Best of the Week
Most Popular
1.Dow Stock Market Trend Forecast 2015 by Nadeem Walayat - Nadeem_Walayat
2.Gold And Silver – Forget The News. Silver $12 – 14? Gold $1,000 – 1,100? 5 - Michael_Noonan
3.A TOP Formation In Apple Inc. - Crash Condition Signal Recorded - David Harris
4.Gold Gets Safe Haven Bids But COMEX Has Stopping Power - GoldSilverWorlds
5.The Swiss 10-Year Bond Illustrates Central Banks` Flawed Monetary Policy - EconMatters
6.Exponential Explosions in Debt, the S&P, Crude Oil, Silver and Consumer Prices - DeviantInvestor
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.Is Russia Planning a Gold-Based Currency? - Marcia Christoff-Kurapovna
9.Stock Market Trend Forecast 2015 Video - Nadeem_Walayat
10.Gold GDX ETF Technical Analysis - Austin_Galt
Last 5 days
UK General Election 2015 Seats Forecast - Who Will Win? - 28th Feb 15
UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - 28th Feb 15
Stocks Bull Market Continues - 28th Feb 15
U.S. Debt Breaking Bad - 28th Feb 15
NATO Frankenstein - When Centralization Scales Beyond Our Control - 28th Feb 15
Gold And Silver Insanity Prevails; Precious Metals Without Direction - 28th Feb 15
Fed Raising U.S. Interest Rates - Shovelin’ Schmitt Against the Tide - 28th Feb 15
Don't Let This Stock Market Myth Cost You Your Gains - 28th Feb 15
Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - 28th Feb 15
Stock Market Indexes Creeping Towards the Edge - 28th Feb 15
GGD Going for Mexican Gold - 27th Feb 15
Foreign Real Estate Is the New Swiss Bank Account - 27th Feb 15
10 Reasons Washington Has War Fever - 27th Feb 15
Gold and the Euro Tragedy, Iraq 3.0, Ukraine Conflict Three Ring Circus - 27th Feb 15
Deepak Chopra - New Age Genius or Bullshit Expert? - Video - 27th Feb 15 - Videos
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15
Wheat Commodity Price Technical Trend Forecast - 24th Feb 15
Bitcoin Price Might Stay below $250 - 24th Feb 15
Another Important Stock Market Inflection Point Approaching - 24th Feb 15
Gold: The Good, Bad, and Truly Ugly - 24th Feb 15
Eurozone Gold Holdings Increase to 10,792 Tonnes As “Reserve of Safety” Amidst Crisis - 24th Feb 15
Bird Doo; Yellen Goes to Congress - 24th Feb 15
Is Gold Investing Risk Free? - 24th Feb 15
The Bull Case For Gold Price 2015, and the Bear - 24th Feb 15
Europe - The Intersection of Three Crises - 24th Feb 15
Gold Price Just Needs More Time - 24th Feb 15
Gold Price Downtrend Looks Set to Continue - 23rd Feb
Silver Price Depressing Downtrend Will Eventually End - 23rd Feb 15
5 Reasons Why You Should Sell Amazon Stock - 23rd Feb 15
Global System Catastrophe Is Key Threat To Human Civilisation - 23rd Feb 15
Greece Crisis Yields Ideal Market Opportunities - 23rd Feb 15
Gold and Silver Stocks or General Stock Market Indices? - 23rd Feb 15
Swimming With Sharks: Goldman Sachs, Schools and Capital Appreciation Bonds - 23rd Feb 15
Stock Market - The Fed Still Has Your Back - 23rd Feb 15
Soybean Commodity Price Technical Outlook - 23rd Feb 15
Gold Weekly COTs and More - 23rd Feb 15
Stock Market New Highs With Weak Breadth - 23rd Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

Hidden Inflation Means Gold is Going Higher

Commodities / Gold and Silver 2013 Jan 22, 2013 - 04:39 PM GMT

By: Robert_M_Williams

Commodities

Back in 1980 the US experienced high inflation, close to 20% and with interest rates in excess of 18%, before the Fed finally got things under control. Companies had to raise prices and sales suffered as a result. In today’s world we are experiencing inflation, but it’s a lot harder to see. The government has changed the weighting of its inflationary indexes so the true effects aren’t reported. We also have more subtle ways of hiding inflation. Companies have learned not to raise prices since everyone can see that. Instead they’ve learned to quietly cut back on content while maintaining prices at previous levels.


