New, unlimited money-printing from the Federal Reserve. Unlimited euro-printing from the European Central Bank. And that’s not all.
Japan’s central bank is printing more yen. The Bank of England is on the fray as well, announcing even more pound-printing.
And yet, as you can see from this chart, the price of gold has not even bettered this year’s March high at roughly $1,802, nor last year’s November high at the $1,823 level.
Despite all the money-printing, gold has not even made new highs above those levels.
So where’s the beef? Where’s the evidence that gold is now headed to $5,000?All that money-printing, and gold is nearly $150 below its all-time record high.
Where’s the evidence that all that money-printing is overpowering the credit contraction that’s occurring nearly worldwide?
Where’s the evidence that inflation is about to break out to the upside and send the U.S. economy into hyperinflation?
There isn’t any.
In fact, gold is telling you exactly the opposite: That more debts are about to be liquidated than the central banks can offset with money-printing.
That inflation has not yet broken out to the upside.
That there isn’t even record demand for gold right now; instead, demand is actually slumping.
Look, I would love nothing more than to tell you that gold has finally embarked on its next leg up to $5,000-plus.
But the fact of the matter is that there is no evidence that it has. Period.
That evidence may yet come, but until it does, I’m not willing to stick my head out and load up on more gold. Nor should you.
So let me state for the record: I will NOT change my interim forecast for gold to go bullish until spot gold has closed above $1,823 an ounce on a weekly and monthly basis. That will be the signal that gold’s next leg up is beginning.
Until then, gold remains highly vulnerable to a move back down to the $1,400 level, perhaps even a tad lower.
Until then, gold remains highly vulnerable to the kind of action we saw this week in crude oil. Crude oil, with all the geopolitical tension with Iran and in the Middle East — coupled with all the money-printing — should be soaring, right?
Well, dead-wrong. The price of oil collapsed this week, plunging more than $9 a barrel — a full 9.4%, in a matter of days.
Or gold may end up looking like the rout that occurred in the grain markets this week, where soybean prices plunged 8.4% — despite nearly everyone remaining wildly bullish on food prices.
Don’t get me wrong. I am extremely bullish on gold prices over the long term.
And I will issue the signal to buy more gold as soon as the coast is clear and we see, as mentioned above, gold close above $1,823 on a weekly and monthly basis.
So then, the question of the day must be: With all the money-printing going on, why hasn’t gold broken out yet?
Why is gold below its March 2012 and November 2011 highs?
To me, the reasons are simple:
First, money-printing means absolutely nothing when most of the money being printed is merely ending up sitting in banks. The banks are not lending and, instead, that money is parked back with the Federal Reserve in the form of excess reserve deposits, for which the Federal Reserve is paying 0.25% interest to the banks!
Second, all that money-printing means nothing when consumers aren’t interested in adding to debt by increasing their borrowings and credit lines ... and the velocity of money, or its turnover, is virtually non-existent.
Ditto for corporations that are conserving cash and largely paying down or refinancing debt rather than taking on new debt.
hird, all the money-printing means practically nothing when Europeans are still scared to death the euro will fail, and are pulling their money out of European banks like there’s no tomorrow; some $465 billion in capital has fled the euro region in the past three months alone.
In short, money-printing by itself means nothing. If it did, gold would already be at new record highs. And it’s not.
The dollar would already be at record lows. And it’s not.
Crude oil would be soaring. And it’s not. Most other commodities would also be soaring. They’re not, either.
All the conditions necessary for the next leg up in gold and commodities are not here yet.
So if you think it’s a no-brainer now that gold is taking off to the upside like so many investors and analysts do think, I urge you to be skeptical and very, very careful.
Until next time ...
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