Gold’s Typical Correction During Cyclical Inflation

When inflation works to cover up the economy’s weakness, gold under-performs

Still we see them blaming manipulation and conspiracy, and still they are wrong.

Is gold manipulated? Yes. Are other markets manipulated? Yes. Does gold perhaps get gooned up worse than most? I think so, considering its utility. Gold is a tattle tale. The dinky kid in the front row who tells the teacher on you when you break rules like passing a note to Julie or smoking weed in the boys room.

Or printing money you don’t have to keep an illusion of prosperity (or viability for that matter) intact.

Less metaphorically, gold is insurance and as such it is a place holder for when things fall apart. Then insurance kicks in and keeps players whole. I wouldn’t think of not having insurance for my home or car. So why not my risk ‘on’ portfolio holdings?

Anyway, whether you view it this way or not it is still a good idea not to personalize the stupid rock. Not to wave flags and certainly not to…


Old fashioned promoters always want you to be pro-gold. “Go gold!”“got gold?” make sure you “Keep on stackin’!!” But the fact is that gold had major risk ‘off’ utility when risk was still ‘off’ in the eyes of the majority but now that risk is ‘on’ those very same riverboat gamblers have moved on to risk friggin’ ‘ON’. Get it? The herd is the herd is the fucking herd.

Now, here is what was an important chart when gold was bulling (indicating excess to the fear trades) and it is just as important now (indicating excess to the greed trades). We have views of gold vs. US and global equities, currencies and bonds as well, but this one is commodity-centric (with the reflation-sensitive US Materials sector thrown in for good measure). Where is the risk now and where is the reward? Beuller? Anyone?

Risk will not be realized in the stuff that is ‘on’ now until it is realized, and the reward will come to those with patience and the perspective not to be part of the cacophony that has now and in my experience always gotten it wrong on gold. Get inflation out of your head when thinking about gold. That can be a utility of the monetary metal, but it is not primary and until the inflation either fails or goes stag gold will under-perform.

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