news.goldseek.com >> 14 November 2017

Sentiment Synopsis
By: Steven Saville

The Commitments of Traders (COT) reports are nothing other than sentiment indicators, but as far as sentiment indicators go they are among the most useful. In fact, for some markets, including gold, silver, copper and the major currencies, the COT reports are by far the best indicators of sentiment. This is because they reflect how the broad category known as speculators is betting.

 news.goldseek.com >> 9 November 2017

The Quantity versus the Austrian Theory of Money
By: Steven Saville

The Quantity Theory of Money (QTM) has been around since the time of Copernicus (the 1500s). In its original and most basic form it held that the general price level would change in direct proportion to the change in the supply of money, but to get around the problem that what was observed didn’t match this theory it was subsequently ‘enhanced’ by adding a fudge factor called “velocity”. From then on, rather than being solely a function of the money supply it was held that the general price level was determined by the money supply multiplied by the velocity of money in accordance with the famous Equation of Exchange (M*V = P*Q)**.

 news.goldseek.com >> 3 November 2017

Investing in bubbles
By: Steven Saville

Many assets show signs of being immersed in bubbles right now. The most obvious example is the cryptocurrency speculation, which includes Bitcoin, the numerous and rapidly-multiplying Bitcoin alternatives and, more recently, the stocks that are involved in cryptocurrency ‘mining’. Other examples are the broad US stock market, the stocks of companies involved in social media and/or e-commerce, the market for junk bonds, and a group of junior mining stocks where just the hint of a possible discovery has led to spectacular price gains and market capitalisations that bear no resemblance to current reality.

 news.goldseek.com >> 1 November 2017

An attempt to quantify the immeasurable
By: Steven Saville

To paraphrase Einstein, not everything worth measuring is measurable and not everything measurable is worth measuring. The purchasing power of money falls into the former category. It is worth measuring, in that it would be useful to have a single number that consistently reflected the economy-wide purchasing power of money. However, such a number doesn’t exist.

 news.goldseek.com >> 17 October 2017

Gold, the stock market and the yield curve
By: Steven Saville

The yield curve is a remarkably useful leading indicator of major economic and financial-market events. For example, its long-term trend can be relied on to shift from flattening to steepening ahead of economic recessions and equity bear markets. Also, usually it will remain in a flattening trend while a monetary-inflation-fueled boom is in progress. That’s why I consider the yield curve’s trend to be one of the true fundamental drivers of both the stock market and the gold market. Not surprisingly, when the yield curve’s trend is bullish for the stock market it is bearish for the gold market, and vice versa.

 news.goldseek.com >> 3 October 2017

The Laffer Curve is misleading and dangerous
By: Steven Saville

The biggest problem of all, though, is that the Laffer Curve is downright dangerous to the extent that it seemingly removes the need to implement cuts in government spending to fund cuts in taxes. Thanks to the support provided by this bogus curve, unscrupulous and/or ignorant politicians can promote tax-cutting plans that have no offsetting spending cuts based on the idea that lower tax rates will eventually bring about a counter-balancing increase in tax revenue. The potential result is a tax-cutting plan that quickens the pace at which private-sector savings are siphoned to the government, that is, a tax-cutting plan that leads to slower economic progress.

 news.goldseek.com >> 26 September 2017

Why the Fed’s balance sheet reduction will be more interesting than watching paint dry
By: Steven Saville

Janet Yellen has quipped that the Fed’s balance-sheet reduction program, which will start at $10B/month in October-2017 and steadily ramp up to $50B/month over the ensuing 12 months, will be as boring as watching paint dry. However, like many financial-market pundits she is underestimating the effects of the Fed’s new monetary plan.

 news.goldseek.com >> 19 September 2017

Home ownership bounces from a 50-year low
By: Steven Saville

In a 2015 blog post titled “Unintended Consequences” I explained that policies implemented by the Clinton and Bush administrations to boost the rate of home ownership not only had unintended consequences, but the opposite of the intended consequence. This post is a brief update on the US home ownership situation.

