Essentially for the following reasons:
1. If deflation, Contrary to belief of many on this thread, I don't believe gold should be strong. Assuming, that those who believe that deflation can be consistent with strong gold prices, are correct and therefore the recent strength in gold is conistent with a deflationary scenario, I still don't think we will be seeing a deflationary environment because commodity prices appear to me at least to have hit bottom and now are under tremendous accumulation. E.G. Oil stocks have come into heavy insider buying. My indicators are showing that acccumulation in oils and other commodity stocks is incredible. The committments of traders reports indicate that key metals such as gold and copper are under accumulation by commercials. The fed has pumped huge amounts of money into the economy, this will result in higher prices if history is any guide. The response to the inflated money supply always lags. The powers that be now realize that they must keep the money pump going because: 1. The consequences of a market crash accompanied by deflation would be devastating. 2. Given world wide devaluation of currencies, the US will be totally noncompetitive if the dollar does not weaken. The strong dollar is in danger of bankrupting the world. LASTLY AND MOST IMPORTANTLY, AT MAJOR TURNS THE MAJORITY IS NEVER RIGHT, IF WE ARE TRULY ABOUT TO ENTER A PERIOD OF DEFLATION, TOO MANY PEOPLE KNOW IT. MY EXPERIENCE TELLS ME THAT CONSENSUS AT SUCH A TIME IS ALWAYS WRONG. I am always leery of my fundamental analysis, but the technicals are confirming what I suspect. I know this is somewhat rambling,but it sets our what I believe to be the situation.
Live long and prosper,
Little joe |
