Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18
SP500 Stock Market Sell Off Well Forecast by President Trump - 11th Oct 18
USD and US Tr. Yields Retreat, GBP Gains on Brexit-deal Report - 11th Oct 18
Loss Of Yield Curve "Shock Absorber" Could Mean A Rough Ride Ahead For Markets & Housing - 11th Oct 18
Just How Bearish is the Stock Market’s Breadth? - 11th Oct 18
Here’s Why Gold Stocks, Gold, and Silver Are Great Buys Now - 10th Oct 18
Russian Ruble Technical Chart Analysis and Forecast - 10th Oct 18
Society Trends To Keep in Mind in the USA - 10th Oct 18
[eBook] How to Identify Turning Points in the Market - 10th Oct 18
Euro Vulnerable as Slowing Growth Reveals Underlying Issues - 9th Oct 18
Construction Companies to Watch For in 2019 - 9th Oct 18
ECB Meeting Minutes and US Inflation Data in Focus - 9th Oct 18
Interest Rate Shock-Time to Find Out Who has been Swimming Naked - 9th Oct 18
Unintended Consequences of Expanding Sheffield's Best Ranking State Secondary Schools - 9th Oct 18
Crude Oil Price Trend Forecast 2018 Update - 9th Oct 18
Inflation Is Starting To Heat Up - 8th Oct 18
Stock Market Seasonal Influence at Work - 8th Oct 18
Barrick Randgold Deal Breathes New Life into Gold - 8th Oct 18
Stock Market Sell Off, Dollar Rally Expected, Now What? - 8th Oct 18
The Chartology of Gold and Silver - 8th Oct 18
The Income for Life Playbook - 8th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

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.


© 2005-2018 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