financial crisis. And we don't have to be a macroeconomist to know that reduced demand is not good for the economy and also helps ultimately the gold price.

     

    We all like investing on this site and that is about predicting the future. The gold price has dipped and has in my mind had gotten ahead of itself and you are predicting it will crash to $800. This means the price of a top of line suit at Saks will decline to $800 using the old adage that it takes an ounce of gold to buy a suit in a store like that. Hope you are right. I need a new suit.
    1 Jun, 11:38 AM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    @RickHusband.

     

    I didn't say all was wonderful economically in the USA. But, there's a massive difference between now and 2008-2009, when credit markets were seizing up, when volatility was wildly intense on a daily basis, when the possibility of major financial institutions' sustainable viability was in question. Then, in 2011/2012, we had a redux going on in Europe where the viability of many major European financial institutions were in question, whether the Eurozone would break up, and what would be the costs of Greece, Spain, Italy, Portugal leaving the Eurozone. And interest rates in peripheral Europe were going through the roof on a daily basis. Those were both crisis times, and we are in a period now of virtual serenity in financial markets. For you to still characterize that we are in a crisis - well, I think you overuse the term "crisis", then.

     

    I also think this so-called debasement of the currency by the Fed is a ruse, a false reason for gold to rally. QE has been going on for 5 years, and extended so many times it has gotten mocked as QE Infinity. That QE initially helped gold, and then it ceased to in 2011. Yet, it still gets trotted out there as a reason for gold to go up. I call b.s. on that reasoning. Not happening for 3 years now, so it's moot.

     

    As to Reinhart and Rogoff, I'm no expert on the subject and I linked to only one article. I am just aware that their work came entirely into question based upon some real flawed assumptions in their data. If you are basing much of your thoughts on a flawed thesis, I'd recommend you find more articles on the subject and see exactly what they are. To make investment decisions based upon flawed data, or theory, is hazardous to your financial health. I don't know if those "Princeton economists" do or don't have a political axe to grind behind their book, as I haven't read it and don't know their backgrounds. Beware of economists who do, such as Arthur Laffer whose Laffer curve turns out to be wildly flawed. Tax cuts do not pay for themselves, as evidenced during Reagan, Poppi Bush and George W. Bush. Each time they resulted in rapidly expanding deficits, but listening to Arthur Laffer you'd never know, as he has his political axe to grind.

     

    Finally, if you think that a move to $800 in gold is a crash, well that is also a misplaced use of the word. That would equate to an approximately 55% selloff from the top after a parabolic move over a decade. Not very different from the move in the SP500 after it topped out in 2000, after a decade + long run from much lower prices, and had reached bubble valuations, or the move to the lows in 2009. Unquestionably, gold up 700% in 10 years had reached bubble valuations in 2011. A crash would be closer to an 80% loss in value, something that Nasdaq did from 2000-2003. A crash in gold would more resemble a move to $500 an ounce. The 35% move lower from the top in gold is simply a mild move compared to selloffs in other major asset classes, following parabolic moves accompanied by overwhelmingly bullish sentiment. And now that gold has new competition from Bitcoin, competition that never existed before, it seems perfectly reasonable to assume that more people will lose their belief that gold eventually and inevitably rises in price. That belief was lost in all of the 1990's, as gold fell to levels previously considered to be impossible and absurd, and about 75% off the highs of 1980. And then, gold sat around for years barely registering a pulse, as no one cared about it anymore, a mere afterthought of an asset class. It can happen again.
    1 Jun, 09:30 PM Reply Like
  • Rick Husband
    , contributor
    Comments (46) | Send Message
     
    fxdudeinmia
    I still want my new suit @$800. Last I checked in Saks here in Dallas, it was north of $1200. Hell, a pair of socks was $80. So get me major deflation. We all can use it. We just see different channels. That's all.

     

    Your comments about tax cuts not paying for themselves through Reagan, HW and W are right on; very true. That is one of the major ruses in our history, and as I said earlier, W, in particular, will go down in history as the Herbert Hoover of this century. No argument. You are right on. We are in a huge liquidity trap.

     

    Reinhart and Rogoff are academics and have no axe to grind. My big take away from the book was debt, both public and private. You can read about the decline and fall of the great powers per various historians, one named Kennedy (not JF) comes to mind who wrote The Rise and Fall of the Great Powers, wherein one of the common causes big empires falling (Rome, etc.) was debt, both private and public, and that was a take away I had from Reinhart and Rogoff. We get too comfortable.

     

    In this day and age our excesses are exasperated by the money printers. Ultimately, we pay the piper. My point: gold goes up. It dipped and has not found a bottom, but will resume its upward trend at some point.
    1 Jun, 10:56 PM Reply Like
  • fxdudeinmia
    , contributor
    Comments (504) | Send Message
     
    " My point: gold goes up. It dipped and has not found a bottom, but will resume its upward trend at some point."

