Thursday, July 2, 2015
GOLD: What will it take to turn it around?
With the intensification of the Greek Crisis, gold continues to fall. This has led many to ridicule gold as a lost cause, a barbarous relic. If the Greek Crisis can 't move gold, they claim, nothing will. It no longer has use as a safe haven in the modern world.
Gold has not risen during the Greek Crisis, because it is a Greek Crisis. Gold didn't rise during the Crisis in Chad, or the crisis in Chechen, or the crisis in Iceland, or the crisis in Uganda. It won't rise if there is a crisis in your household either.
To understand Gold, you must understand one thing and one thing only. Gold is an alternate currency. it will rise when the stability of the major reserve currencies APPEARS TO BE threatened.
ALL markets reflect one thing and one thing only: THE CURRENT CONCENSUS REGARDING THAT MARKET.
Markets do not discount the future. If they did, they would never crash or spike. They would move in gentle slopes. That's just math.
Markets reflect current consensus.
Current consensus is the Dollar is stable. Current consensus is that the Euro is stable. Current consensus is that even the Yen is stable.
When this consensus is shaken gold will move. Not one second before.
When the Greek crisis is mirrored in Spain as Podemos takes power, and in France as Le Pen takes power, the consensus about the Euro will change. Then you'll see gold begin to rise.
When the crisis spreads to the yen, as China's recession intensifies, gold will move higher.
When the crisis spreads to the dollar, as the US engine is the only engine left to power the world, and it's anemic (statistically manufactured) 2 percent growth just isn't strong enough to hold up under that burden, then gold's rise will intensify, and it will spike.
But not until then.