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  • Case For GLD Bullishness: FOMC Induced Inflation Uncertainty [View article]
    It should be pretty clear by now that inflation is not in the cards any time soon. The vast money printing exercises undertaken in the US, Japan and now the EU are pretty dispositive. The winds of deflation are simply too strong.
    That, of course, is good for gold. Why? Because the problem is and continues to be too much debt and if we cannot inflate our way out of it then the forces of deflation will do the job for us.
    Unfortunately, history tells us what that means for our financial system and why gold will become valuable relative to paper IOUs.
    Mar 21, 2015. 04:42 PM | Likes Like |Link to Comment
  • Will The Fed Spike The Gold Price? [View article]
    It would appear that the only significant difference between the two of us is timing. In this regard, financial crises typically don't play out over time; usually there is a trigger - a seemingly random event like the Lehman failure - that causes liquidity to dry up. From thereon the crisis spreads like a wildfire.
    Right now, there are any number of potential triggers out there -Greece being the most prominent. My guess is that the storm will come from Europe because its banking system is far more leveraged than ours and contains mountains of sovereign debt which continues to be treated as risk free and requires no capital to carry.
    Whatever it turns out to be the vast majority of investors will remain unprepared as is always the case when a crisis hits.
    Mar 16, 2015. 09:30 AM | Likes Like |Link to Comment
  • Will The Fed Spike The Gold Price? [View article]
    I am not a trader, so my perspective is more macro than micro. That being said, I must disagree with your view that a rising dollar will have a negative impact on the price of gold.
    Before coming to that conclusion, you must first figure out the impact of a rising dollar on things other than gold. In this regard, I would note that $9 trillion (no typo, it starts with a T) US dollars (not their equivalent) have been borrowed by borrowers in non-dollar economies. I would also note that, in the past year, the dollar index has risen approximately 25% (from 80 to 100). That means that the debt service on all these obligations has increased by 25%. That is a very serious problem and it is likely that a meaningful number of these loans are going to default.
    These defaults are not likely to be inconsequential. $9 trillion is a very big number - roughly equivalent to the GDP of China and only the GDP of the US and the EU exceeds $9 trillion.
    The result, in my opinion, will be the breaking up of the financial markets as we know them and in the process a flight into dollars (which will exacerbate the problem) and into gold.
    Mar 15, 2015. 10:42 AM | 6 Likes Like |Link to Comment
  • Gold - The Oversold Commodity That Is Worth Picking Up [View article]
    We, along with the rest of the world, are tipping into deflation as the result of an excess of debt and a major financial crisis looms ahead. I suspect that its onset will only be determined in retrospect and that it could have already begun.
    However, until it becomes more apparent or until we have a "Lehman" moment, the price of gold is likely to fluctuate. Once the crisis becomes apparent, both gold and the dollar will soar. Why? Because in a deflation cash becomes more valuable relative to the goods and services that it can buy and in the case of the US dollar, there is presently a roughly $9 trillion short in the dollar (consisting of the dollars borrowed by or invested in non-dollar economies). In the case of gold, it will soar as a result of bankruptcies (which will make all debt suspect).
    That is the real reason for owning gold.
    Mar 9, 2015. 11:04 AM | 1 Like Like |Link to Comment
  • GLD Bearish As Greece Kowtows To The European Commission [View article]
    For Germany, that's a big number: 16% of their GDP. I am not sure how they survive that hit other than by the extend and pretend game.

    On the other hand, I agree that the US stock market is overvalued - as are the rest of the world's markets. That is the unsurprising consequence of low interest rates and their application to discounted cash flows. At current levels even small interest rate increases have a huge impact on present values.
    Mar 1, 2015. 09:31 AM | 1 Like Like |Link to Comment
  • GLD Bearish As Greece Kowtows To The European Commission [View article]
    Greece actually matters a lot. Look up something called Target 2 balances (which do not show up as debt). You will find that Greece owes the Bundesbank (Germany's central bank) another 600 billion euros in balance of payments deficits.
    Feb 28, 2015. 10:36 AM | 1 Like Like |Link to Comment
  • GLD Bearish As Greece Kowtows To The European Commission [View article]
    Extend and pretend is all that we have so far and it is hard to see how that can be bullish for either Greece or Europe. Anybody who thinks that Greece will ever be able to repay its indebtedness is smoking stuff that is not generally available legally. And that indebtedness does not include the T2 balances held by Germany.
    Some time has been bought, but it is not clear to what end. In four months Greece cannot show much progress. So far, since the beginning of the crisis all Greece has been able to do is to increase its debt (as has the entire EU).

