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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (50202)	1/19/2006 11:21:19 AM
From: TimbaBear	Read Replies (3) \| Respond to of 110194

Gold Gold is a deflation Play I thought commodities went down in a deflation? Isn't that the theory: lower wages mean folks can't consume therefore the prices of goods and services must fall? Commodities are part of "goods". If you don't have the demand for the goods, then you don't have the demand for that of which they are comprised. Or will you now ask what goods are made from gold? To sidestep that, lets take a look at the other commodities as see if they would have been as good a hedge against your deflation: copper, coal, iron, cement, platinum, etc. Commodities go up in deflation, huh? Mmmmmm, must brush of the Austrian school economic books I suppose, that wasn't the way I learned it. What's that you say? The deflation is about to come, but not here yet? Well, why not, we haven't had a real rise in wages in 5 years, ergo, deflation right? I'm razzing you a bit because you keep going out on some pretty thin branches to defend your position and it sometimes looks like you are doing it in spite of the facts. We don't make the market do what we want, we try to be dispassionate in trying to read what it is telling us. Gold is going up against the major currencies. It is easy to brush it off as a mania, and that would be fine if that is what it is. But suppose, it is not yet a mania? Central banks are increasing their holdings of gold (see Australia, Russia, China). Those central banks that are doing so have less price movement of gold vis-a-vis their currency than the ones that don't. These are clues, just like the pulse is a clue to the condition of one's heart. It begs the question: "In which currencies does gold seem to be moving the most?" and then: "Why those currencies or that one currency?" Then the real question for the American future: "What will the situation look like if a currency collapse precipitates a credit collapse?" Please note, I did not say "when", I said "if" and I do so because I am exploring various scenarios trying to then discover what signposts would show me whether one scenario or the other might be unfolding. A closed mind gathers limited input. Timba