re: *** inflation - bad for gold *** reply ***
"I seem to recall that a bear market in US Treasuries and hard assets, coupled with rising inflation, are key elements in the equation that quantifies a long term bull market in gold.
I might say that the round pegs are now falling into the round holes quite nicely for gold’s challenge of $480 followed by $518-$529.
I have no concern whatsoever regarding the recent decline in the gold price. You will recall that my approach was that we would have a violent chop in gold with an upward bias. That is just what is happening. This type of chop is common to the gold price when a major breakout to the upside is pending.
Gold has a habit of trying its best to throw the bulls out just when they should be demonstrating their utmost tenacity in their long positions. I believe firmly that this is one of those times from both a fundamental and technical perspective.
Those who hold the view that interest rates will help the dollar fail to appreciate the lessons of history and are bound to relive them on the wrong side. Interest rates do help the US dollar when they exceed the expected level of real inflation one year ahead. That is not the case at present nor will it be for a very long time. Interest rate increases below that level only add to costs thereby becoming a constituent of inflation.
Master Kenny Adams and I hold the same opinion on this issue. He sees the low to mid-twenties as major support for the gold price. There is serious support right here as Sydney trades down on the false pretense that interest rates have any chance of supporting the US dollar except in the very short term.
Chop action as we are now experiencing can be counted on to reappear in the $440s and $460s prior to the $480s but the real come hither is the infamous $518 to $529.
This is the real thing and will be as unbelievable as it was when gold moved for the second time above $400 in the 70s. Top callers among the “Golden Oldies” might consider being bottom fishers in each move, but they are hopeless. The coming low will be the platform for gold at the prices outlined above.
The best bet in this gold arena, in my opinion, are the junior gold and silver sector shares with good management, good sources of finance - both private and public - who administer their responsibilities with ethics and governance.
These are the companies the shorts have been trying to ruin by destroying their ability to publicly finance. They might have won, but for one small exception. Gold is headed in this generational bull market to $1650. Right now, the price of gold has $518 written all over it. That is definitely a spanner in the plans of the short selling gold cynics."
