Gold Q&A from Readers

Read the Latest News About:

Gold    Silver    Economy    Central Banking

Gary Christenson - Deviant Investor

Based on questions, opinions, and rants from several websites, these are some typical questions and my answers:

Q: “Gold has been going down since August of 2011. It is clearly in a bear market, so why tell me it will go up?”
A: Yes, gold has fallen about 40% from its high, but why assume that means it will continue falling? It looks to me like a 40% correction in a long-term bull market.

***

Q: “If gold were in a bull market, it would be going up but gold is clearly going down, so why do you think gold is in a bull market?”
A: I probably can’t convince you, but these are the facts as I see them:

  • Gold was selling for about $42 in 1971 when the national debt was about $398 Billion, not the $17.5 Trillion ($17,500 Billion) it is now. Gasoline was selling for about $0.36 per gallon and most prices for food, energy, housing, and automobiles were similarly inexpensive compared to today. That looks like a long-term bull market in quantity of debt and a bull market in the prices for food, energy, and gold. It looks like a bear market in the value of the dollar and most other paper currencies. Be happy you don’t have your life savings in Argentinian Pesos.
  • All markets correct. The NASDAQ 100 dropped from about 1,480 in July of 1998 to about 1,060 in three months. However, by early 2000 it had surged to over 4,800. Crude oil prices, T-Bonds, the S&P, and most markets rally, fall, and rally again. Gold will rally and then correct again and again.
  • Gold in 1980 was in a bubble as was the NASDAQ in 2000. The charts, ratios, and timing for gold currently look like a correction, not the aftermath of a bubble.
  • The Federal Reserve and most central banks are monetizing debt or, as it is often called, “printing money.” Do you think they are doing this because our economies, which are drowning in debt, are healthy? Do you think this won’t result in some nasty inflation? When people realize that central banks and governments are NOT supporting their currencies, they will buy even more gold and hard assets as they see their savings being trashed by the “printing” and the inevitable inflation.
  • Do you think printing many $Trillions to support failing banks and bad derivatives is a signal that “all is well” or a sign of desperation? Central banker desperation supports gold prices.

***

Continue reading