>>Good ... gold does better in deflation.
I agree with this... stated it many times. Problem is many suggest that rates going up is the only term of inflation. But we all here know that there is more then 1 kind of inflation. CPI is by and far the worst kind to look at. Higher yields in the face of low discount yields is where the real pressure comes from. If USA DOESN'T raise rates, then they will create higher inflation. But not necessarily does that mean that gold will climb. Bonds are already reflecting higher rates to come. Back on the GPM, someone stated an interesting formula for real inflation. {I used a different formula, but can up with the same answer} inflation is around 6.25%... growth is nearly the same. This may be why gold seems stable. But how does growth of an economy affect their currency, and thus gold? I stated before the FED lowered, that the correct direction was UP...
Consider these 2 pairs:
1) Bonds rates directions
2) FED rates directions
by looking at these you have 4 possible outcomes:
1) Bonds leading the FED rates higher
2) Fed leading the Bonds higher
3) Bonds leading the FED rates lower
4) Fed leading the Bonds lowerer
which are inflationary, and deflationary.
>Look how gold has performed relative to the CRB (One of the best indicators of global price deflation).
Not true... CRB index is a commodity based index, and is reflective of commodity prices, not inflation or deflation. Plot a chart of the FED discount rates to that of 5/30 year T-bonds, with a gold price baseline. Try valuing the CRB in a neutral currency. If Gold acts as a currency, and the CRB is base materials; then the two cann't be compared except in terms of supply and demand. But gold is not a simple animal, if you believe it has a currency portion. I doubt that the CRB has much correlation to the POG...
"Lots of jokers like to use the comparison of the great depression in trying to claim that gold retains its value."
The great depression had less to due with monetary policies, but with fiscal policies.
"Those who sold there gold back in the 1980's (or even early '90s) and went completely to US dollars stuffed in their mattress, are now able to buy back significantly more gold than they once possessed."
Not fully correct:Those that took an agreessive call writing hedging from then to now, have reaped more profits then those that sold in 80's and bought back in. How many times did they write options that never got collected? And they still own the same amount. Consider around $50/oz per year. ABX & PDG have received as much as $86 per ounce, and as little as $40. This leads to the short positions. This is why many can say there is 8000 tons short. But how much of it is the same ounces being counted more then once. How much is really shorted. |
