GOLD (COMEX) &quot;Have We Reached The Breaking Point?&quot;

Originally posted by Tmacker69 ↑

Article certainly has a lot of fear mongering.

From the shemitah to China stopping production for Apple... not sure what to make of all that. Sentences written in capital letters scare me the most though.

Back to gold.

What the article obviously fails to point out is that gold generally isn't a very good hedge for financial crises. If it spills over dramatically into the real economy then I suppose gold might be a good hedge. So arguably it's not completely stupid to have some.

What is very interesting at the moment is the foreign cash being thrown at treasuries. The last 30y auction was insane (and immediately sold into.. hmm). It's like interest rate/duration risk is being eclipsed by a huge global flight to safety for some particpants (which is understandable but to this extent?), yet gold continues to ignore uncertainty (in USD). Perhaps if they do raise rates it'll affect supply side inflation (good for gold / bad for bonds?). But if it creates a sheetstorm, then what happens to treasuries? Would it be considered policy failure if long bond yields fall (and remain low)? I'm not sure there's much literature out there for this specific occasion but the bond market is certainly telling us something. It could be wrong though.

Guessing with current market dynamics selling treasuries (perhaps also soon after.. moderately long some equities) is a punt that fed policy direction and timing is correct, which is contrary to the opinion of an increasing number of central banks worldwide (who are urging for it to be delayed). Going long gold might also be a punt that tightening will not be deflationary..

There's a lot of disparity these days between central banks' thinking (and central banks and government). Just recently we have Germany's FinMin saying monetary policy is dangerously going in the wrong direction (whilst Draghi continues to speak about prolonging QE), BoJ intervening (kuroda also coming out saying he sees no bubble just a few weeks before the Aug 24 bloodbath.. too funny) whilst Japan's chief secretary says equities are over valued... hardly unified and a bit worrying. Who's going to be right? Is it wise to have faith in a bunch of policy setters who don't agree with each other?

According to that article the fed is stuck. But can a rate rise cause inflation? Might not be that bad for gold once the dust settles.

Expand

"But can a rate rise cause inflation?"

No.

The idea is so idiotic that it barely warrants comment.

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