Evenin' Paul -
Special Focus: Deflationary Message from Gold?
webcom.com
Great article, focuses on GOLD as a Leading Indicator. I've noticed that most of us tend to look at every fact and examine it as if it were a leading indicator for gold. This article would make me stop and ask, "Who wags the dog?" If indeed gold is the TRUE monetary standard, why do we not first look at the trend of the bullion to extrapolate the economy/commodities/interest rates, rather than look at the economy/commodities/interest rates to extrapolate the trend of the bullion? Let us say then that a weak gold prices is BULLISH for the dollar, rather than say that a weak dollar is bullish for gold. After all, the dollar is strong, gold is weak, gold is a leading indicator, the true monetary standard, and the tail must not wag the dog! Loaded with interesting charts from which to extrapolate trends, correlations, inverse relations;
gold vs PPI/core rate
gold vs cpi/core rate
gold vs industrial metals (strong)
gold vs crude (weak)
gold vs bonds
gold vs t-bills
gold vs dollar
gold vs forex value
official gold reserves/yearly change/industrial vs developing countries
gold as % of total reserves/industrial vs developing countries
Some interesting notes; gold's share of total reserves is now only 2.5%, down from 65% in the early 60's. Inverse relation between dollar and gold, strong correlation between gold and industrial metals and commodities, weak correlation between gold and oil, gold prices lead bond yields (more so at the long end than the short), gold leads industrial metals by about 18 months (forecasting decline in CRB industrial metals beyond 1998, raw industrials to break below trend), and lastly, actual deflation in PPI finished goods prices, and a decline in CPI inflation. |
