Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold: The End and The Beginning

Commodities / Gold and Silver 2015 Sep 22, 2015 - 04:39 PM GMT

By: DeviantInvestor

Commodities

Gold prices peaked in January 1996 and then fell for 3.5 years into a multi-decade low.  It was the age of stocks, debt, leverage, and good times; nobody needed or wanted gold.

Since the gold price peak in 2011 the Federal Reserve has “generously” supplied the world with trillions of dollars of newly created digital and paper debt, all backed by nothing but faith and credit.  Bonds have rallied and the S&P is higher by 50% or so.  The Japanese Central Bank has similarly produced trillions of yen, bought stocks and bonds, and extended their recession several more years.


Yes, the past four years have been a repeat of the age of stocks, debt, and leverage, but only the financial and political elite experienced good times.  Debt is massively higher and gold is still bumping around a bottom.

  • Gold dropped from about $405 in January 1996 to $253 in July 1999: 38% in 42 months.
  • Gold dropped from about $1900 in August 2011 to $1070 in July 2015: 44% in 47 months.  The drop is similar to the 1996-1999 collapse.

The US national debt has steadily increased.  Examine the following two graphs regarding gold and the national debt.

WHAT THESE GRAPHS SHOW:

  • Gold prices increase with national debt, with notable exceptions such as 2001 and 2015 – circled in green. Those exceptional prices did/will correct higher to match the upward trend in national debt.
  • Gold prices in 2015 are clearly low compared to long term national debt, as they were in 2001. Expect gold prices to rise substantially to compensate for the past four years of declining prices.
  • The ratio of gold to population adjusted national debt for the past 20 years shows that gold prices rise along with both population and the inexorably increasing national debt. Currently the ratio is at the low end of its multi-decade range.  Gold prices will rise more rapidly than population and the national debt for several, probably many, years.

Examine the 25 year log scale graph of gold and note points 1 – 4 on the graph.

CONCLUSIONS:

  • The sun will rise tomorrow and national debt will continue its exponential increase.
  • Gold prices will rise and fall but inevitably follow the increase in money supply and debt. The next big move will be upward to match the exploding national debt.
  • The ratio of gold to national debt is currently low, based on decades of history. Expect the ratio to increase in the next several years.  Since we absolutely know that national debt will increase, gold prices have considerable upside, even without hyperinflation or a currency collapse.

Gold prices could (I doubt it) fall further in the short term, since High Frequency Trading dominates trading action, and central banks need to hide the fact that their policies and currencies are failing, which usually means they suppress gold prices.  Gold was formerly the “canary in the coal mine” indicating the failure of monetary and fiscal policies.  But active suppression of gold prices has replaced the “canary” with a plastic look-alike that disguises the warning signal which tells us that something is very wrong with our monetary policies.

However, it is only a matter of time, whether it is days or months, before the consequences of massive debt and uncontrolled “printing” of unbacked debt based fiat currencies sink more of the world into “Venezuela conditions.”

Paper currencies, central banks and delusional paper promises will fail.  We need something better.  Gold and silver come to mind…

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2015 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in