 news.goldseek.com >> 1 September 2017

The most useful leading indicator of the global boom-bust cycle
By: Steven Saville

The long-term economic oscillations between boom and bust are caused by changes in the money-supply growth rate. It can therefore make sense to monitor such changes, but doing so requires knowing how to calculate the money supply. Unfortunately, most of the popular monetary aggregates are not useful in this regard because they either include quantities that aren’t money or omit quantities that are money.

 news.goldseek.com >> 21 August 2017

The weakest boom ever
By: Steven Saville

The US economic boom that followed the bust of 2007-2009 is still in progress. It has been longer than average, but at the same time it has been unusually weak. The weakness is even obvious in the government’s own heavily-manipulated and positively-skewed data. For example, the following chart shows that during the current boom* the year-over-year growth rate of real GDP peaked at only 3.3% and has averaged only about 2.0%. Why has the latest boom been so weak and what does this say about the severity of the coming bust?

 news.goldseek.com >> 18 July 2017

Inflation as far as the eye can see
By: Steve Saville, The Speculative Investor

Many investors pigeon-hole themselves as “inflationists” or “deflationists”, where an inflationist is someone who expects more inflation over the years ahead and a deflationist is someone who expects deflation. I am grudgingly in the inflation camp, because the overall case for more inflation is strong.

 news.goldseek.com >> 23 June 2017

Gold’s True Fundamentals
By: Steve Saville, The Speculative Investor

To paraphrase Jim Grant, gold’s perceived value in US$ terms is the reciprocal of confidence in the Fed and/or the US economy. Consequently, what I refer to as gold’s true fundamentals are measures of confidence in the Fed and/or the US economy. I’ve been covering these fundamental drivers of the gold price in TSI commentaries for almost 17 years. It doesn’t seem that long, but time flies when you’re having fun.

 news.goldseek.com >> 6 June 2017

The “Debt Jubilee” Nonsense
By: Steve Saville, The Speculative Investor

This post is a rehash of something I wrote at TSI last September in response to the article titled “The Gold Standard and Debt Jubilee“. The article is a confused jumble of Marxist, biblical and capitalist ideas/assertions, but its gist is that we need both a debt jubilee and a gold standard. My views are that a gold standard is not a worthwhile objective and that a debt jubilee would be both an economic and an ethical disaster.

 news.goldseek.com >> 26 May 2017

Why bad economic theories remain popular
By: Steve Saville, The Speculative Investor

Ludwig von Mises and Friedrich Hayek, the most prominent “Austrian” economists of the time, anticipated the 1929 stock market crash and correctly predicted the dire consequences of government attempts to artificially stimulate economic growth in the aftermath of the crash. John Maynard Keynes, on the other hand, was totally blindsided by the stock market crash and the economic disaster of the early 1930s. And yet, Keynes’s theories gained enormous popularity during the 1930s whereas the work of Mises and Hayek was largely ignored. Why was it so?

 news.goldseek.com >> 22 May 2017

What is a bull market?
By: Steve Saville, The Speculative Investor

A reasonable definition of a bull market must be practical. This means that it must take into account the fact that what people really want from an investment is an increase in purchasing power, not just an increase in price. Figuring out whether or not an investment is in a bull market is therefore not as straightforward as observing its long-term trend in nominal currency terms.

 news.goldseek.com >> 16 May 2017

Inflation/deflation and the desire to avoid short-term pain
By: Steve Saville, The Speculative Investor

The desire to avoid short-term pain is a powerful motivator. Even in cases where it is known that the steps taken to avoid pain in the short-term will lead to greater pain in the distant future, people will often choose the path that entails lesser short-term pain. Also, there’s often the hope that if pain is postponed for long enough then something will spring up to circumvent the need to experience the pain. The relevance to the inflation-deflation issue is that the long-term cure for an economy suffering from the bad effects of high monetary inflation involves stopping the inflation, but stopping the inflation always results in short-term pain.

