DislikedYou can see that as the dollar index goes down, the price of gold goes up... gold went down only a little during the crash in '08 but then continued with it's strong move up after the central banks opened the money taps.Ignored
QuoteDislikedGranted Mish was talking about the start of this year, however our discussion is on generally trends and principles and you can't take an article written in February 09, quoting data from January 09 on a daily chart, and make a conclusion based on one month's worth of data in the face of nearly a decade's inverse correlation.
I can take that article and I did because it is still valid. I am so amazed you fail to see this. We have already seen this over the last few sessions where gold spiked up and halted the fall of USDJPY. This is a beginning of the return to stressed market mode we saw last year.
Errr please prove "decades inverse correlation" first. Just because the chart looks vaguely inverse correlated doesn't mean anything. All you have observed is the last 10 years of "short USD long everything else" caused by monetary mismanagement of the Fed. We might as well say USD and Oil have an inverse correlation or USD and AUD have an inverse correlation.
This just means to me you do not know what a correlation is.
Run an actual correlation analysis and you will see we are talking about a low correlation (i.e. 0.4 or less). Mish is providing a specific data set from a financial crunch, the only time since 1987 we can see this sort of data unfolding in real time. If you didn't notice this simple game every night happening during the financial crisis you must not have been watching:
Gold up, USDJPY up.
Gold down, USDJPY down, everything down.
Please examine the last retrace high of USDJPY to 100ish and examine the price of gold at the same time. What happen when gold hit 1000? USDJPY resume downtrend, markets resume uptrend.
QuoteDisliked- your first link uses some statistics to conclude that gold isn't the best hedge against inflation, rather stocks and real estate were:
"So, in the US, M3 has gone up by something like 207% over the last 20 years while gold has gone up in USD terms by 58%. So has gold been a hedge against inflation over this time frame? Of course not - stocks have been a better hedge against inflation than gold, and property even more of a hedge than that."
Given that this article was written in February 2007, I would suggest that both stocks and real...
Please state your obvious reasons as you seem to be lacking in understanding on the issue of what constitutes an "utter failure" as an inflation hedge. Considering you can't buy a house with an ounce of gold like you could 200 years ago indicates to me that real estate is a much better hedge against inflation than gold.
You are claiming that because real estate prices and stock values in the US went down they are a bad inflation hedge compared to gold? This indicates a rapid exit from an inflationary period and nothing more. For all intents and purposes, we have just exited the most rapid inflationary period since 1974 and gold only managed a 58% gain compared to the indices which performed much better (and realestate even better than that) we can easily say gold is a terrible inflation hedge. She is a good hedge against govt monetary mismanagement though.
QuoteDislikedHaving said that, Mish's other point is true that gold isn't the perfect hedge against inflation... although I would think that Mish's other point that gold performs best during credit dislocations is an excellent point. I would further suggest that it is well known that central banks are acting together to suppress the gold price as much as they can.
This is plain goldbug hogwash and simply indicates a poor understanding of the market model. When everyone wants to buy gold (i.e. now) the central banks MUST (READ: MUST) go net short, they are the only ones who can provide liquidity to the gold futures market on that extent. I fail to see why the GATA crew are blind to this. For the gold market to continue to function, during retail net long periods, the central banks must provide sells to the market when nobody else is selling. That is their job. If you REALLY think central banks are manipulating the gold market then why the hell is world central bank gold reserves still sitting at 10% of total reserves? Why wouldn't they just forward sell that down?
QuoteDislikedI think the performance of gold this entire decade in the face of a declining dollar is evidence for the real threat of inflation in the future. I know that Mish is a deflationist (getting a lot of his ideas from Steve Keen), and there's this whole argument about whether inflation or deflation will win out in the end... from my point of view, I think both are true.
I find it very amusing you think Mish gets his ideas from Steve Keen.