Well, well... what bottom? LOL
So Stagflation is upon us? Currently 10 yr UST bills have a yield of 1.5%. This implies a market expectation of 1.5% inflation per year over the next 10 years.
What has caused the largest rise in gold prices: Actions of the central banks, or Fund investments in gold ETFs? Tick tick tick... time is up. It's a trick question. The answer is neither. The largest driver has been the demand for gold in China quadrupling. Why? Because the average Chinese buying gold jewelry (e.g. 24 karat 99% gold) still doesn't trust their system of government. Or using their money to invest in the Chinese stock market - can't blame em there. But as that trust increases, their demand for gold will drop. Why? Because they will be investing in higher return stocks, and bonds.
That's right, over the past 40 yrs US real estate returned an average of 12% per year compared with 11.4% for stocks, 7.5% for bonds and 5.4% for gold. Only in the bear markets of 2000-2002 and 2008-2009 did gold outperform US stocks. This blue print will eventually occur in the emerging Chinese market.
So unless stagflation occurs (instead of the current deflation pressures), and one believes the Chinese will never invest in their own market or diversify their investments in the future, then the bottom for gold is not in. Do I hear a bid at 1000? 900?
The Jewel of the Mind is Colored with the Hue of what it Imagines