 news.goldseek.com >> 10 May 2017

Gold, Commodities and Economic Confidence
By: Steve Saville, The Speculative Investor

To believe that the gold market is influenced by the manipulation of a banking cartel to the extent that the gold price doesn’t reflect the true fundamental drivers it is necessary to have almost no understanding of what those price drivers are and how they should affect the market. There are many fundamental relationships between gold and other markets that I could show in chart form to support this statement, but in this post I’ll focus on a chart that illustrates the relationship between gold, commodities and economic confidence.

 news.goldseek.com >> 9 May 2017

The insidious effects of monetary inflation
By: Steve Saville, The Speculative Investor

Most people with a basic grounding in economics know that increasing the supply of money leads to a fall in the purchasing power of money. However, this is usually as far as their understanding goes and explains why monetary inflation is generally not unpopular unless the cost of living happens to be rising rapidly. Monetary inflation would be far more unpopular if its other effects were widely understood.

 news.goldseek.com >> 5 May 2017

The only problem with Keynesian theory is that it is completely wrong
By: Steve Saville, The Speculative Investor

Governments and central banks have invoked the writings of J.M. Keynes to justify the massive increases in government spending and monetary inflation that have occurred over the past 9 years. However, some of Keynes’s apologists have pointed out that the famous British economist would not have agreed with many of the policy responses for which his work has provided the intellectual justification.

 news.goldseek.com >> 2 May 2017

What should the gold/silver ratio be?
By: Steve Saville, The Speculative Investor

The price of gold is dominated by investment demand* to such an extent that nothing else matters as far as its price performance is concerned. Investment demand is also the most important driver of silver’s price trend, although in silver’s case industrial demand is also a factor to be reckoned with. In addition, changes in mine supply have some effect on the silver market, because unlike the situation in the gold market the annual supply of newly-mined silver is not trivial relative to the existing aboveground supply of the metal.

 news.goldseek.com >> 1 May 2017

Are rising nominal interest rates bullish or bearish for gold?
By: Steven Saville

The short answer to the above question is that they are neither. Read on for the longer answer. Consider what happened to nominal interest rates during the long-term gold bull markets of the past 100 years. Interest rates generally trended downward during the gold bull market of the 1930s, upward during the gold bull market of the 1960s and 1970s, and downward during the bull market of 2001-2011. History’s message, therefore, is that the trend in the nominal interest rate does not strongly influence gold’s long-term price trend.

 news.goldseek.com >> 24 April 2017

Long-term price targets are meaningless
By: Steve Saville, The Speculative Investor

The 2011 low of 5.7 in the Dow/gold ratio wasn’t far from the top of my expected bottoming range, although I doubt that the long-term downward trend is over. In any case, none of the buying/selling I do this year will be based on the realistic possibility that the Dow/gold ratio will eventually drop to 1. Such long-term forecasts are of academic interest only, or at least they should be. If I were forced to state a very long-term target for the US$ gold price, it would be infinity. The US$ will eventually become worthless, at which point gold will have infinite value in US$ terms. But then, so will everything else that people want to own.

 news.goldseek.com >> 29 March 2017

Is gold a good store of value?
By: Steve Saville, The Speculative Investor

The point is that when gold is not money (the general medium of exchange) it tends NOT to maintain its purchasing power over what most people would consider to be a normal investment timeframe. Instead, gold’s purchasing power tends to experience massive swings. By being knowledgeable and unemotional you can take advantage of these swings. What you can’t reasonably expect to do is conserve your purchasing power by mindlessly buying gold at any price.

 news.goldseek.com >> 28 March 2017

The limitations of sentiment as a market timing tool
By: Steve Saville, The Speculative Investor

It’s important to state up front that despite the associated pitfalls, it can definitely be helpful to track the public’s sentiment and use it as a contrary indicator. This is because most participants in the financial markets get swept up by the general mood. They end up buying into the idea that prices are bound to go much higher despite valuations having already become unusually high or the idea that prices will continue to slide despite current valuations being unusually low. This causes them to be very optimistic near important price tops and either very pessimistic or totally disinterested near important price bottoms.

