Beware of Gold motivators.

[icm63]

Gold has three primary motivators of its price.

1) Falling $USD
2) Negative real interest rates CPI vs 10 Yr Yield Govt Bond
3) Demand and supply (I believe 1 and 2 are much more dominate)

Consider 1980 gold rally.

1977 to mid 1978, $USD falls, gold moves moderately
min 1978 to 1980, negative real interest rates explode (CPI vs 10yr), gold explodes.

Consider Current gold rally

2000 to late 2007, $USD falls, gold moves up proportionately.
Late 2007 to current, negative real interest rates (CPI vs 10yr), fall to just below zero, gold rallies hard.

Whats my point, if and when the energy portion of inflation falls ( ie oil falling) while crises news remains low, gold will fall, any crises news that pushes 10yr yield down and inflation stable will obviously send gold up.

God help the perfect storm, crashing $USD with falling 10 yr yields, and rising inflation, then gold thru the roof, clouds and stars !

Just thought I would offer my 2c on this interesting gold price mix of price motivators.
BewareOfGoldMotivators.gif

[icm63]

Re: Beware of Gold motivators.

The shaded red bars on the chart are official recession periods.

These alone are not enough to motivate gold price as much as negative real interest rates and $USD.

[LargoWinch]

Re: Beware of Gold motivators.

2) Negative real interest rates CPI vs 10 Yr Yield Govt Bond

Me thinks Numero Secondo is the main driver.

Real Negative Interest Rates (when mesured with accurate inflation data - and that is the key; refer to Bart's or shadowstats.com for great analysis), will detroy the function of money as a store of value.

Once the process is ignited as you said; to the moon, clouds and stars...unless Volcker comes in and raise real interest rates 8-9 pts over accurate inflation.

[Olduvai]

Re: Beware of Gold motivators.

What to think of Fear as a motivator.
Fear of a financial meltdown, new war on the horizon etc.
Fear is not always a wise motivator but all the same a very powerful one.