Posted on 02/02/2013 10:53:18 AM PST by blam
12 Charts That Will Make Gold Bulls Furious
Joe Weisenthal
February 2, 2013, 10:48 AM
The anti-gold bandwagon is getting more and more crowded.
Analysts Tom Kendall and Ric Deverell of Credit Suisse is out with a bombshell report this morning titled: Gold: The Beginning Of The End Of An Era.
The article argues that the 2011 peak of $1921 was the top, and that now the run of the cult metal is coming to an end.
The argument essentially boils down to two arguments, which are related.
The first is that we're seeing rate normalization. When real interest rates are ultra-low, gold does well historically.
The second is that the era of crisis is over, and so the impulse to hedge against collapse (or massive volatility) is diminishing.
(click to the site to see the charts)
(Excerpt) Read more at businessinsider.com ...
Even for Joe Weisenthal, this is pretty weak cheese. Well, let’s just get to ‘em, one by one:
1) Current rates are purely the result of the Fed buying every debt instrument in sight with printed money, nonstop.
2) Gold is above its long term average, so what? A bag of chips has surged to new all time highs and is currently above its long term average too; should I expect it to be cut back to its 1968 price?
3) Official CPI has been fraudulent for forty years, and increasing in the level of fraud with every adjustment. Draw that again with real inflation numbers and we can talk. (Does anybody know what the numbers on the Y-axis here mean?)
4) Gold is overvalued because the biggest housing bubble in the history of the world busted?
5) Any talk of “the Eurozone” being “saved” in the near or far future is simply foolishness. They have only one solution for their debt problems: pay off that debt with more debt-backed debt.
6) Now all of a sudden, something out of trend is supposed to continue to go out of trend, instead of reverting to “historical average”. That same graph shows that two years ago, the price moved 3 standard deviations in less than a year, twice.
7) Cherry-picking graph points. The full graph from 2010 on says nothing more than that we’re bouncing around at zero. (NB that each bounce is weaker than the one before.)
8) Again, from 2010 on, it’s just a graph of random movement.
9) Noise.
10) Housing prices are going up again? Again, so what? BTW, shouldn’t this be indexed to CPI, excuse me, to real CPI?
11) It doesn’t follow that an increase in households implies an increase in housing. I need to see this broken down as home ownership vs rentals.
12) More cherry-picking. The decades-old adage of a silver quarter buying a gallon of gas and an ounce of gold buying you one hell of a suit still holds.
Over time, there is a 90% correlation between Federal reserve credit expansion (buying feral debt/printing money). The Fed Head has committed to open-ended credit expansion until the unemployment rate become acceptable. To assert that the dollar price of gold will fall in a period where the Federal Reserve is funding about half of federal spending by printing money and notating it with a journal entry defies logic.
Moreover, when about 25% of grocery spending is funded by social programs and when 50% of citizens receive some kind of government payment and the federal government is borrowing more than 50% of the money it spends, how much of the sales and profit of consumer goods companies like P & G is funded by money-printing?
What percent of the SP500 index is made up of companies whose customers are people who receive government benefits, or direct business from government? What percent of the SP500 index is funded by air-backed FedBucks? And so what fraction of the DJI is inflated by air backed FedBucks and when the Fed gets exhausted, how much will the SP500 and the DJI drop?
I agree with everything you've said.
I've read that if interest rates go up by two percent, TS(will)HTF.
If we begin to have any sort of recovery, interest rates will go up. So...some self-limiting things going on.
Call me cynical in my advancing years, but wouldn’t a concerted effort to drive down the price of gold make it easier for Obama and the Fed to accrue and pay for the 300 Tons of it that they owe Germany?
Care to explain what anyone holding gold should do now? The scripture your quoting is confusing. Thanks in advance for explaining it to me bmw! God Bless You
Care to explain what anyone holding gold should do now? The scripture your quoting is confusing. Thanks in advance for explaining it to me bmw! God Bless You
Great article. Is this the crack in the financial Hoover Dam?
Whatever happens to gold will not be revealed by the “analysis” of trillion $ coin Joe Weisenthal and the other giddy MMT girls of Business Insider.
Ah, here’s something that we should know about. See the drought forecast through April 30.
http://www.cpc.ncep.noaa.gov/products/expert_assessment/seasonal_drought.html
Sometime in the near future, global agricultural interests will be unable to keep meat prices down by taking revenues from other businesses/debt, IMO. It will be difficult to tell, though, as to when to buy livestock. I’m holding off on getting yaks for at least another year (high altitude and cold here for year-round cattle that consume more hay). Hay’s very difficult to find and afford in the West.
Oh, so our national debt is under control then? No? Didn’t think so. Gold prices have plenty of room to grow just as fast as that debt has been. The Market Makers send out these pinheads to spread propaganda and then buy or sell depending on what they need. Happens all the time, and anyone that is serious in the financial world only listens to them to know which way they are trying to manipulate the markets.
The only thing left is faith in Jesus and pray. Then listen to your heart. He will out the answer for you there. It will be different for everyone.
Goldbug Ping.
These idiots misinformed souls don't understand that gold is money -- not an investment vehicle. Don't buy gold for a return; buy gold to maintain the purchasing power of your savings.
Dopes.
Gold and silver was used for thousands of years as a medium of exchange long before fiat currency was invented.
We have hay coming out of our ears around here (Mobile).
Here's a little tidbit of info that I learned from my archaeology studies.
Cows use their food three times more efficent than do horses. Archaeologists use the ratio of cow/horse bones in an area to determine if deaths were drought related. More horse will die and sooner than cows.
The world is very different today in the world of exchange. the value of items for a short period will not be like the old systems until things adjust. These periods of change have been in the past. Money and gold will not worth crap.
For me, gold and silver is insurance. I don't ever expect to make any money from it.
I'll survive most anything with it though.
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