40 c, a new low, page-59

"I guess that is the theory of money supply and relationship with gold. I just join the dots together and as far as I can comprehend no inflation after 3 attempts at the stimulus."

I’m still not looking for an argument AJ. I always prefer a constructive debate;

Gold is money- much more so than anything else. The almighty US dollar that the media tells us is king has lost well over 90% of its value and most of that since 1970 when the final ties to gold were cut and it was freely printed. Gold has held most of its value over thousands of years (fluctuates up and down but not down by 90%!). We did see gold drop by nearly 50% in the 70’s and by more than 50% after the 1980 peak but that peak was a bubble so gold was just reverting to its mean while the USD’s fall is constant and permanent. Price of gold as measured against the USD has risen from $35 in the early 70's to $1240 now. Reality is that gold has not gone up in value but rather that is how much value the almighty USD has lost. These are the facts and everything you hear about gold these days is media hype. IMO (and in the opinion of the worlds banks) it's not a theory of money; gold is money (one of those central bankers, Ben just doesn't like saying so publicly!).

The inflation theory is that gold can only rise during times of price inflation of goods. Not true although it does often work out that way. More accurately, over time gold rises with inflation of money (the increase of the money supply) which in turn eventually (or at times more rapidly) does lead to price inflation of goods. It is now well behind the curve in that regard which tells me the fundamentals are very strong. Investor sentiment (and the charts) and the fundamentals are very different things.

The market might be looking to jump back into gold at the first hint of accelerating inflation or the anticipation of it knowing full well gold is fundamentally undervalued. I'm talking about the big money, not the majority of investors and traders. Most retail investors will still be fed with bearish news when gold begins its move. Most investors/traders will continue to believe the negative propaganda and assume its just another bear market rally to short or sell into. The price will have to break through at least $1,500 and probably $2,000 before the majority realise they have been misled.
The GFC lows were full of news of how terrible things were. The market rallied by a huge amount over the next few years despite the continuing feed of stories of how bad everything was still in Europe, the Euro zone would fall apart, Chinas bubble would pop, etc, etc. The US S&P has nearly tripled and now we are hearing less bad news. You might keep hearing the bad news on gold until it passes $2,000.

You have done well to stay out of SLR lately and I’m not telling anyone they should buy (or hold) anything they are not comfortable buying but I would hate to see any very long term investors get shaken out of their investments near the lows and be too shaken up to buy back only to potentially miss what might be a bigger rally than the post GFC rally for gold stocks. It will be easy for some long term holders to have sold 20, 30 or 50% higher but not buy back in later thinking any rally will fail. Then later as the price goes above their exit price, they will wait for it to come back down before getting in. Some might get that chance, others will be left behind and large losses will be locked in for good. Long term investors should do their homework and act on that (homework is not reading HC opinions!).