Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21
Scan Computers - How to Test New Systems CPU, GPU and Hard Drive Stability With Free Software - 4th Jun 21
Hedge Funds Getting Bullish on Gold - 4th Jun 21
THERE ARE NO SOLUTIONS When the Media is the VIRUS - 4th Jun 21
Investors Who Blindly Trust the ‘Experts’ Will Get Left Behind - 4th Jun 21
US Stock Market Indexes Consolidate Into Flagging Pattern – Watch For Aggressive Trending Soon - 4th Jun 21
Microsoft (MSFT) Stock Trend Analysis - 3rd Jun 21
No More Market Bloodbath – Beyond Cryptos - 3rd Jun 21
Bank run, or run from the banks? - 3rd Jun 21
This Chart Shows When Gold Stocks Will Explode - 3rd Jun 21
The Meaning Behind Gold’s Triple Top - 2nd Jun 21
Stock Market Breakout Or Breakdown – What Does The Next Big Trend Look Like? - 2nd Jun 21
Biden’s Alternate Inflation Universe - 2nd Jun 21
What You Should Know Before Buying Car Insurance - 2nd Jun 21
Amazon (AMZN) Stock Summer Prime Day Discount Sale - 1st Jun 21
Gold Investor's Survival Guide - 1st Jun 21
Silver and Copper to Benefit from Global Electrification Push - 1st Jun 21
Will Gold Shine Under Bidenomics? - 1st Jun 21
Stock Market Buy the Dip, Again?! - 1st Jun 21
Stock Market Consolidation Ahead - 1st Jun 21
Stock Market Summer Correction Review, Crypto CRASH, Bitcoin Bear Market Initial Targets - 31st May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold is Dead and Neitzsche had Nothing to do with it

Commodities / Gold & Silver 2009 Feb 05, 2009 - 10:53 AM GMT

By: Oxbury_Research


Best Financial Markets Analysis Article“Gold kind of scares me because very often the people involved with it seem to be slightly insane.”– James Montier, head of equity research, Societe Generale, London

Some say that it doesn't matter when you buy gold, that you should buy it regularly and always, and that it represents the only true store of value. Fair enough. When all is said and done, buying gold may be the only means of acquiring real wealth for the very long term. Especially today, when all major currencies are devaluing by hook or by crook – some voluntarily, others not so – it behooves an investor to shore up his gold holdings.

Yet at the same time, from a pure investment point of view, it's never a good idea to sink money into a depreciating asset. That's what the smart guys call “dead money.” And when it comes to gold, which neither pays a dividend nor offers interest, a decline in value against other asset classes is not something we want to bear, if given the choice.

That in mind, we come (again) to comment on the current price level of the yellow metal, and to suggest what is to be done for those who currently hold bullion and/or gold stocks, and those who are considering making an imminent purchase.

First the case for immediate purchase:

  1. Gold is a hedge against inflation (so they say), and we have massive inflation in the pipeline .
  2. Gold is a safe haven and will rise due to continued financial troubles globally.
  3. Gold is the only currency capable of replacing the fiat currency monstrosities now in use the world over.
  4. Bullion supply is declining.
  5. Investment demand for gold is underpinning a steady, unstoppable rise in price. The chart below clearly shows the increased role ETFs are playing on the demand side – irrespective of the price of the metal.

And now the case against:

  1. Weak fabrication demand. Gold jewellery accounts for about 60% of global gold sales. In times like these, though, it's hard to imagine buying the dear Mrs. another dear piece of jewellery.
  2. A strong dollar would take the wind out of gold's sales, and could drive it significantly lower.

It's to this latter point we now turn our attention.

Look here

You're looking at a chart of the U.S. Dollar Index for the last year. We've brought it to make a comparison with gold, but first a brief explanation.

Gold and the dollar have an inverse relationship; when one is rising, the other falls. It hasn't always been this way, but long enough to be relevant to those of us who care about timing our gold purchases. According to Bloomberg , gold and the dollar have had a

-0.7% correlation over the last five years. That's significant. Now look here:

This is gold over the same time frame. Note the correlated decline in price.

Research from the World Gold Council shows that the correlation between gold and the dollar is stronger when the latter is falling. At such times “investors tend to diversify away from dollar-linked assets, boosting the negative relationship between the two.”

Fine. But that leads us to the $64,000 question: what to make of the purple, boxed areas on the right side of both charts.

