The Gold Market: Making Sense of Chaos

Why Is the Gold Price Down When There is So Much Financial Turmoil?

It is never easy to say with certainty what is happening day-to-day in the gold market. By nature, this is a private market which is opaque by design...those who own gold do so in part because it affords anonymity and independence from the conventional financial system. That said, here is our best guess as to the reasons behind the 20% decline in the spot price of gold from its recent high above $1900 to a low of $1535.

Does Gold Hedge Against Inflation?

Yes, depending on what you mean by inflation. Most people assume it means increases in the CPI - Consumer Price Index. Using this argument, gold's high of USD$852 per ounce in 1980 should equate to an inflation-adjusted high of about $2,400 today. But gold is not a currency that you spend at the grocery store. Therefore, it does not hedge against a decline in the purchasing power of the dollar, euro or peso.

Basic Facts About Gold: Prices, Elasticity and Uses

There are about 5 billion ounces of above ground gold supply worth about USD 9 trillion at current prices. Less than half of this is in deliverable, investment-grade form. The above ground gold supply is growing at about 1.5% annually, the 300 year average.

What's Going on in the Gold Market? Summer 2011

In our last report in early May, we suggested that investors buckle up in preparation for a run in the gold price. Events have unfolded as expected. Gold has now established its own path as the premier vehicle for the preservation of wealth independent of currencies and other asset classes (whether commodities, equities or bonds). The decision in early August by the Swiss and Japanese central banks to intervene in the markets to weaken their currencies has served notice that strong currency alternatives to gold will not be tolerated. And gold is once again the preferred reserve asset of the world's central banks: South Korea, Thailand and Kazakhstan joined the ranks of buyers in the last 30 days.

The Gold Market: Time to Buckle Up?

Is the gold market now approaching its moment of truth? The mainstream continues to ignore the relentless rise of the gold price, proclaiming each new high to be a 'bubble' top, noting again and again that gold has no real use, cannot be eaten and pays no dividend or interest. But in our view, beneath the surface, confidence in the current monetary order is being eaten away by the twin cancers of rising debt and reckless monetary expansion. Are we approaching a major market dislocation which fundamentally changes the perceived value of gold?

What's Going on in the Gold Market? Fall 2010

In our view, the next phase of the gold market has begun. The stealth bull market of the past 10 years is now going main stream. For the last decade, gold has mostly traded with the commodity complex, negatively correlated to the US dollar, in what has recently been called the 'risk-on-risk-off'' trade. But as gold moves to center stage as a preferred store of wealth and a preferred central bank reserve asset, dollar-euro and dollar-yen no longer seem to matter. Gold now appears to be trading independently of the commodity complex and the dollar which means that traditional yardsticks for the gold price no longer apply. This is the transition which we long have predicted would mark the beginning of the real gold bull market.

What's Going on in the Gold Market? Summer 2010

In our view, the next leg up in the gold price is imminent. The deflation scare we have been predicting is now in full bloom, right on schedule. The Keynesian inflationist economists are using this fear to gather support for an expansion of the Federal Reserve balance sheet in the form of further quantitative easing ("QE"). More stimulus spending by the US Treasury is unlikely given the current level of concern about the deficit. But Federal Reserve expansion of the money supply is what the Keynesians believe is necessary to revive a failing economic recovery and most of these economists work for Wall Street or Washington, both of which are intent on preserving the status quo at any cost.

What's Going on in the Gold Market? Spring 2010

Excerpt from the Report to Shareholders, April 23, 2010

Basic Facts About Gold

There are about 5 billion ounces of above ground gold supply worth about USD 5 trillion at current prices. Perhaps half of this is in deliverable, investment-grade form. The above ground gold supply is growing at about 1.5% annually, the 300 year average.