gold

$1500 Gold Price Is Fair And Accurate

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Is $1500 a reasonable price for gold? Some of the more ardent gold “bulls” might say no. A price of $2000 per ounce should sound better to them. That particular number is likely more popular because gold’s price didn’t quite get there eight years ago, stopping just shy of $1900 per ounce.

Similar behavior occurred after 1980, when gold’s price assent was stopped at $850. At that time, $1000 became the price projection of choice.

In both cases, the expectations for gold were likely born out of desire, rather than fundamentals.

So, how can we know what is a fair and accurate price for gold today – right now?

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A Lesson About Gold – How Bullish Can It Be?

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A Lesson About Gold

Apparently, there is no limit. This seems especially true right now with all of the “obvious” signs and indicators staring you in the face. It is almost blasphemous to speak cautiously. Better to let your imagination run wild and join in the revelry.

I can’t do that. I don’t choose to be dumped into the same cauldron of boiling fantasy with other analysts and advisors, who tout and promote based on the latest headlines. There has to be more to it. I think there is.

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Gold Explodes, Then Implodes – Again

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GOLD EXPLODES, THEN IMPLODES

It shouldn’t be a surprise to anyone, because it has happened before.

Gold’s quick roundtrip from $1540 to $1610 and back again ($1539 earlier today) had its roots in actions and words between the United States and Iran. Prognosticators say there is more to come. Maybe; maybe not. But there is historical precedent for gold’s action.

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Gold Peaked In 1980

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When gold’s price reached $850 per ounce in January 1980, it seemed as if nothing would stop the runaway train that was headed straight for $1000 per ounce. But it was stopped, and began sliding downhill quickly.

By June 1982, two and one-half years later, gold’s price had declined by sixty-five percent. At close to $300 per ounce, the price of gold seemed farther away from the $1000 mark than ever before.

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What If Gold Is Not In A New Bull Market?

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What if it’s not a new bull market for gold? What if gold prices are going lower – not higher?

Think it can’t happen? Think again.

In December 1987, gold prices stood at just over $500.00 per ounce. They had been on a tear for the previous three years after hitting a post-peak low of just under $300.00 per ounce in February 1985.

The increase in gold’s price of $200.00 per ounce may not sound like much, but it represents a sixty-seven percent increase over that three year period. Coming on the heels of a similar percentage decline after reaching an all-time high of $850.00 per ounce in January 1980, it was a welcome salve for those who had been wounded so severely.

Proclamations of a new bull market were abundant.  Expectations for exceeding the old highs had some investors fantasizing rabidly. They were rudely disappointed.

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Price Of Gold Is A Reflection of US Dollar; Not US Dollar Index

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Several articles by others recently have pointed out the apparent inconsistency of the US dollar’s action relative to the price of gold. For example, over the past year the US dollar Index has continued to strengthen, while gold has also risen in price.

That would seem to indicate that the US dollar’s value is not a primary factor in determining the price of gold. As we have said, though, the US dollar Index is not the same thing as the US dollar. The two are not interchangeable.

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For Gold, The Fed’s Decision Didn’t Matter

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THE FED’S DECISION

Pretty much everyone got it wrong.  Yes, they got the rate cut they were expecting; but as far as the price of gold is concerned, the Fed’s decision didn’t matter. The reason for this is that the focus on the Fed’s decision was misplaced.

It was a case of simple logic. But the logic was based on a faulty premise and led to unrealistic expectations.

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Gold’s Breakout And The US Dollar

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GOLD’S BREAKOUT

If you are bullish on gold prices right now, you are running with the crowd. That is perfectly fine, unless the crowd is running in the wrong direction. Or, maybe the race hasn’t started yet.

With all of the talk about fundamentals for gold, it would be nice if someone could set their emotions aside and look at some facts that might bring some clarity to the subject.

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Has Gold Broken Out Or Not? Technicals And Fundamentals

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HAS GOLD BROKEN OUT?

A casual glance at the latest short term chart for GLD would tend to support the notion that, yes, gold has decidedly broken out of its trading range and is headed higher.

Below is a two-year chart of GLD (bigcharts.marketwatch.com) with the latest activity (June 21, 2019) updates…

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Gold, MMT, Fiat Money Inflation In France

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“Modern Monetary Theory (MMT) is a heterodox macroeconomic framework that says monetarily sovereign countries like the U.S., U.K., Japan and Canada are not operationally constrained by revenues when it comes to federal government spending. In other words, such governments do not need taxes or borrowing for spending since they can print as much as they need and are the monopoly issuers of the currency.”  Investopedia

Of course governments are not ‘constrained’ by revenues. They have always been able to “print as much as they need”.

Modern Monetary Theory is not ‘modern’. Far from it. 

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