Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

GATA's Sheer Ignorance About Gold

Commodities / Gold & Silver 2019 Mar 01, 2019 - 07:43 AM GMT

By: Avi_Gilburt

Commodities

GATA's Sheer Ignorance About Gold

As I have said before, my job on FATrader.com is to further intellectual honesty about financial markets but cutting through much of the dross being presented by most analysts and media outlets.

So, as I am known to do, I will peruse the various posting through the interest for something interesting and then write about it. And, while I cannot say what GATA writes is “interesting,” I can say it is always provides fodder for presenting why so many do not understand the gold market.

In its latest missive, GATA takes umbrage with Mark Hulbert’s latest article on gold To that end, they write:

“Hulbert notes that gold often fails to correlate with inflation, though it is widely supposed to. Indeed, gold's underperformance of inflation in recent decades has been a major disparagement of the monetary metal.


But Hulbert fails to inquire into this anomaly, though possible explanations are obvious.

After all, even some mainstrem financial analysts now acknowledge that government's official inflation metrics are constantly revised and rigged to underreport inflation. Does anyone who buys his own groceries or pays medical insurance premiums or taxes still believe that, as officials long have been proclaiming, there is no inflation?

And what about surreptitious intervention by government in the gold market? Hulbert hasn't denied it but then he hasn't ever mentioned it. Documentation and admissions of it abound -- but Hulbert never gets past the supposed sentiment of retail investors as the primary determinant of the gold price.”

I am not even sure where to start with this. So, let’s go in order.

There are two camps out there. Those that believe that gold will rally during inflation and those that believe that gold will rally because of deflation (as a safe haven). But, history has shown that gold will rally and decline during periods of both inflation and deflation. Yet, both sides will only point to the periods of time which support their thesis, while ignoring all others. This is the intellectual dishonesty within the gold market which we must recognize and take to task, or at least simply ignore.

So, GATA’s claim that we need to find an explanation as to why gold is not rallying during a period of inflation is simply ignoring history and shows their true lack of understanding of the gold market.

Next, GATA cites groceries, medical insurance and taxes as their support for inflation. Well, it is quite clear that GATA has never taken Economics 101.

I have written about this in the past, so I am going to repost what I have written, and let’s see if we can simplify this to the level that even GATA can understand:

DEFINITION OF INFLATION

As defined by Webster’s Dictionary:

Inflation is a persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money caused by an increase in available currency and credit beyond the proportion of available goods and services.

Written in a calculation format, we would present it as follows:

INFLATION = MONEY/DEBT INCREASE ….. Yields ---> ….. GOODS & SERVICES PRICE INCREASE

In its simplest form, inflation is CAUSED by CREDIT/MONEYBASE EXPANSION. If you think about it, if everyone has more ability to buy goods because there is more money/credit available for them to do so, then the cost of the limited number of goods available must go up based upon the law of supply and demand. Of course, the opposite is true as well.

PERVASIVE MISCONCEPTIONS OF INFLATION

How is a determination of “inflation” actually arrived at by many of our experts today? We hear many pointing to the CPI or the PPI rising and then claim that we have inflation. We hear many pointing to the rise in price of precious metals - and then claim we have inflation. We hear many more pointing to energy and food prices rising and claim that we have inflation.

Yet, these same “experts” have had to dismiss periods during which the CPI has risen during declining employment statistics, or the declining housing statistics, or declining consumer debt statistics. They say that those price declines are happening for “other” reasons.

But, is the fact that we see certain prices rising (even though others are declining) a reason to cry from the top of the financial peaks that “inflation is upon us!?” Let’s analyze the definition of inflation a little more closely and see if these cries for inflation are truly warranted.

A CLOSER LOOK AT THE DEFINITION OF INFLATION

Whenever we analyze definitions, such as the one for inflation, we have to understand that there are two aspects to the equation; one is the cause, and the other the effect.

INFLATION CAUSE: an increase in available currency and credit beyond the proportion of available goods and services

INFLATION EFFECT: a persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money

Keep reminding yourself during this exercise that inflating prices is an EFFECT of the definitional cause, and not the determinative factor in making the case for inflation. In order to determine if this effect is actually pervasive in the market and can be termed “inflation,” we need to determine if the CAUSAL side of the equation actually exists. Ultimately, we need to see an increase in available currency or credit which is outpacing ALL available goods and services in the economy in a relative manner.

We have all heard the term that “a rising tide raises all ships.” This is exactly how inflation works. Again, if more people have more buying power through possessing additional greenback notes or additional credit, then the prices of ALL the limited available goods and services in the economy, as a whole, should be rising.

Yet, we have some asset prices which are soaring, while other prices have been declining. But how can some asset prices really be declining if there is true inflation, which is supposedly caused by more “money” available to buy those assets? Shouldn’t the additional purchasing power, if it truly exists, cause ALL asset prices to rise in a true inflationary bout?

It seems to me that most analysts are only looking at the effect side of the equation and ignoring the causal side of the equation. But simply identifying price appreciation in some assets is not how we appropriately define inflation. Have you heard any “expert” point to a rising relative monetary base as the cause of the rising prices they cite? If not, how can one reasonably claim a resulting effect of inflation?

So, when GATA looks at certain rising prices, and claims that we have inflation, well, maybe its time for remedial economics.

Lastly, GATA last claims that “Hulbert never gets past the supposed sentiment of retail investors as the primary determinant of the gold price.”

Well, when GATA finally recognizes what Mr. Hulbert clearly understands, then maybe they may get a clue of what really drives the gold market. You see, it is investor sentiment and only investor sentiment which has driven the gold price. But, I suppose they need to continually fire the flames of manipulation to get their “members” to pony up more donations to them instead of being honest about the true driver of this market.

As an aside, I want to let you know that we have opened a new site – FATrader.com -- dedicated to fundamental analysis. To this end, we have brought together some of the best minds in their areas of expertise in economics, commodities, biotech, and energy/sustainable investing, and will be soon bringing on analysts for gold mining stocks, real estate, technology, shipping, and dividend/high yield to provide analysis for our members.

In our first 24 hours since we opened this past Tuesday, we have sold out half of our 750 discounted charter memberships. Feel free to come join us for a free trial so you can lock in a charter rate as well. But, they are going fast. As one of our members just commented:

“I found enormous value in the high quality posts thus far!” -- Chris Walker

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets. He recently founded FATRADER.com, a live forum featuring some of the top fundamental analysts online today to showcase research and elevate discussion for traders & investors interested in fundamental rather than technical analysis.

© 2019 Copyright Avi Gilburt - 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