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More Evidence of post-QE Deflation Bias

 -- Published: Thursday, 25 September 2014 | Print  | Disqus 

By Turd Ferguson

The POSX has surged through 85 today and looks to be on its way to 87+. Just more evidence that our current theme/idea of temporary deflation is, in fact, playing out.

Below is a 5-year chart of the POSX. Note that since this " post-QE deflation" trend took hold, The Pig has rallied nearly 8% and, by getting through resistance just below 85, it looks set to continue rallying toward the 2010 highs between 87 and 89.

So what is so interesting about that? Do you recall what was happening in mid-2o10??

Between December 2008 and June 2010, The Fed purchased a combined total of about $1.6T of MBS and treasuries. In late 2009 and before the program began to wind down in 2010, The POSX began to rally in anticipation that that was the last of it...that The Fed was done and that QE was over for good. Anticipating the deflation that might follow, The POSX shot UP from 80 to 89 in under six months. (Sound familiar?)

Of course, The Great Ponzi began to rattle and shake without Fed liquidity and you know the rest. QE2 was announced just five months later in November 2010 and by mid-2011, The Pig was back down to 78.

We are, right now, in the exact same position! The "market" thinks that QE has been tapered to ZERO, never to be re-started. Do you think that? Probably not but we have to let the "market" sort this out for itself. Perhaps a war or false flag will provide cover for the Fed to start QE4? Does it even matter? You know it's coming and it's just a matter of when.

Back in 2010, the paper gold "market" didn't quite know what to do. It rallied and backed off. Sold off and then rallied. In the end, from late 2009 through mid-2010, price was about flat. And what do we see now?? Since the "taper" announcement last fall, gold has rallied and back off. It has sold off and rallied. In the end, price is about flat.

I still think that price is likely to weaken a bit more in the days ahead as the prospect of running the stops below $1180 has to have The Cartel Monkeys salivating. However, from just a purely "market"-based perspective, how much lower can/will it go IF you believe as I do that perpetual QE is now a necessity for the maintenance of the current system.

(And please don't tell me how gold slid 30% during QE3. Is it not clear to you by now that, after seeing gold rally about 70% during both QE1 and QE2, aggressive action was taken to prevent a similar rise during QE3? A rally which would have implied a price of about $2800 by 2014!)

In the end, QE will resume. The POSX will fall and gold will rally. Those that claim that "the bull market in gold is over" and that "gold is heading to $500" are either ignorant of history or purposefully misleading you. Gold will soon make a very important low and reversal. Prepare accordingly.



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 -- Published: Thursday, 25 September 2014 | E-Mail  | Print  | Source:

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