Saturday, May 30, 2015
Sunday, May 3, 2015
***WATCH PRICE VOLITILITY TO SEE WHERE IS GOLD HEADED!***
For a while there seemed to be a lot of conflicting data about where gold is headed. And rather than blog all the contradicting views, I thought I'd spend sometime and better understand WHY!
Of course the FED would never admit to a weakening economic outlook. But one "tell" is the QE, and while I wasn't sure about inflation/deflation the CPI certainly wouldn't provide any answers.... Yet low if not minus interest rates shows that central banks are doing everything to counter deflationary trends.
So?
I think the price of gold is bottoming out.
Enter Harry Dent. He claims that gold is headed to $700 by 2016. Based mostly on demographic spending and other statistical data. He thinks we've preparing for the wrong "season". And I agree with him, like I mentioned, central banks seem to be acting in line with his prediction. However, until now gold has held well against currencies, but not as well against stocks.
Deflation usually occurs during a deep recession, when there is a sustained fall in demand and output. This deflation may occur in the aftermath of credit boom and bust or severe tightening of monetary policy.
Monetarists place emphasis on the role of the money supply – falling money supply and / or velocity of circulation causing a fall in the price level.
That got me thinking, you see, if there is rapid deflation due to the FED increasing interest rates, the higher cost of borrowing money will slow velocity. If it's deflation that Harry is predicting, the great depression shows us that gold (and mining stocks) actually did well, and while US citizens couldn't hold physical gold, 9 months after the confiscation the government actually raised the gold price.
Then there is the production cost, which will stabilize the price of gold simply though supply and demand.
But the real reason I think the price will not go to $700 is because with increased money in circulation, low interest rates and uncertainty in the markets, peppered by global monetary developments regarding the IMF, SDRs and China (the US dollars questionable status as the worlds reserve currency). One thing is for sure, we will see greater and greater volatility in all markets. THAT'S WHEN GOLD ALWAYS PERFORMS WELL, fear and chaos are it's true drivers.
Of course the FED would never admit to a weakening economic outlook. But one "tell" is the QE, and while I wasn't sure about inflation/deflation the CPI certainly wouldn't provide any answers.... Yet low if not minus interest rates shows that central banks are doing everything to counter deflationary trends.
So?
I think the price of gold is bottoming out.
Enter Harry Dent. He claims that gold is headed to $700 by 2016. Based mostly on demographic spending and other statistical data. He thinks we've preparing for the wrong "season". And I agree with him, like I mentioned, central banks seem to be acting in line with his prediction. However, until now gold has held well against currencies, but not as well against stocks.
Deflation usually occurs during a deep recession, when there is a sustained fall in demand and output. This deflation may occur in the aftermath of credit boom and bust or severe tightening of monetary policy.
Monetarists place emphasis on the role of the money supply – falling money supply and / or velocity of circulation causing a fall in the price level.
That got me thinking, you see, if there is rapid deflation due to the FED increasing interest rates, the higher cost of borrowing money will slow velocity. If it's deflation that Harry is predicting, the great depression shows us that gold (and mining stocks) actually did well, and while US citizens couldn't hold physical gold, 9 months after the confiscation the government actually raised the gold price.
Then there is the production cost, which will stabilize the price of gold simply though supply and demand.
But the real reason I think the price will not go to $700 is because with increased money in circulation, low interest rates and uncertainty in the markets, peppered by global monetary developments regarding the IMF, SDRs and China (the US dollars questionable status as the worlds reserve currency). One thing is for sure, we will see greater and greater volatility in all markets. THAT'S WHEN GOLD ALWAYS PERFORMS WELL, fear and chaos are it's true drivers.
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