 news.goldseek.com >> 24 March 2017

‘Real’ Performance Comparison
By: Steve Saville, The Speculative Investor

Market volatility increased dramatically in the early-1970s when the current monetary system was introduced. This shows that the generally higher levels of monetary inflation and the larger variations in the rate of monetary inflation that occurred after the official link to gold was abandoned didn’t only affect nominal prices. Real prices were affected in a big way and boom-bust oscillations were hugely amplified.

 news.goldseek.com >> 6 March 2017

What is the root cause of a gold bull market?
By: Steve Saville, The Speculative Investor

If the future were 100% certain then there would be no reason to have any monetary savings. You could be fully invested all of the time and only raise cash immediately prior to cash being needed. By the same token, if the future were very uncertain then you would probably want to have a lot more cash than usual in reserve. This has critical implications for the gold market.

 news.goldseek.com >> 1 March 2017

Has the Fed been a long-term success?
By: Steve Saville, The Speculative Investor

To know whether or not the Fed has been a long-term success, the reason for the Fed’s creation must first be known. Here is the reason from the horse’s mouth: “It [the Fed] was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.” If this is the real reason then over the long-term the Fed has not been a success. In fact, it has been an abject failure.

 news.goldseek.com >> 28 February 2017

Bank de-regulation is less important than bank credit
By: Steve Saville, The Speculative Investor

In response to the 2007-2009 financial crisis, policy-makers in the US who had absolutely no idea what caused the crisis enacted legislation that would supposedly prevent such a crisis from re-occurring. The legislation is called “The Wall Street Reform and Consumer Protection Act”, although it is better known as “Dodd-Frank”. Unsurprisingly, considering its origins, the Dodd-Frank legislation has done nothing to reduce financial-crisis risk but has made the US economy less efficient. Quite rightly, therefore, the Trump Administration is intent on repealing all or parts of it. What are the likely consequences?

 news.goldseek.com >> 22 February 2017

The only commodity supply-demand indicator that matters
By: Steve Saville, The Speculative Investor

What about the reported inventory levels for commodities such as oil and the base metals? Is this information useful? In general, no, because a lot of aboveground supply is not held in the storage facilities that are covered by such reports. There will be times when a relative shortage or abundance of physical supply is correctly signaled by the widely-reported inventory levels, but in such cases the evidence of shortage or abundance will also appear in the “term structure”. And the “term structure” will be more reliable, meaning that it will generate fewer false signals.

 news.goldseek.com >> 15 February 2017

An age-old relationship between interest rates and prices
By: Steve Saville, The Speculative Investor

First and foremost, interest rates are the price of time. They reflect the fact that, all else being equal, humans place a higher value on getting something now than on getting exactly the same thing at some future time. Interest rates transcend money, because they exist even when money does not. With or without money and all else being equal, getting something now will always be worth more than getting the same thing in the future**. This is called time preference.

 news.goldseek.com >> 13 February 2017

A trade deficit is never a problem
By: Steve Saville, The Speculative Investor

Trade, by definition, is not an adversarial situation resulting in a winner and a loser. Rather, both parties believe that they are benefiting, otherwise the trade would not take place. Most of the time, both parties do benefit. In general, one side wants a particular product more than a certain quantity of money and the other side wants the quantity of money more than the product. When the exchange takes place, both sides get the thing to which they assign the higher value at the time.

 news.goldseek.com >> 10 February 2017

Charts of Interest
By: Steve Saville, The Speculative Investor

The Dow Transportation Average (TRAN) traded comfortably above its November-2014 high during December-2016 and January-2017, but in each case it failed to give a monthly close above the November-2014 close. This means that TRAN still hasn’t broken above its 2014 peak on a monthly closing basis, which represents an interesting non-confirmation of the breakouts achieved by other indices.

