Tilting at Golden Windmills

As posted at Biiwii this morning…

dq.windmillsThere is a writer we’ll call Don Quixote who is tilting at something that no longer really exists… the evil gold promoters that used to be taken seriously by innocents to the tune of near total destruction of their portfolios.

Don once went on about the gold cult and I even highlighted his post because I had been going about the gold cult as well. The cult-like aspect of the gold “community” (← a dead giveaway) was real, and the group-think that the 2001-2011 bull market fostered was very strong and really damaging to those who did not question its tenets until it was too late.

But here’s the thing… it is now 2015 and nobody takes gold bugs spewing about a $2,000 PoG (if there are any of them left) seriously. But still Don tilts at the active promoters he imagines around every corner. Methinks Don is creating a niche of his own, firmly within the new phenomenon that has manifested in Martin Armstrong’s wake. Behind Marty have come a growing number of those who would save us from the evil promoters.

Again, naming no names I’ll just say that I find it very curious that Don and at least one other entity negative on the gold promoters (“we won’t get fooled again”), along with Marty himself, had been promoted by poor cast out gold perma-bull Jim Sinclair in the past.

Speaking personally, while real analysis states that the gold sector’s fundamentals are not yet in line, cartoon analysis states that gold is bearish when “interest rates” rise. You see, cartoon analysis must – if it is going to achieve its goal of pulling the maximum number of readers, subscribers, customers, clients, etc. – be a connect-the-dots variety. As a friend told me when I began writing years ago “Gary, you’ve got to write at a 10th grade level; that’s the sweet spot for getting the most readers.”

Well, there is nothing simple about financial market analysis these days and Don’s railing against the gold promoters combined with a fixation on “interest rates” seems a bit cartoonish. Too many people obsess on “interest rates”, when it is interest rate relationships that matter most. But of course, this is beyond a 10th grade financial level.

While the correlation is by no means perfect over long periods of time and various cycles (with varying stimuli and inputs) we can see that gold has often gone with the spread between 10 year and 2 year yields over the long-term. The spread is currently bearish for gold and is one of the primary fundamentals we look at when stating that gold’s fundamentals are “not yet baked”.

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A rise in long-term yields would not necessarily be bad for gold if those yields rose faster than short-term yields. That would be a picture of policy falling behind the inflation curve. But what we have had lately is the pink dotted line (2 year yields) rising slowly but consistently while the 10 year yield has declined. That is absolutely bearish for gold because its implication is that monetary policy is tightening and inflation is nowhere to be found.

Now, why do you think I talk about ZIRP so often? It is because the 2 year is telling the Fed that it is long past time to raise interest rates on the Fed Funds, and yet…

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Okay, well this started out as a short post for me to vent on what I think is a new promotion going the other way to the old, debunked gold promoters. Now it is bogging down and threatening to get too talky. So I’ll just clip it here.

Bottom Line? Think for yourself at all times. Promo’s are everywhere, even here at Biiwii. Everything is a promotion because one definition of ‘promotion’ is…

“activity that supports or provides active encouragement for the furtherance of a cause, venture, or aim”

It’s a matter of deciding what is behind the promotion that is important. It has to be cross-referenced by the viewer and put to the acid test of one’s own knowledge base and consideration.

Postscript: It may well be that the anti-gold promoter cottage industry is just made up of people who have not yet gotten the memo that gold promoters are either extinct or thoroughly tuned out by the public. After all, it took a subscriber knocking me on the head to get me off that shtick. In other words, we are all human I guess, and that’s all the more reason each human has to think for herself.