Archive for deflation
From a long-term perspective, gold is a bargain at recent prices in the $900 to $930 an ounce . . . and will remain so even as it begins to move into a higher trading range.
Recent gold-market developments and technical price action — along with broader economic and financial-market developments — suggest gold is bracing for a resumption of its long march upward and a retest of its historic high in the months ahead.
First and foremost, the bullish outlook for gold rests on the increasing likelihood of accelerating U.S. inflation in the years to come — and an associated unprecedented rise in investor demand for the yellow metal.
This nascent inflation has not yet been reflecting in world financial markets. But, judging from anecdotal evidence and the financial press — and the warnings of a growing number of institutional investment managers — we believe a gradual, subtle, but important, upward shift in inflation expectations is already underway.
Inflation Expectations
Inflation doves (and others fearing imminent deflation) point to the currently low, almost negligible, rates of consumer price inflation and the narrow interest-rate spread between ordinary U.S. Treasury securities and U.S. Treasury Inflation-Protected Securities (TIPS) as evidence that inflation and inflation expectations remain subdued. This — along with other important factors that we’ll discuss in subsequent posts — has helped keep gold prices down in recent months.
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Filed under: Gold Briefs | American Precious Metals Advisors, deflation, economics, economy, gold, gold price, inflation, Jeffrey Nichols, monetary policy, money supply, Quantitative Easing|No Comments
The World Economic Crisis and the Outlook for Gold
Shanghai, China / December 4th, 2008
Thank you Mr. Chairman for that flattering introduction and thank you to the conference organizers who have made it possible for us to exchange information and insights into the future of gold here in China and in the global marketplace.
You should know that my presentation today will be posted on my website, NicholsOnGold.com, so you can easily check back in a few days, or a month, or a year – to review my analysis and my expectations for gold.
A few weeks ago, I mentioned to a Chinese acquaintance in New York that I would be traveling to Shanghai. He said, with some excitement that his family was originally from Shanghai and that he still had relatives here. Then he told me about a friend of his grandmother . . . a very old lady who is a fortuneteller of great repute. He said, in all seriousness, that I must visit her before speaking here today on the outlook for gold, just to be sure, and volunteered that his cousin would accompany me and translate.
So yesterday afternoon, we visited the old lady in her new apartment. We were offered tea and sat down together to talk. Finally, I asked: “So where do you see the price of gold next year?” To which the old lady replied: “Well, young man, we’ll just have to wait and see.”
Jeff Nichols addresses China Gold Summit
What the old fortuneteller really meant was this: Global asset markets have jumped into another dimension – a non-linear “Alice in Wonderland” universe – where the irrational and unpredictable have suddenly become the most likely.
Indeed, writing a forward-looking speech – at this moment of unprecedented worldwide economic crisis and uncertainty – has been like trying to hit a fast-moving target. Today, the price of gold has less to do with ordinary supply and demand fundamentals . . . and much more to do with fear-driven investment and speculative demand at the margin.
Every country is now affected by the spreading recession. From day to day, the business news worsens, bankruptcies and unemployment mount, one central bank after another cuts interest rates, new fiscal initiatives and other policies are undertaken – some of them seem wise, others may prove to be less so – and the United States, still by far the world’s largest economy and dominant political force, is in the midst of changing Presidents and changing directions in Washington.
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Filed under: Speech | American Precious Metals Advisors, central banks, China, deflation, economics, economy, gold, gold price, inflation, Jeffrey Nichols, monetary policy, money supply, Quantitative Easing, Sovereign Wealth Fund, U.S. dollar|1 Comment
Gold was bound to rise once the selling abated . . . and each day it remains in $800+ territory, the technical picture and the yellow metal’s good fortunes improve.
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Filed under: Gold Briefs | China, deflation, economics, gold, gold lending, gold price, inflation, Jeffrey Nichols, monetary policy|No Comments
Gold’s relative price strength in recent days — in the face of plummeting U.S. consumer and producer prices, declining prices for oil and other (non-precious metals) commodities, and lower multi-year lows in world equity markets — suggests that the yellow metal, technically speaking, may be building a solid base in the $770 to $800 range from which to embark on a sustainable advance into higher territory.
Interestingly, gold has been outperforming silver and the PGMs, suggesting that investors and traders are differentiating among the metals, favoring gold as a monetary asset, safe haven, and hedge.
Deflation in the Air
With all the talk suddenly about deflation, gold- and silver-market participants need to know just what effect deflation might have on these precious metals.
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Filed under: Gold Briefs | deflation, economics, gold, gold price, inflation, Jeffrey Nichols, silver, silver price|No Comments
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