Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold's Inflation Bogey and Prechter's Stock Market 50 Point Crash

Stock-Markets / Gold and Silver 2010 Jan 27, 2010 - 02:33 PM GMT

By: Adrian_Ash

Stock-Markets

Best Financial Markets Analysis ArticleThis 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...

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2019 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