@BullishBearishThankyou for your views Bullish, this is in...

@BullishBearish

Thankyou for your views Bullish, this is in response to your post regarding ar eversion to the mean, with regards to the price of gold. Appreciate your contributions along with many others here. I am replying here because it seems like a more appropriate thread.

I believe you are referring to those two periods there. And you are absolutely right in that the period after 2012 was brutal for many years.

I don't think that quite applies to the 2021-2023 period though. Each bottom quickly recovered, unlike the earlier period. In fact, there were only two periods where Gold declined by more than 10% and they lasted only 7 months and 6 months respectively before
recovering whereas it took nearly 4 years for gold to find a bottom after 2012.

It is no surprise, in hindsight only of course that gold would take a huge step up during the GFC due to that period being of great financial stress, and of great quantitative easing.

But after that period of financial stress subsided, the world went back to what one might call business as usual. Economically and geopolitically. That's bad for gold.

Then came Covid, another period of economic stress, and waterfalls of money again. Good for gold.

That barely had time to settle down when Russia invaded Ukraine and America decided to show its adversaries why they must never hold US financial assets while continuing to spend more much more money than it earned every year. That's good for gold.

Metrics like US interest rates or US dollar strength that would previously have crushed the price of gold start having no effect at all. The Fed hikes to 5.25% over 7 months, gold crashes and then comes straight back up.

As for reversion to the mean, I suppose the question going forward is:

Is business as usual on the horizon? Are China and America going to be friends again, and are there going to be fewer US dollars or Euros floating around in the years to come?

The Fed has just slowed Quantitative tightening overnight, Germany has decided it too is going to borrow a mountain of money and America is not showing signs of being serious about getting its financial house in order, DOGE or not.

And then we have the second clash of civilizations on our hands happening right now. Is America strong enough to bring all its challengers to heel and get back to business as usual, a world where America is without peer and calls all the shots?

I really am not seeing anything that suggests that a reversion to the mean like the from 2012-2018 could be upon us anytime soon. Any sort of reversion I'd think is more likely to be shallow and/or brief.

Not major and sustained unless big changes start happening in the world that will lead to more economic and/or geopolitical stability, not less.

And while I cannot find the article anymore, UBS had a study where gold was up an average of 25% 500 days after the start of every single rate cutting cycle since 2000. The charts certainly bear that out and there's currently no reason to believe this cycle will be different.

Of course America may escape a recession and also strike a sustainable deal with China which would bring the world back, or close to .... business as usual.