Gold and the Recovery

Put Wall Street Journal writer James Mackintosh firmly in the clueless camp. 

Mackintosh says Gold Will Need More Bad News to Keep Prospering.

If economic recovery continues, expect gold to suffer: There will be less need for insurance, fewer worries about the dollar’s reserve status and lower prospects of more Fed action. Of course, if the Fed lets inflation rip gold might ultimately rise a lot more—but for now, at least, investors see little chance of this.

Gold-Dollar Relationship 

US Dollar Index vs Gold 2020-08-17

With the US dollar index at 93, where it is today, gold was at $2,000 and $1400 and $320. 

Something else is going on and recoveries have nothing to do with it.

Also see my July 27 article, Nonsense from the WSJ on Gold vs the Dollar

Reserve Currency?

Mackintosh does get some things right. He does not expect the dollar is about to lose its status as the world’s anchor currency, and neither do I for reasons explained many times.

Faith in Central Banks

It is lack of faith in central banks propelling the dollar. We had three major recoveries in 2000, in 2009 and in 2020 with gold rising in each. 

It's the monetary stimulus stupid. 

We can have a Fed-induced orgy of a recovery (we already have on in the stock market, just not the real economy), and it will fuel gold, not collapse it.

No Magic Money Multiplier

Hello. There is No Magic Money Multiplier but the Fed believes there is. 

As long as central banks and governments keep debasing money, there will be little faith in central banks but lots of faith in gold.

For discussion of reserve currency status, please see What Would It Take to Dethrone the Dollar?

Mish

How are Gold and Money Supply Related?

M1 and M2 Money Supply numbers are surging. Will gold follow?

Gold: How High in 2020?

Gold broke out of a six year consolidation. Things look up in 2020.

Gold is Not a Function of the US Dollar Nor is Gold an Inflation Hedge

Swings in the US dollar have no long-term impact in the price of gold. Nor is gold an inflation hedge.

Not Getting It: Michael Moore, Hollande, Merkel, Financial Times, Stephen Colbert

The parade of politicians and media pundits who are totally clueless about what happened and why is miles long.

ECB to Keep Negative Rates for "At Least" Another Year: Treasuries Rally

The ECB will end its asset purchase program in Dec. but will keep negative rates "at least through the summer of 2019".

Valuing Bitcoin: Millennials Fake Gold or "Something Else Entirely"?

Vitaliy Katsenelson emailed an article about the Bitcoin bubble. Let's compare to the "Something Else Entirely" belief.