Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Pause Should Extend - 21st April 19
Why Gold Has Been the Second Best Asset Class for the Last 20 Years - 21st April 19
Could Taxing the Rich Solve Income Inequality? - 21st April 19
Stock Market Euphoria Stunts Gold - 20th April 19
Is Political Partisanship Killing America? - 20th April 19
Trump - They Were All Lying - 20th April 19
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19
Online Grocery Shopping Will Go Mainstream as Soon as This Year - 17th April 19
America Dancing On The Crumbling Precipice - 17th April 19
Watch The Financial Sector For The Next Stock Market Topping Pattern - 17th April 19
How Central Bank Gold Buying is Undermining the US Dollar - 17th April 19
Income-Generating Business - 17th April 19
INSOMNIA 64 Birmingham NEC Car Parking Info - 17th April 19
Trump May Regret His Fed Takeover Attempt - 16th April 19
Downside Risk in Gold & Gold Stocks - 16th April 19
Stock Market Melt-Up or Roll Over?…A Look At Two Scenarios - 16th April 19
Is the Stock Market Making a Head and Shoulders Topping Pattern? - 16th April 19
Will Powell’s Dovish Turn Support Gold? - 15th April 19
If History Is Any Indication, Stocks Should Rally Until the Fall of 2020 - 15th April 19
Stocks Get Closer to Last Year’s Record High - 15th April 19
Oil Price May Be Setup For A Move Back to $50 - 15th April 19
Stock Market Ready For A Pause! - 15th April 19
Shopping for Bargain Souvenirs in Fethiye Tuesday Market - Turkey Holidays 2019 - 15th April 19
From US-Sino Talks to New Trade Wars, Weakening Global Economic Prospects - 14th April 19
Stock Market Indexes Race For The New All-Time High - 14th April 19
Why Gold Price Will “Just Explode… in the Blink of an Eye” - 14th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold – “Make Me Feel Good…Tell Me Anything”

Commodities / Gold and Silver 2018 Sep 25, 2018 - 06:50 PM GMT

By: Kelsey_Williams

Commodities

Most technical analysis of gold boils down to “what the charts tell us about gold’s next move”. The next move according to most seers of the trade – is “imminently bullish” and represents one, last chance for investors to save their financial souls.

The problem is that more people have lost more money by ‘investing’ in gold upon the advice of those who proffer it, than will likely ever be made up going forward.”…Kelsey Williams

There are several reasons for that. 


First, most services provided on a retail basis (newsletters with special bulletins, buy/sell recommendations, daily and weekly charts, etc.) are geared for traders, not investors.  And most of the advice is short-term in nature. There is considerable lip service to the big picture, of course. But that is usually offered either to emphasize the immediacy of the prediction or justify why it is taking so long for the expected results to materialize.

Second, advisors and their clients continue to view gold as an investment. Big problem. Gold is not an investment. It is money. And it is real money because it meets all three specific requirements of money – medium of exchange, measure of value, and store of value.

Third, unrealistic expectations. Since gold is not an investment, it does not respond to any of the things that most people characterize as “drivers of the gold price” – political instability, social unrest, global wars, changes in interest rates, etc. Hence, the logically expected results don’t happen. The problem is not in the logic, but in the underlying premise. Actions taken in belief that gold is an investment will yield unexpected results.

There are some who think they can predict the price of gold based on mathematical calculations of the extent to which the money supply has been inflated. But the effects of inflation are volatile and unpredictable. The price of gold is a reflection of changes in the purchasing power of the U.S. dollar. Since the U.S. dollar is continually losing value over time, this results in a gold price which is continually higher over time.  The specific results of the inflation are impossible to predict.

The same principles are in play regarding the Fed’s 2% inflation target:

Should they happen to hit the target, they can either maintain their current posture, or tweak it accordingly so as not to overshoot in the future.

But they will never “hit” their target.  Especially this one.  Why not?

Because it is a moving target, comprised of moving parts. And it is the result of the Fed’s own previous actions…The Fed’s 2% Inflation Target Is Pointless

Nowhere has analysis of gold become more of a joke than in attempts to infer correlation (conversely or inversely) between gold and something else. Nay, anything else. It has reached a point that if we hear any news of a negative nature, it is assumed that gold will benefit, i.e., its price will move higher.

Common themes involve the economy,  the stock market, interest rates, trade wars, other countries’ financial problems, social unrest, etc.

Most people don’t understand these topics on their own, let alone, when gold is added to the mix. For example, what is the relationship between the economy and the stock market? Does a weak economy translate to a falling stock market? Are lower interest rates conducive to economic activity? Are rising interest rates today a sign of inflation?

In the rush to explain gold’s price action, reporters and analysts continue to confuse and complicate.

The lack of knowledge regarding gold leads to answers and explanations for price action that are illogical and incorrect. Another factor is that the explanations are headline driven.

It is presumed that any price action of consequence must have a clear explanation. When an explanation isn’t readily apparent, check the headlines; and make something up:

“Gold Prices Ignore Mixed U.S. Housing Construction Data”…Kitco News

Huh?! Is an explanation/refutation even necessary? Just “ignore” the article and move on.

Finally, here is one more headline:

    “All Signs Point To Upside For Gold”…Kitco News

‘All’ Signs? Below is a chart of gold prices for the past ten years. It may or may not be a sign, but it doesn’t appear that the price action of gold supports the claim.

source

And, if it were true that gold prices are headed higher, there is only one ‘sign’ that will tell us whether or not we are correct. Higher gold prices translate to a weaker dollar. Here is a chart of the U.S. dollar index over the past ten years. Draw your own conclusions.

source

If you are acting on advice from others about gold, you may want to reexamine their claims and results.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

By Kelsey Williams

http://www.kelseywilliamsgold.com

Kelsey Williams is a retired financial professional living in Southern Utah.  His website, Kelsey’s Gold Facts, contains self-authored articles written for the purpose of educating others about Gold within an historical context.

© 2018 Copyright Kelsey 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.


© 2005-2019 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

6 Critical Money Making Rules