     

    RickHusband, we finally agree on something. Yes, at some point gold will go up. I believe after a brutal, grinding bear market lasting many more years, gold will eventually go up. An asset class that does well in crisis times, but fares poorly in non-crisis times, it's not what I want to own. It's what I want to short.
    2 Jun, 08:03 AM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11149) | Send Message
     
    Golds fall off doesn't hide the spike in almost everything else that is roiling the inflationary equation. Meat, fruit, veggies, gas, healthcare, electricity, water, etc. all up. Maybe gold holders are using some gold to buy up food which is popping up like its going out of production. Or maybe they have health problems and know the only reason Obamacare is cheaper right now is due to taxpayer contributions that will end. Healthcare prices will rise from here.

     

    The days governments could hide inflation by only manipulating gold and silver prices is ending. Food prices are the easiest to see even if they manipulate them in the inflation equation by replacing steak with ground beef and ground beef with chicken.
    31 May, 12:14 PM Reply Like
  • Seth Walters
    , contributor
    Comments (675) | Send Message
     
    I can get chicken breast for under $3 a lb, cheese for $4 a lb and sometimes under, bulk whole grains for about $1 a lb (and delivered to me)... Vegetables are not that expensive. Fresh sustainable seafood is cheaply available from a local Japanese market. I'm not seeing a significant amount of food inflation, really.
    31 May, 01:49 PM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    Your quality is lower Seth. You are still paying more for less good meat.And veggies Mmmm mmmmm gotta love those GMO enhanced vegetables.
    31 May, 02:19 PM Reply Like
  • sarichter
    , contributor
    Comments (358) | Send Message
     
    I'd have to agree with Seth here. My food bill hasn't changed much over the past 5 years. I am very careful what I buy and where it comes from and I'm not seeing much of a difference at all.

     

    That being said, I'm sure certain food items have gone up, but they are generally prepared meals and luxury goods.

     

    The only thing I know for certain that has gone up... milk. It's up to $3.15 a gallon from $3.00 over that time span.
    31 May, 06:55 PM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    You forgot to mention gasoline prices.And that's one of the main reasons for the continuing higher food prices that all of us are experiencing.it cost more to deliver food to the store,more to go and get it. It will continue to cause higher prices at the grocery store. And less peanut butter in the jar you pay more for.

     

    http://nbcnews.to/1nUuSy2
    1 Jun, 03:55 PM Reply Like
  • 2 Macbooks Airs and a Mini
    , contributor
    Comments (11) | Send Message
     
    the rise in gasoline prices had been partially offset by the increase in average MPG.
    2 Jun, 06:33 PM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    LOL Large delivery trucks are diesel and the price has exceeded any gains in mileage.
    2 Jun, 07:53 PM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    Should have said FUEL prices .
    2 Jun, 07:55 PM Reply Like
  • T-time
    , contributor
    Comments (311) | Send Message
     
    Hey, as long as the US can print its' own money we are as good as "gold" (pun intended) - but as soon as we lose reserve currency status - and the new global currency is pegged to gold (who has all the gold now? Fort Knox? Don't think so - there is a reason they stopped inventory on Fort Knox - nothing to record. It is all in China! and of course in GLD reserves in London - but not in Fort Knox). Who needs gold when you have the world's reserve currency? As China government recently said "... dangerous to rely on the currency manipulation and irresponsible management of 'one country' regarding the world finances" (any guesses who is the one country they are talking about?). You don't think they are looking for a way out of USD holdings? If not, why are they buying all this gold???!
    I am not a doomsday guy - not a prepper with guns stashed and tunnels dug near my bug out location, and I do not believe end of world scenario to happen overnight - but history is history, folks. If we are not careful, someday we will actually owe the 17 trillion dollars debt that we can today print our way out of - once that ability stops - and middle eastern oil accepts other currency than US dollars - look out! If this is not going to be a catalyst for gold - than what is? Silver is a better shorter term metal investment anyway in my opinion... Look at palladium since Jan - this one would have been good to be holding YTD.... PM are not a bad long term investment...
    31 May, 02:08 PM Reply Like
  • Rick Husband
    , contributor
    Comments (46) | Send Message
     
    t time, Some prognosticators are already predicting the beginning of the end of the petrodollar, which is consistent with your thesis.

     

    http://bit.ly/1nUpRFR

     

    China will soon surpass the US as the largest economy, as we go the way of a western welfare state. Silver and palladium have some other real uses, unlike gold, which I think why you are seeing a difference.
    1 Jun, 03:39 PM Reply Like
  • John Grandits
    , contributor
    Comments (376) | Send Message
     
    In terms of performance silver is worse off than gold recently so how does the 'practical use' fit into that statement? I do think it offers a better investment value right now vs. gold
    1 Jun, 07:15 PM Reply Like
  • Rick Husband
    , contributor
    Comments (46) | Send Message
     
    I have bought silver pellets for a unit in a refinery, so it has actual industrial market, though not huge turnover, as it does not have to recycled for a couple of years. Gold is as Buffett says: we dig a hole to get it, melt it into bars, and put it in another hole in the ground. Apart from jewelry or an occasional cavity filler, the metal has little practicable utility.
    2 Jun, 07:06 PM Reply Like
  • CoinsK
    , contributor
    Comments (3480) | Send Message
     
    But it is the best store of wealth we have. And it's an asset that isn't someone else's liability.
    2 Jun, 07:55 PM Reply Like
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