Central Banks’ Balance Sheets vs. Gold

By -

(Editor’s note – Gary Tanashian gives us the post below, which is timely given my newfound love of gold. Just to be clear, particularly for the miners, I am long precious metals as a bounce play; I am as bearish on miners as ever – – I don’t feel nearly as strongly about the metals themselves – – and have every intention of shorting the bejesus out of miners once they’ve bounced; however, some of the battered miners might spring 50% higher from current levels, so it pays to wait – Tim)

The noise of the day includes much hand-wringing about gold
manipulation, gold’s precarious technical situation, the end of gold as a
useful tool for protection against inflation and even the end of its
bull market.  But maybe a simple look at the facts works better.


Central Banks’ Balance Sheets vs. Gold. Source: DoubleLine Funds

There was a reason that rational people needed to be guarded during
the Euro Jerk (knee jerk reaction into gold on a global scale) influx in
2011.  By the measure of global Central Bank inflation activity at
least, gold has simply remained on trend.

But never let the facts get in the way of a good story.

Bull Camp:  They are manipulating gold to hide their evil intentions!

Bear Camp:  The bull market is over!  See?  The charts have broken down (200 day moving average has been lost!  Oh my).

Fact:  Gold is on trend with global inflation efforts by this measure.

Fact:  Gold is above the lows of last summer.

Fact:  If gold loses those lows, it would be technically broken, but not until.

Fact:  Sentiment is now opposite its hyper over bullish state from
the summer of 2011.  Gold newsletters and the public are near limit-down

Fact:  The herd is always wrong at important junctures.

Being a contrarian is hard.  Gold was going to the moon in 2011
because after all, price was rapidly accelerating upward and everybody
knew that the Euro crisis was ending the world as we know it.  Today we
have ridiculous articles showing up in the MSM about how the Dow is the
new safe haven.

The world turns folks and people never seem to change.  Gold bugs get
damaged by unrealistic expectations and the herd is well… the herd. 
Always wrong in the end.  The graph above is just one of several
developing pictures that says “gold is fine”, just as I have been saying
since I started this website in 2004.  All the other noise, whether
over bullish or over bearish is just casino patrons, self-promoters and
assorted other wise guys and market geniuses throwing their hats into
the ring.

Understand value and don’t stress about price.  Gold is not about
price.  It is about keeping up with things like the blue line on the
graph above.  Furthermore, should the market impose austerity on these
inflating pigs one day, gold may go down right along with the tale of
their inflationary tape.  Deal with it.


Mark This Post as a Favorite