Gold, Silver & Other Commodities

12 short months ago, the immediate future looked like a lock yet 2014 turned out to be a pretty good year for the powers that be and the economic theories that animate their behavior. 2014 should not have happened, but it did, and now the sound money community is left trying to figure out what it missed and, crucially, whether what happened refutes the sound-money/gold-bug case, or simply delays it. This article has the answer.

I must take Harry Dent to task regarding his adamant call of $250-$400 gold...In my mind he is dangerously "DELUSIONAL" because following his advice will place you in grave danger. Here's why.

2014 is ending unexpectedly for PMs, considerably weaker than what most thought would be sharply higher prices. Based on what the charts are conveying, at least the initial part of 2015 will not fare much better. Supply and demand are not the driving factors - world financial dominance is [and most]... PM “experts” are not focusing on this aspect. [Let me do so and show you how such a factor is the price trend in gold and silver in the charts provided.]

This one seems like a no-brainer. The government or the central bank prints more bonds, notes and bills, and prices for things go up in response. Gold is real money, so it must fluctuate along with the inflation rate. It’s basic physics but it doesn’t happen that way. Let’s examine the history of inflation and the precious metals since the low of the Great Depression.

A sensible story of causation regarding oil prices and stock prices made by countless economists is that "rising oil prices increase the cost of energy and therefore reduce corporate profits and consumers' spending power, thus putting drags on stock prices and the economy." Stunningly, as far as I can determine, however, no evidence supports that claim, as the discussion below will show.

There is a potential for gold to be forming a bottom, based on the explanation provided on the chart below, but there are a few steps that must be met before anyone can say, “The bottom is in.” If these simple but important steps are not met, then there is the likelihood that yet another low can occur.

Every bottom undergoes a process of retesting but none is yet apparent in gold & silver. In the early part of 2014 we said that the second half could likely be more of the same as it was in 2013, and with just a few weeks away from the end of the year, prospects for 2015 can equally be brought into question regarding the price appreciation of gold and silver.

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Since 1999 the gold price has moved in concert with the growth in the US Federal Reserve Balance Sheet including the recent correction in both during the past three years. Accordingly, the following objective analysis forecasts the gold price out to 2016 based solely on historical Central Bank data.

There's a relationship between gold and oil that's worth understanding because each, being valued in U.S. dollars, putatively serves as a measure of inflation and, since both commodities have a common denominator, it's easy to price one against the other. Ergo, the gold/oil ratio i.e. the price of gold expressed in barrels of crude, and the current gold/oil ratio begs the question: "Is gold getting pricey or is oil too cheap?