chart please, page-20

Thanks John,

Re the next bear, deflation and gold now compared to gold in the 70’s and what gold and gold stocks did during the GFC.
I have plenty of my own thoughts on the subject.

I can’t be sure how this all works out but below are parts of what I have posted recently;

Govts world wide are completely dedicated to avoiding deflation and will print unlimited amounts to make sure of it (Japan govt strongly pushing its central bank to adopt a policy of 2% inflation (from current 1%). US with similar mandates inflation and unemployment rate.
Bill Gross predicts unemployment stays above 7.5% for 2013. The fed said it wouldn't stop QE until it falls to 6.5% or inflation rises to 2.5%.
That’s what the Fed says.
The reality is the Fed needs to keep funding the US trillion dollar deficit by creating money because no one else can or will any more.
They also need to keep buying bonds to keep interest rates down.
I think QE is likely to be around for a long time no matter what they say, or inflation picks up which itself would be bullish for gold with or without QE, although news of a slowing of QE is likely to initially push gold lower.
The real danger is inflation gets out of control because the US economy is unlikely to be able to handle the higher interest rates that it would take to control strong inflation and gold finally goes parabolic as in the late 70's when it jumped from $100 to $800 in 2.5 years. What stopped the POG at $800 was a dramatic increase in interest rates to control runaway inflation. How does the US govt (or Europe, Japan etc) afford even a small increase in interest rates these days? They can't.
Perhaps the market fearing less QE at some point provides fuel for a correction in gold at the time (from what level though $1900, $2500?) but inflation with very low interest rates is probably going to be more bullish for gold than anything. In the 1970’s gold had a huge move with high inflation DESPITE much higher interest rates than we have now.

What interest rates did it take in 1980 to fight inflation and put an end to gold’s explosive run?
Actual interest rates in 3rd quarter 1980 were 18%
http://www.ferc.gov/legal/acct-matts/interest-rates/archived-interest-rates.pdf
Real US interest rates were paying around 10% after inflation.
That’s massive.
That’s what it took then and the world could not handle anything like those interest rates these days.
That suggests that when the amount of extra cash being created finally triggers strong inflation, it will be almost impossible to stop and gold with high inflation and low interest rates will likely go exponential again.

Assume no runaway inflation but just the status quo of fed financing deficits, keeping rates low and everything just chugging along. What will POG do?
The following chart sums that up better than anything I know of.

These thoughts are on the med/long term picture. As I often mention, short term moves are much less predictable.