This time IS different for gold. Different from how everyone sees it, that is…
STOCK-MARKET BULLS are so dumb, apparently they need Bob Prechter to tell them to sell.
Blamed for causing a further 50-point plunge in the Dow on Tuesday – precisely the kind of news-driven move that Prechter’s Elliott Wave International says just can’t happen – he also told CNBC viewers that gold is “over owned” and over exposed.
Thanks to the “non-confirmation” in silver, in fact, after gold hit a new record high in March 2008 – only to…well…hit a series of new records throughout late 2009 – the metal is now fated to fall.
Gold’s real bogey man however, says Prechter, is inflation. Or rather the lack of it. You need to quit everything except “cash and near-cash”, in fact, because deflation now looms. Which would be disastrous advice if inflation took hold. But the death of inflation, long forecast by Prechter…and even longer forecast by market historian Roger Bootle here in London…is now upon us, apparently, and will see consumer prices fall, the value of dollars and debt increase, and the ultimate inflation-hedge, gold, sink without trace.
Which could come to pass. But it hardly explains the last 10 years…let alone the 20 before that…
From Aug. ’08 to Aug. ’09, year-on-year inflation in the CPI decelerated at its fastest pace in 60 years, dropping by almost eight percentage points to turn negative for the first time since 1949.
Gold, in contrast, rose almost 15% against the US Dollar…gaining more than a fifth vs. the Euro and adding 31% for UK Sterling investors.
A blip? Perhaps. Or perhaps not…
From the fall of 2004 to late-autumn 2009, the cost of living in the United States – as measured by the officially compiled Consumer Price Index – rose by just less than 14% all told.
Accepting those tweaks the bean-counters made to keep the CPI cool, that rate was pretty much half the 5-year pace averaged during gold’s two-decade bear market of 1980-2000, back when gold fell from a month-end peak of $666 to $255 an ounce. Yet in the back-half of the Noughties, however, and with underlying consumer-price inflation little changed from the late ’90s…at pretty much its lowest level since the mid-60s…the gold price somehow trebled for US savers, as well as for everyone else in the world.
Indeed, gold’s decade-beating bull run to date – longer than ever the US stock market has managed – came against the lowest official US inflation since the 1960s.
No, gold’s quadrupling last decade didn’t quite match the 1970s’ twenty-four-fold gains. But that doesn’t say squat for the myth that gold can only rise when inflation soars. Indeed, “Gold is a poor inflation hedge” as Ivy League economists such as Martin Feldstein are finally bothering to note.
Big shocker, right? Father Christmas, by the way, might not really exist.
Fact is, if you need such a thing, gold was a poor hedge against the inflation of the 1980s and ’90s. Whereas it worked wonders against the even angrier price rises of the 1970s, and yet somehow beat all other assets once more during the ongoing – but muted – destruction of money’s value so far this century.
Seeking guaranteed inflation protection in gold is a forlorn hope, therefore. But only if, like Harvard professors and gold infomercials, you think guaranteed inflation protection is what you need most.
Part II to follow…
Adrian Ash
for Money Morning Australia
Adrian Ash is head of research at www.BullionVault.com
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For those still interested in climate debate, here is an interview of Lord Monckton by a role-confused reporter. I say confused, because he seems to be argumentative with his subject, trying hard to demolish Monckton’s credibility, but who puts him in his place and once again comes across as a paragon of reasonableness. The article is also a good read and update on developments.
http://www.smh.com.au/opinion/politics/climategate-gives-lord-of-the-sceptics-plenty-of-ammunition-20100127-mywc.html?comments=160#comments
In his interesting piece about gold, Adrian wrote: ‘From the fall of 2004 to late-autumn 2009, the cost of living in the United States – as measured by the officially compiled Consumer Price Index – rose by just less than 14% all told.’
Why not tell us what happened in Australia instead of in the USA? Isn’t Australian gold the same as the stuff they sell in the United States? Are similar statistics for Australia not available here?
