"The fact of the matter is gold does well in deflation. It also does well in times of credit stress. There is immense credit stress right now in sovereign debt in Europe.
Moreover, central banks have on-and-off stepped on the monetary pedal in unison to combat recessions and deflation. Gold has reacted to that. Recently, gold has reacted to Fed statements regarding QE3 and bond buying by the ECB.
Gold may or may not track short-term fluctuations in the US dollar, but on a long-term basis it is clear that it doesn't.
History suggests central banks will step up the printing presses again. When that happens, I expect gold to make another all-time high, perhaps just as the US dollar index makes another plunge below the 80.5 mark from well above it.
I Don't Know, They Don't Either
I do not know what the price of gold will be tomorrow, or next week, or any point in the future. No one else does either. Moreover, even if someone were blessed with the knowledge of where the US dollar index would be three years from now, that person would still be clueless about the price of gold.
Yet, I have lots of people asking me where gold will be and others telling me where it will be (based on the US dollar).
All anyone can really say is the fundamentals for gold are strong because the fundamentals for credit stress and central bank printing are strong.
When I perceive those fundamentals have changed, my position will change. In the meantime, we have had a relatively trivial drop in the price of gold to which many gold bugs threw in the towel in disgust..."
at http://globaleconomicanalysis.blogspot.com/2011/12/dear-nouriel-roubini-fundamental-case.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29
Moreover, central banks have on-and-off stepped on the monetary pedal in unison to combat recessions and deflation. Gold has reacted to that. Recently, gold has reacted to Fed statements regarding QE3 and bond buying by the ECB.
Gold may or may not track short-term fluctuations in the US dollar, but on a long-term basis it is clear that it doesn't.
History suggests central banks will step up the printing presses again. When that happens, I expect gold to make another all-time high, perhaps just as the US dollar index makes another plunge below the 80.5 mark from well above it.
I Don't Know, They Don't Either
I do not know what the price of gold will be tomorrow, or next week, or any point in the future. No one else does either. Moreover, even if someone were blessed with the knowledge of where the US dollar index would be three years from now, that person would still be clueless about the price of gold.
Yet, I have lots of people asking me where gold will be and others telling me where it will be (based on the US dollar).
All anyone can really say is the fundamentals for gold are strong because the fundamentals for credit stress and central bank printing are strong.
When I perceive those fundamentals have changed, my position will change. In the meantime, we have had a relatively trivial drop in the price of gold to which many gold bugs threw in the towel in disgust..."
at http://globaleconomicanalysis.blogspot.com/2011/12/dear-nouriel-roubini-fundamental-case.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29
