Gold Prices Are Down, But Gold’s Not Out

Gold prices have been on a long downward slide since peaking at $1921.50 per ounce in September 2011. But this past Monday’s price plunge was different. With the Japanese markets closed for a holiday and long before the European and United States markets were open, some 33 tons of gold were sold on the Shanghai Gold Exchange in just two minutes.

Certainly, with major banks recently convicted of felony charges for manipulating the Libor interest rates and rigging the $5.3 trillion-a-day foreign-exchange markets, suddenly dumping double the amount of gold than the Exchange handles on an average day and in a thinly-traded market, leaves room for suspicion. The headlines, however, told a different story: “Gold hits lowest level in five years amid signs of US economic recovery,” Financial Times, 21 July 2015. Money and Power: How G... Cohan, William D. Best Price: $2.14 Buy New $9.60 (as of 08:50 EST - Details)

The general consensus for gold’s decline is that gold is seen as a hedge against inflation and a weak dollar. But with America’s economy rebounding, the dollar strengthening, and the prospects for US interest rates to rise, gold has lost its glitter.

Not according to our forecast. In fact, some of the very reasons given for gold’s decline – such as commodity prices from metals, energy and agriculture falling sharply – we see as warning signs that signal a positive trend line for gold.

Tower of Basel: The Sh... Adam LeBor Best Price: $11.05 Buy New $10.76 (as of 05:55 EST - Details) Commodity prices are tanking because much of the world is suffering an economic slowdown. Indeed, the International Monetary Fund recently downgraded its global economic growth forecast for 2015, predicting it will be the worst year since 2009. China, for example – in midst of an economic slowdown, an equity market calamity and trying to keep its real estate bubble from bursting – absorbs some 50 percent of copper, iron ore and coal exports. Thus, nations rich in commodity resources, such as Canada, Australia, Brazil, Venezuela, Peru, Russia, Nigeria, Angola, Chile and Indonesia, are in recession or heading into one as demand for their exports declines worldwide.

As for gold going down “amid signs of US economic recovery,” that belies the facts. Retail sales, which account for some two thirds of America’s GDP, are flat to weak. And the White House downgraded their growth forecast from 2.9 percent to 2 percent for 2015.

Going for the Gold

Gold is much more than a hedge against inflation and a weak dollar. Gold is the safe haven asset when economies are failing, currencies are being battered, geopolitical crises mount and equity markets, pumped up by cheap money policies, risk crashing. These are the current events forming future trends that support our forecast for a greater long-term upside potential for gold compared to the current downside risk.


Broken Markets: How Hi... Saluzzi, Joseph C. Best Price: $7.44 Buy New $24.98 (as of 05:40 EST - Details)

The Secret Club That R... Kate Kelly Best Price: $2.23 Buy New $16.87 (as of 09:55 EST - Details)

The Great Deformation:... David A. Stockman Best Price: $2.00 Buy New $9.95 (as of 09:55 EST - Details)

The Death of Money: Th... James Rickards Best Price: $0.25 Buy New $3.50 (as of 10:20 EST - Details)

Political Theatre

LRC Blog

LRC Podcasts