gold on the cusp of a break, page-43

"gold spikes don't happen from greed and mania they happen because of fear and panic... The gold spike of 79-80 was not about inflation it was about a middle east energy crisis"

I think the evidence backs you up there, CT. In the chart below it is very clear that gold stocks did not provide any leverage to rising gold due to this fear in 1979-80, and in fact just the opposite... the only worst performances by gold stocks relative to bullion were seen in the 2008 panic and bear bottom low in 2000-01.

Also note that gold stocks didn't start outperforming strongly until 1983, the year Volcker took inflation down to 3% from a peak of 14% (Wikipedia). Inflation isn't good for gold equities as is commonly assumed, which was evident again in the 2004-08 commodity boom with the XAU/HUI barely keeping pace with the gold price advance.

Yesterday's article touches on the dangers of inflation in the context of 2010 profit results (even if the headline is rather alarmist):

http://www.thestreet.com/story/11013407/1/gold-miners-keep-dividends-coming.html



http://static.safehaven.com/authors/saville/15677.png

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