Direxion Daily Gold Miners Be (DUST)

[Sgreg]

This is exactly what I mean

"The Bank has sought for three years to push inflation up to its target level, spending 700 billion euros on asset buys in the past year alone. But it has been to no avail amid weak investment, high unemployment, high debt and productive slack in the economy.

Draghi announced that ECB staff had slashed its inflation and growth expectations, predicting that even with fresh stimulus, price growth will not reach its target for years to come and growth will slow."

As I have been trying to say. Gold is a hedge against inflation not really a very good hedge against the market. Inflation is good for gold and deflation is bad for gold.

As everyone can see, no matter what the ECB tries they are stuck in mud and can not get any inflation going. Deflation is feared. In Asia it is the same. China is imploding. These are all deflationary stories playing out which is bad for gold. Gold needs inflation to thrive.

In the US data is not too bad and the FED desires to raise rates. Raising rates is a deflationary measure. The rest of the world is doing inflationary measures but it is not working and they are fighting like mad to fight off deflation. Only the US is having inflation but the FED desires to raise rates which will be a deflationary measure.

In my opinion this is bad for gold. Gold like anything else loses value during deflationary times. During 2008 deflation was hitting and what did gold do? It spiked down. What did gold miners do? They spiked down. Deflation takes everything with it. Cash is king during deflation and everything else bows to it, including gold.

Why gold would be up like this so far this year really makes little sense to me. It is the hedge against inflation (not markets) but there is no inflation and none is really expected. Fears of deflation are growing though.

I am going to wait a bit longer but I will be owning DUST pretty soon. The market will fix this bogus rise in gold soon as there was not the inflation in economies this year to justify such a rise.

This is why there had been a big rise in gold for a few years since 2009. In 2009 all the central banks started stimulus. The thought was that over time this would lead to big inflation. Gold went on a tear for a few years.

The past several years however gold has been coming down. It has been going down because again, it is the hedge against inflation and as time went on people started to see that even with all this stimulus from central banks inflation never really took off. This is why gold has struggled the past few years.

Now, has this story of lacking inflation changed today? No it has not, matter of fact it is getting worse. Therefore gold, in a world lacking inflation and fighting off deflation, should be heading down.