By the way, having worked in academia, I am quite familiar with the peer review process, I can confirm that Lord Monckton’s description and defence of the paper he wrote and published in a peer reviewed journal is veridical and reasonable. And by the same token, Ben Cubby’s attempt at splitting hairs to prove that the paper was not a creditable, properly reviewed scholarly publication is simply contemptible.
Worse, so is the Journal’s post-facto attempt, seemingly under pressure from influential warmists like the infamous and crooked Phil Jones from the now discredited CRU, at discrediting the standing of that paper. These mongrels ultimately chose to re-classify themselves from a peer-reviewed journal to a non-peer reviewed journal as their only avenue of lessening the standing of Lord Monckton’s paper in question. Unbelievable. This is like, a general in the army extending a commendation to a soldier for bravery, and then later renouncing his generalship for a captainship, just so that the soldier cannot claim anymore that he got a commendation for bravery from a general. It might not be the best analogy just off the top of my head, but this is the sort of thing that these people have done. It is nothing short of despicable behaviour, but amazingly Lord Monckton only refers to this decision to have been “for reasons best known to themselves.” Crooked, crooked, crooked scam.
But none of this slimy slithering and dishonourable behaviour changes the fact that the paper in question was properly reviewed, accepted and published through a review process which is very much appropriate and common in the case of invited papers to a peer-reviewed journal. That they later disowned their own standing in the scolarly literature, is their problem. It reflects very bad on themselves, as anyone familiar in this field would readily attest, and not at all on the legitimacy and standing of the paper in question in the scholarly literature. Which also goes to show what an ignoramus fool Ben Cubby, role-confused warmist/reporter shill happens to be.
Dave, I think the article is written and primarily aimed at a North American audience, and MMA simply reprints it for those of us with an eye of what is going down (and up) in the good ol’ US of A.
David – dont quote me but i think adrian works in the UK
Ah, this is a gem, and I cannot resist. Canada’s chief alarmist rat is making a swim for it. The IPCC warmongering ship of fools and crooks is surely sinking. http://wattsupwiththat.com/2010/01/27/heading-for-the-exits/#more-15717
And, yet, according to Penny Wong, we will still have an ETS. Maybe so. If not a bogus carbon tax, then it will have to be some other method of skinning the poeple. After all, someone has to pay for all those boondoogles and the band of profligate clowns on annual junkets like Copenhagen. Next year it will be Mexico, so with the better weather, the numbers should be even larger.
CB -
Wong and the rest of the Labor communists will push this ETS through despite what has transpired (the fact that the earth is in fact cooling instead of warming and that CO2 emissions do virtually NOTHING to cause warming).
The reason being of course that “climate change” has nothing to do with this ETS – it’s just another way of stealing more money from us!
cb suggested : ‘I think the article is written and primarily aimed at a North American audience, and MMA simply reprints it for those of us with an eye of what is going down (and up) in the good ol’ US of A. ‘
Possibly, in which case MMA is following the lead of most of the other media operating in Australia, collectively drowning us in USA culture instead of supporting our own. I suppose it will always be easier to play American music, show American films, and copy American printed articles than it might be to produce an equivalent in Australia.
But a danger of immersing Australian sheeple in so much American culture is that before long we start to sound like yanks, look like yanks, and think like yanks… to the point where the large numbers of people around the world who despise the yanks and their behaviour will start to regard Australians the same way. And I’m not thinking only of Usama bin Laden!
Lol, Dave. I agree that it would be better to have a stronger Australian focus, but truth be told, both MMA and DRA have been improving over the course of the past year. They used to be terrible in this regard, but I must say they are much much better now, and the good trend is likely to continue, as they find their feet more and more in the domestic soil.
Ah, Sandra, I fear that you may be right. They have been lying low since Nopenhagen, but it looks like they have been collecting numbers and probably bribing individuals in the background. They will not make the same mistake again. They will make sure beforehand that this time they do have the numbers before they make it once again a visible item on their dirty little agenda.
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