Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Inflation as the Debt Ridden Western World Deflates Against the Price of Gold

Commodities / Gold and Silver 2010 Dec 07, 2010 - 01:33 AM GMT

By: Anthony_J_Stills

Commodities

Best Financial Markets Analysis ArticleLast night the US Federal Reserve chairman, Ben Bernanke, went on “60 Minutes” and said that he is not printing money and that the first two rounds of quantitative easing does not constitute printing and did not increase the money supply. Mr. Bernanke never went so far as to say exactly what it is or where the four trillion dollars comes from. The Fed doesn’t have four trillion dollars and it never did, no one loaned it the money, it shows assets of almost US $3 trillion on its balance sheet so where did these assets come from? Then he went on to say that yet another round of quantitative easing (QE3) may be necessary. Mr. Bernanke must think he is talking to a nation of brain dead individuals, and maybe he is, because how else do you explain how we got into the mess we’re in now.


Everybody is concerned that quantitative easing will lead to inflation and that could be the case but I have my doubts. In the first place it all depends on what measuring stick you use when calculating the rate of inflation. If you measure inflation in dollar terms, or even Euros for that matter, you may have a point. That is a nominal measurement. In order to understand if we have inflation in real terms you need to use a real measuring stick, and nothing is more real than gold. The yellow metal has been in a bull market for more than a decade and the secondary trend has been decidedly up since October 2008. It has rallied with and against the Dow, with and against fiat currencies and with and against commodities. If you want to see if things are truly inflating, measure the movement of their prices against the movement of the price an ounce of gold.

Here I am measuring the rise of the prices of a number of commodities in terms of oil, copper, grains and cotton and over the last two years all of them have deflated in terms of the price of gold. Only cotton has come close to holding its value in real “gold” terms. Also, you may recall that in the December Newsletter I demonstrated that the Dow, as good as it’s been since the February 2009 low, has lost value against an ounce of gold over that last two years, and by the way so have bonds (not shown).

So with Bernanke openly talking about QE3, and the ECB talking about increasing their permanent rescue fund, it should come as no surprise that the price of commodities, and even stocks over the short run, will rise in dollar and/or Euro terms. But in real terms, measured against a store of wealth that cannot be created by simply pressing a computer key, we are experiencing deflation and that is just what you would expect in a debt-ridden Western world. Asia on the other hand will escape most of the deflationary pressures because they save, they avoid deficits for the most part, and sooner or later they’ll peg their fiat currencies to an ounce of gold. That’s also why February gold is up 10.80 at 1,417.00 this morning when just about everything else is in the red. China, India, Russia and Brazil are all moving to gold in a very big way and that will drive the price much higher sooner rather than later.  

Anthony J. Stills
analyst@theablespeculator.com

www.theablespeculator.com

© 2010 Copyright Anthony J. Stills - 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.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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