{"id":37793,"date":"2013-04-24T14:36:09","date_gmt":"2013-04-24T18:36:09","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37793"},"modified":"2013-04-24T12:36:32","modified_gmt":"2013-04-24T16:36:32","slug":"ignore-the-goldfrueders-gold-remains-a-great-store-of-value","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/24\/ignore-the-goldfrueders-gold-remains-a-great-store-of-value\/","title":{"rendered":"Ignore the “Goldfrueders”… Gold Remains a Great Store of Value"},"content":{"rendered":"

By Justice Litle<\/strong><\/p>\n

Conventional wisdom on Wall Street is often worth the price paid (i.e., nothing). But some hoary nuggets have value.<\/p>\n

“Sell in May and go away,” for example, is based on a true and powerful phenomenon.<\/p>\n

As Mark Hulbert reports on MarketWatch<\/a>:<\/p>\n

Over the past 50 years, the Dow, on
\naverage, has produced a gain of 7.5% during the winter months and lost
\n0.1% during the summer months.<\/em><\/p>\n

The “sell in May pattern also exists
\nin other countries besides the US. Ben Jacobsen, a finance professor at
\nMassey University in New Zealand, reached that conclusion after studying
\nall available historical evidence from each of 108 separate stock
\nmarkets around the world. For example, his statistical tests detected
\nthe seasonal pattern in the British stock market as far back as 1694.<\/em><\/p>\n

Any pattern with that kind of staying power is driven by very
\npowerful forces. That the pattern is global is further evidence it is
\nworth paying attention to.<\/p>\n

And in 2013, something more ominous lurks. Commodities, Treasurys and
\nrecent economic data readings are openly telegraphing deflation and the
\nfailure of central banks in the developed world to revive flagging.<\/p>\n

You don’t have to look too hard for telltale signs of deflation.
\nPrices for crude oil and copper \u2013 two of the most growth-sensitive
\ncommodities \u2013 are falling, not rising.<\/p>\n

Treasury bond yields are falling<\/a>, not rising (despite no changes in Fed buying). Falling yields are a classic deflation omen.<\/p>\n

In the US, recent manufacturing and jobs data have disappointed. So have retail sales and consumer confidence readings.<\/p>\n

New fears of deflation and global slowdown also help explain gold’s recent price declines.<\/p>\n

If the world is slowing in spite of massive debt monetization by
\ndeveloped-world central banks… and if European leaders can strong-arm
\nbankrupt governments in Cyprus and Portugal into selling their gold…
\ninvestors are starting to question gold’s value as a hedge against
\ninflation and further fallout from the ongoing European crisis.<\/p>\n

But to write off gold’s long-term value would be myopic. <\/strong><\/p>\n

A period of price adversity, coupled with a flushing out of “weak
\nhands and hot money holders, is a far different thing than permanently
\ndismissing the value of gold or declaring the decade-plus gold bull
\nmarket to be “over.<\/p>\n

For that to happen, you would have to see the macroeconomic drivers
\nbehind gold’s 13-year bull market change… and change significantly.
\nAnd that clearly isn’t the case.<\/p>\n

Have central banks in the US, Japan and Britain stopped deliberately debasing their currencies<\/a>?
\nNo. Have the deadly serious economic issues plaguing Europe, the US,
\nChina and Japan tied themselves up with a neat little bow? No. Has there
\nbeen a swing from negative real interest rates in the developed world
\n(and China) to positive real interest rates? No.<\/p>\n

This hasn’t stopped an outbreak of joy at the sharp decline of gold
\nprices \u2013 what you might call “goldenfreude \u2013 in the mainstream press.
\nMost of this, of course, comes from neo-Keynesians such as Paul Krugman.
\nBut it has nevertheless rattled the nerves of many individual gold
\ninvestors.<\/p>\n

If you own gold… or are thinking of buying some following recent
\nprice declines, you must first understand that gold’s recent sellers
\nfear deflation.
\nYou must also grasp two important things about deflation:<\/p>\n

    \n
  1. Modern central bankers loathe and fear deflation more than anything.
    \nThey will do anything to stave off the threat of a deflationary downward
    \nspiral.<\/li>\n
  2. The “first deflation, then inflation scenario still ultimately
    \nmanifests inflation 100% of the time. This happens either by way of late
    \nwithdrawal of monetary stimulus by central bankers in the case of a
    \ngenuine recovery… or because central banks go “all out to defeat
    \ndeflation and end up severely debasing fiat currencies as a result.<\/li>\n<\/ol>\n

    In this light, drivers of the gold sell-off make sense. It has
    \nnothing to do with the false narrative painted by the “goldenfreuders.<\/p>\n

    Understanding this allows us to foresee the endgame. One way or
    \nanother, gold’s status as a store in a time of central bank folly will
    \nbe confirmed.<\/p>\n

    Carpe Divitiae,<\/p>\n

    Justice<\/p>\n

    \n
    \n

    Disclaimer<\/span><\/span><\/span><\/h3>\n
    \n

    Article brought to you by Inside Investing Daily. Republish
    \nwithout charge. Required: Author attribution, links back to original
    \ncontent or     www.insideinvestingdaily.com<\/a>. Any investment contains risk. Please see our disclaimer<\/a>.<\/em><\/p>\n

     <\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    By Justice Litle Conventional wisdom on Wall Street is often worth the price paid (i.e., nothing). But some hoary nuggets have value. “Sell in May and go away,” for example, is based on a true and powerful phenomenon. As Mark Hulbert reports on MarketWatch: Over the past 50 years, the Dow, on average, has produced … <\/p>\n

    Continue reading “Ignore the “Goldfrueders”… Gold Remains a Great Store of Value”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-37793","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/37793","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=37793"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/37793\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=37793"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=37793"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=37793"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}