    As a separate matter, I would note that deflation would be good for gold. Why? Because deflation bankrupts debtors and bankrupt debtors will bring down the financial system as we know it.
    Feb 27, 2015. 05:42 PM | 4 Likes Like |Link to Comment
  • FOMC Deflation Interpretation Drives GLD Down [View article]
    You say that "Gold... serves as a hedge against inflation and instability" and I agree. When the worldwide debt bubble bursts, I can assure you that you will have a severe dose of instability. One of the things that could burst the bubble is rising interest rates. The problem is that most of the developed world - not to mention the less developed world - is struggling to service their debts at current interest rates.
    Defaulting debt will bring down the banks and as debt becomes suspect, gold will be the only remaining (liquid) safe haven.
    Feb 25, 2015. 04:48 PM | Likes Like |Link to Comment
  • Gold Slides As The Greenback Climbs [View article]
    I usually stop reading when I read that gold has no intrinsic value because that is simply not true. What is true is that it does not provide a stream of income, but you do not need to have a stream of income to have value, intrinsic or otherwise.
    Furthermore, gold is traded in a world market and simply looking at its value in dollars doesn't tell you much. If you look around the world there are a great many currencies in which it has been a most profitable investment. In addition, the Central Banks are increasing their gold holdings, suggesting that they see some intrinsic value in gold. Bottom line, Gold shines brightest when the value of paper obligations become suspect.
    Feb 15, 2015. 01:30 PM | 5 Likes Like |Link to Comment
  • Fed's Insistence On Transitory Disinflation Puts A Pause On The GLD Trade [View article]
    Gold has been rising and will continue to rise as a result of the appearance of deflation. This is the bit that most people don't understand because we haven't seen deflation for several generations. The key part of a deflation is defaulting debt which causes people to look for a safe haven that is not someone else's debt.
    It has also been a long time since there was a gold standard, but if you check, every deflation has ended with a devaluation of the currency against gold.
    Jan 30, 2015. 05:57 PM | 4 Likes Like |Link to Comment
  • What Is Keeping GLD Up? [View article]
    The simple answer is demand. A more complex answer is because of deflation fears.
    Jan 12, 2015. 03:28 PM | Likes Like |Link to Comment
  • Gold moves to three-week high, miners gain again [View news story]
    Dollars is the short answer. Indeed the dollar has been soaring and, in my view, will continue to do so because we are in a deflation and that's what happens in a deflation. The soaring dollar, however, will create a lot of losers for those who are part of the $8-9 billion who have borrowed dollars for non dollar projects. Their debt service costs will soar and many will default. It will be even worse for those borrowers of dollars who produce oil, copper and iron ore.
    All this is bad news for the banking system and people who buy debt. In that environment investors will want assets that are not someone else's liability and that will cause gold to soar. And lastly. I don't think that you will find that all deflations end with a revaluation of currency vs. gold.
    Jan 7, 2015. 11:26 AM | 2 Likes Like |Link to Comment
  • Gold moves to three-week high, miners gain again [View news story]
    The really important news is not so much the relatively small move in gold, but rather the very large moves in crude, iron ore and copper as well as the move in the value of the dollar. The fall in the basic commodities reflects a lack of demand and suggests falling industrial production. More important, however, is that a significant amount of the production of these commodities has become uneconomic and that much of the production infrastructure had been financed with debt that will be increasingly difficult to service. For those who have borrowed in dollars, that will provide a double whammy.
    This tells me that unless something in this paradigm changes very soon, we are going to see mounting defaults that will significantly weaken the world banking system. The end of the movie looks like accelerating deflation, which will propel gold prices to levels not spoken of in the last three years.
    Jan 6, 2015. 04:17 PM | 7 Likes Like |Link to Comment
  • Manufacturing PMI Deflation Shock For SPDR Gold Trust ETF [View article]
    If you are right about deflation, then you are wrong about gold. It is my view that deflation remains as a significant risk and with deflation comes bankruptcies - which are the market's way of getting rid of excess debt. That will push people to hold cash (to take advantage of declining prices) and gold (because it is liquid and not someone else's debt). In addition, history shows that deflations are generally followed by a return to sound money, which is achieved by devaluing the currency against gold.
    Dec 3, 2014. 12:50 PM | 1 Like Like |Link to Comment
  • Switzerland And The Change Of The World Economic Order This Weekend [View article]
    That's hard to answer. Perhaps it's just because you don't understand that prosperity cannot be achieved by just printing money and adding to debt. I think that people who believe that are more like your description of the "gold bugs".
    Nov 29, 2014. 09:16 AM | Likes Like |Link to Comment