On the one hand, we have a dollar that pulled back significantly after its rise into December, and which is now moving up to test its previous highs. And on the other, we have gold's uninterrupted climb of $200 from its late November lows around $720. How do we account for this? What happened to the inverse relationship? Should we expect things to look different? Or is this just one of those times (30%) when the two don't correlate?

Or could it be that the World Gold Council's research explains it. Could it be that the dollar's fall led to a “heightened” inverse correlative with gold, a sort of extraordinary stimulo-genesis of the AU tissue in goldbugs the world over that led to frenzied buying and will yet prove their undoing when they wake up to the fact that the dollar may yet spike to new highs!?

And what will happen to their gold rally then, friends?

The NEGATIVE CORRELATIVE (ha, ha, ha – I'm a bloody genius!) has been delayed. But it will not be denied!

More butter! NOW!

Matt McAbby
Analyst, Oxbury Research

After graduating from Harvard University in 1989, Matt worked as a Financial Advisor at Wood Gundy Private Client Investments (now CIBC World Markets).  After several successful years, he moved over to the analysis side of the business and has written extensively for some of corporate Canada's largest financial institutions.

Oxbury Research originally formed as an underground investment club, Oxbury Publishing is comprised of a wide variety of Wall Street professionals - from equity analysts to futures floor traders – all independent thinkers and all capital market veterans.

© 2009 Copyright Oxbury Research - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Oxbury Research Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


05 Feb 09, 14:44
Gold: Everyone has an OPINION

You stated this:

And now the case against:

Weak fabrication demand. Gold jewellery accounts for about 60% of global gold sales. In times like these, though, it's hard to imagine buying the dear Mrs. another dear piece of jewellery.

A strong dollar would take the wind out of gold's sales, and could drive it significantly lower.


To say that the VALUE of GOLD is tied to its JEWELLERY demand or Dental Filings is like comparing HUMANS to being sold as SLAVES. Many analysts who believe in the KEYNES THEORY OF FIAT MONEY would also value gold and silver as a mere COMMODITY. This is no surprise as the KEYNES THEORY of FIAT MONEY has been INDOCTRINATED in the WHOLE COLLEGE SYSTEM as well as PUBLIC and PRIVATE SECTOR.

FIAT MONEY was a nice EXPERIMENT. Gold has been around for thousands of years. TWO-BIT ANALYSTS and ECONOMISTS who want to DIG UP KEYNES and keep his pathetic THEORY of FIAT MONEY ALIVE....are the very ones who are saying GOLD IS DEAD.

06 Feb 09, 09:49
Nietzsche ist nicht tod

Matt I would be happy to buy your last gold coins from you and you enjoy my (fiat) pounds!

06 Feb 09, 13:17
Gold half-baked argument!

If it is possible to have strength in the dollar while it has been de-valued through the Federal Reserve and its printing presses, then we are truly living in a fools paradise. Fiat currency or I.O.U's are only as good as those who have goods to back it. The United States manufactures very little. This country put its entire ecnomy in one global basket. Tru macroeconomics is to diversify assets and liabilites. If we make nothing and we export our debt (like Mortgage Backed Securities)to create ne wealth, then the mighty truly have fallen.

So where in your infinite wisdom is the back-up plan since the current vehicles of wealth have failed.

The emporor is naked. They are stealing from the global taxpayer to continue the illusion of wealth. Take heed, the banksters have been exposed. the stock market only works when everyone believes it should work. Its called collusion. The governments of the G-20 have raised us to believe its ok to share in the crimes they have been committing. Live free or die!

Matt W
07 Feb 09, 19:23
Backwards Gold Analysis

Ohh this article made me laugh.

I think you got your analysis backwards. You need to take into account the trillions of fiat U.S. dollars being printed.

Thanks but i'll keep my Gold.

10 Feb 09, 17:53
Manipulation is key

The recent fall in gold (against the dollar), not replicated in other currencies, began in run up to election. The rout changed course almost on election day. The elite surely are capable of a few months gold manipulation for their favorite Hollywood movie, aka, democracy, why has everybody missed this? Is it because market fundamentalists refuse to recognize that we don't have free markets, that there is a group of insiders who are capable of manipulating markets to a significant extent?

11 Feb 09, 06:00

what is neidsche? comes from "neid" ???

12 Feb 09, 08:47
Societe Generale

“Gold kind of scares me because very often the people involved with it seem to be slightly insane.”– James Montier, head of equity research, Societe Generale, London

Societe Generale SA 1-Year return: -62%

Gold 1-Year return: 0%

Brilliant strategists at SG.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in