PMs: Why Has Gold Not Exploded Upward Yet?

[helmuth_hubener]

The Federal Reserve has been increasing the money supply a lot for this entire millennium -- since 2000. They were increasing it a lot before that too, of course. They have been especially increasing it from 2008 to present. There have also been a lot of crises and a lot of sentiment of uncertainty and worry. Yet gold has gone up only slowly and relatively moderately. Certainly it has not gone up proportionally to the amount of money supply increase that has occurred.

Why is that?

I have my own ideas, but I think it would be interesting to hear everyone's theories as to why gold has not performed better. Gold bugs and gold bears alike: please chime in!

 

[Original_Intent]

Why haven't ALL commodities exploded upwards in proportion to the money printing? Because that money hasn't hit the economy and has been at play in the stock market (notice that it HAS exploded upward from 2008.)

 

[oyarde]

Why haven't ALL commodities exploded upwards in proportion to the money printing? Because that money hasn't hit the economy and has been at play in the stock market (notice that it HAS exploded upward from 2008.)

Looks like to me as well that all money is in the market . Dollar General , now $53.82 , could have been bought , within the past yr as low as $39.73.As an example.

 

[ctiger2]

We're just on the verge of a massive breakout. We're headed towards LTD#4.

Should happen between Sept '13 and July '14. Rough Target ~ $3,000/oz.

 

[Seraphim]

Jim Rogers has it right;

The gold/silver bull is a very, very long secular bull. A cool period in the middle (or so) is normal and healthy.

The last major gold bull market was 1965-1980. Between 1974-1976 gold/silver entered a corrective cyclical bear market after 9 years of going up.

We all know what happened from 1977-1980.

2011-2013 is similar to '74-'76.

 

[helmuth_hubener]

We're just on the verge of a massive breakout. We're headed towards LTD#4.

That is a prediction of the future, not a reason for the past. What's more, you give no reason for your prediction. A prediction resting on a reasoned analysis would be more interesting. Of course, everyone should keep in mind the essential: it would still be a prediction coming from someone who does not know the future.

We are looking for the reason gold has not been doing better.

 

[helmuth_hubener]

The last major gold bull market was 1965-1980.

Unless I am very much mistaken, gold price from 1965 to December 1971 is a flat line. A perfectly flat line. $35/ounce.

 

[tod evans]

We are looking for the reason gold has not been doing better.

My seat of the pants opinion is there are only two reasons gold isn't worth more yet;

1) There's been newly discovered resources.

2) The market is being manipulated.

 

[ctiger2]

Unless I am very much mistaken, gold price from 1965 to December 1971 is a flat line. A perfectly flat line. $35/ounce.

Cause we were still on the Gold Standard set at $35/oz. Yoinks!

 

[ctiger2]

That is a prediction of the future, not a reason for the past. What's more, you give no reason for your prediction. A prediction resting on a reasoned analysis would be more interesting. Of course, everyone should keep in mind the essential: it would still be a prediction coming from someone who does not know the future.

We are looking for the reason gold has not been doing better.

Gold has been the best performing asset for the past decade. You think it should be doing better than the best?

Surely you understand Gold is a currency and central bankers have a vested interest in maintaining it's price relative to the fiat currencies they control. It's very important to silence the canary in the coal mine when you're playing their game.

And BTW the Gold price is just the inverse of the USD's purchasing power. Gold isn't going up, the USD is going down. That's the correct way to think about Gold as it is the monetary ruler of history.

 

[Cap]

You can't deny the dollar is losing purchasing power.

 

[Seraphim]

Due to American deficits, open markets actually had gold double in that time frame. If you wanted to reclaim from the UST, yes it was flat.

Unless I am very much mistaken, gold price from 1965 to December 1971 is a flat line. A perfectly flat line. $35/ounce.

 

[Pennsylvania]

There's been relatively stable demand for US dollars in the recent short term. The most significant factor at the moment appears to be the uncertainty over the future of QE.

 

[fatjohn]

Due to American deficits, open markets actually had gold double in that time frame. If you wanted to reclaim from the UST, yes it was flat.

could you explain/elaborate on/prove that?