 I do my own shopping and I’ve noticed that the cereal boxes carry less content, in terms of weight, although the box size often remain the same. Then there are companies like Starbucks! In Latin America they carried a certain brand of mineral water that costs them US $1.10/bottle, and then they sold to the public for US $2.50/bottle. I should add that it is a quality product. Four months ago they switched to a much cheaper brand, costing US $0.60/bottle, and yet they sell it at the same price. Then we have beer, a popular drink in Latin America selling for around US $2.70/bottle. Over the last two years the bottle size has been reduced from 640 ml to 600 ml, and now there’s a plan to reduce it to 580 ml. I suppose I don’t have to tell you that the price has remained constant.

I could go on but I think you get the idea. Companies find it difficult to raise prices, especially with Asian countries producing at excess capacity. So they quietly go about reducing content. The next time you go to the supermarket take a good look at the content you get for the price you pay. Pay attention to it over time and you’ll be surprised to see it shrink. They’ll be no notices or fan fair, just less content for the same price. That’s inflation, and it will never show up in the statistics.

We currently live in a world where the US, Japan, China and Europe are all printing currency at excessive rates and that is inflationary. On the other hand the Asians are flooded with excess capacity and are willing to export at cheaper and cheaper prices, even if it means a loss, in order to keep people employed. The standard of living has gone up considerably in Asia over the last decade and their leaders are afraid that rising unemployment will lead to civil unrest. Better to export at a cheaper price than lay people off! This of course is deflationary and that’s where we find ourselves today, trapped between two huge conflicting forces.

Demand in the US and Europe have been on the decline for two years and that is evident in the preceding chart of the Reuters CRB Index. You can see the series of lower highs and lower lows that have developed, but if you look closely you can see that the 50-dma has crossed back up above the 200-dma and the index has moved and closed above both. Can the CRB Index move up to post a higher high? Now look at the Baltic Dry Index and we can see the

same kind of deterioration over a long period of time. Then look at the far right of chart and you can see two higher lows. If prices are going to finally turn higher we’ll see the BDI move and close above the 50-dma as a first step.

One of the best warning signs of a coming inflation is gold so I want to take a fresh look and see if there are any new developments:

You can see that gold enjoyed a nice long run from its March 2009 low to the September 2011 all-time high. Then came the correction, shallow by past standards, and less than commodities like oil and copper. The correction lasted eight months and now gold is undergoing a process of accumulation. The difference between this accumulation and past accumulations is that this is the one that will push the gold bull market into its third and most profitable phase.

How close is gold to moving up and out of the accumulation stage? Take a look at this:

The spot gold has been headed higher for two weeks after making a significant higher low at the 1,630.00 support level. This move is taking us toward the higher end of a “flag formation” that has developed over the last three months. Once it breaks out of this formation with consecutive closes above 1,705.00, it will be a strong buy signal. Since gold is a long way from being overbought, it could easily run up to the next level of good resistance at 1,746.20. Now look at the Point & Figure chart below:

 

It has a bearish price target of 1,560.00 but a move and close above 1,710.00 would switch the signal from bearish to bullish, so we’re getting the same message from both charts.

In conclusion gold is about to do something significant and the key is the 1,700.00 to 1,710.00 price range. It is probable that we’ll see some sideways movement, maybe as much as a week, before we see the breakout. We may even see a break and close above the resistance only to see price fall back in the current range (1,674.50 to 1,700.00) for another week or so. This of course is nothing more than market noise and will serve to frustrate investors looking for fast profits, but that’s what gold does best. The gold bull is an expert at getting investors to do the wrong thing at the wrong time. For those of you who hold positions you should just sit tight right now. If you’re looking to add on you do it with a break down toward 1,674.50 should it occur, or consecutive closes above 1,710.00.  Either way gold is going higher over the coming weeks and months, so if you pay a few dollars more or less for an ounce of gold right here, it makes little difference.

Robert M. Williams

St. Andrews Investments, LLC

Nevada, USA

rmw@standrewspublications.com

www.standrewspublications.com

Copyright © 2013 Robert M. Williams - 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.


© 2005-2015 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

Free Report - Financial Markets 2014