 

[helmuth_hubener]

Gold has been the best performing asset for the past decade. You think it should be doing better than the best?

It is just that mathematically, it has not been going up as fast as the rate of dollar creation by the Fed. But yes, of course it has performed well, relatively speaking. I have certainly been happy about the gold I own over the past bunch of years. So to you I would ask a different question: what is the reason gold has performed so well?

Both are really two forms of the same question, which is: What is the reason gold has performed the way it has? (whether you consider that good or bad)

 

[oyarde]

could you explain/elaborate on/prove that?

I have no idea , and I drink a little , but seems like by Christmas of '72 the London price was around $64 , you could not buy any coins for that ....

 

[oyarde]

It is just that mathematically, it has not been going up as fast as the rate of dollar creation by the Fed. But yes, of course it has performed well, relatively speaking. I have certainly been happy about the gold I own over the past bunch of years. So to you I would ask a different question: what is the reason gold has performed so well?

Both are really two forms of the same question, which is: What is the reason gold has performed the way it has? (whether you consider that good or bad)

Well , it is a form of preserving some wealth in times of uncertainty. This economy is the perfect definition of uncertainty . The media spins everything as constantly, significantly improving . It is not. The Fed pumps the 85 billion, the markets have risen to rates that look unbelievable ...... meanwhile, there are few , very few ,median income jobs available or becoming available and the amount of people working , paying taxes is not great enough to prop up the social welfare state and debt rises by a Trillion a year. Social Security , Medicare money is not in that .The Health Care bill has permanently hindered decent job growth and will be a factor (negative ) , forever . Stop me at anytime if this sounds like a fantastic formula for success.... there will also be no spending cuts for at least the next three years...

 

[oyarde]

Think of it as a Poker game, you are going all in with your twenty acre farm , but are expected to match the remainder ofthe 2,340 acre farm in the pot , if you lose . There is the US ....

 

[Zippyjuan]

The Federal Reserve has been increasing the money supply a lot for this entire millennium -- since 2000. They were increasing it a lot before that too, of course. They have been especially increasing it from 2008 to present. There have also been a lot of crises and a lot of sentiment of uncertainty and worry. Yet gold has gone up only slowly and relatively moderately. Certainly it has not gone up proportionally to the amount of money supply increase that has occurred.

Why is that?

I have my own ideas, but I think it would be interesting to hear everyone's theories as to why gold has not performed better. Gold bugs and gold bears alike: please chime in!

Gold doesn't follow the money supply. Why did the price of gold fall from 1980 to 2001? I have observed that it generally follows economic expectations. If the economy is expected to be bad, the price goes up. If the economy is improving, the price of gold goes down. To answer my question I posed, the rate of inflation was declining from 1980 to 2001. As inflation declined, the price of gold also fell. The recent spike came when the economy collapsed and as the economy started to improve, the price of gold started back down again.

 

[eric_cartman]

gold was at around $250 per ounce back in 2000. It got as high as $1900 and we're almost back to $1400 right now. it's out performed almost every other asset class.

even though there has been inflation (rising prices)... it's not like prices are 5x higher than they were in 2000. Yes, your grocery bill is probably higher now than it was in the year 2000... but it's not five times more expensive. it's probably not even twice as much. look at the cost of a Big Mac for example. How much more expensive is a Big Mac right now, in comparison to what it cost back in the year 2000. now look at the price of gold right now in comparison to where it was at in the year 2000.

so gold has still done very well. it's still quite a bit higher than it was in 2008... whereas most other asset classes are only marginally higher at best.

even though the Fed has increased the base money supply a lot... the majority of the money supply is credit. even though the government is going deeper into debt, corporations and consumers are attempting to deleverage and pay down their debt. there are certainly exceptions like student loans, car loans, etc. but we're not seeing the same kind of credit growth that we saw leading up to the 2006-2007 peak.

the US dollar is still pretty strong. the US dollar index is around 80... so it's higher than it was back in 2008. we haven't seen massive inflation yet because the overall money supply isn't growing much and no one has started to dump US dollars or US dollar denomonated debt.