 news.goldseek.com >> 6 February 2017

Regime Uncertainty
By: Steve Saville, The Speculative Investor

In a blog post last Friday I provided evidence that the extent to which a US president is “pro-business” has very little to do with the stock market’s performance during that president’s term in office. Regardless of whether the associated policies are good or bad for the economy, the key to the stock market’s performance over the course of a presidency is the market’s position in its long-term valuation cycle.

 news.goldseek.com >> 3 February 2017

A pro-business government does NOT lead to a stronger stock market
By: Steve Saville, The Speculative Investor

Putting aside the fact that prior to the US Presidential election last November almost everyone believed that a Trump victory would result in a weak stock market, the popular view now is that the stock market has strengthened since the election due to the incoming Trump Administration being more pro-business. It is arguable whether the Trump Administration really will be “pro-business” (early signs are that it won’t be), but in any case the historical record indicates that the currently-popular view is total nonsense.

 news.goldseek.com >> 31 January 2017

Loosening is the new tightening
By: Steve Saville, The Speculative Investor

The Fed meets to discuss its monetary policy this week. There is almost no chance that an outcome of this meeting will be another boost in the Fed Funds Rate (FFR), but there’s a decent chance that the next official rate hike will be announced in March. Regardless of when it happens and regardless of how it is portrayed in the press, the next Fed rate hike, like the two before it, will NOT imply a tightening of US monetary policy/conditions.

 news.goldseek.com >> 17 January 2017

The “war on cash” has nothing to do with fighting crime
By: Steve Saville, The Speculative Investor

The main real reason is to maximise tax revenue. If all transactions are carried out electronically via the banking system then every transaction can be monitored, making it more difficult to avoid tax. In other words, the main reason that governments are very keen to eliminate physical cash is that by doing so they increase the amount of money flowing into government coffers. Unless you believe that the government generally uses resources more efficiently than the private sector you must acknowledge that this would result in a weaker rather than a stronger economy.

 news.goldseek.com >> 16 January 2017

A wide-angle view of the US stock market
By: Steve Saville, The Speculative Investor

As we’ve explained in the past, leverage is bullish for asset prices as long as it is increasing, regardless of how far into ‘nosebleed territory’ it happens to be. It’s only after market participants begin to scale back their collective leverage that asset prices come under substantial and sustained pressure. For example, it was a few months AFTER leverage (as indicated by the level of NYSE margin debt) stopped expanding and started to contract that major stock-market peaks occurred in 2000 and 2007.

 news.goldseek.com >> 2 January 2017

“Gold has peaked for the year”, revisited
By: Steve Saville, The Speculative Investor

Gold’s poor performance during the second half of 2016 was consistent with what I refer to as the true fundamentals*. This means that it wasn’t the result of downward manipulation. That being said, the great thing about believing that market trends have almost nothing to do with “fundamentals” and almost everything to do with manipulation is that you never have to be wrong. If any market goes against you it was due to the distortive effects of manipulation rather than a fatal flaw in your analysis.

 news.goldseek.com >> 16 December 2016

How the fundamental backdrop could turn bullish for gold
By: Steve Saville, The Speculative Investor

The fundamental backdrop is now definitively gold-bearish because we have a) real interest rates in an upward trend and at a 6-month high in the US, b) US credit spreads immersed in a major contraction (indicating rising economic confidence), c) dramatic relative strength in bank stocks (indicating sharply-rising confidence in the banking/financial system), and d) the Dollar Index in a strong upward trend and near a multi-year high. Given these conditions, any analyst/commentator who is now claiming that the ‘fundamentals’ are bullish for gold is either clueless about gold’s true fundamentals or is trying to promote an agenda.

 news.goldseek.com >> 13 December 2016

The second most overbought market since 1980
By: Steve Saville, The Speculative Investor

A short-term momentum extreme occurred at the price peak that was followed by the October-1987 stock market crash, but it is a lot more common for such extremes to be followed by nothing more serious than a routine multi-week correction. With measures of market breadth pointing to a 6-12 month extension of the bull market we probably won’t get anything more bearish than a routine multi-week correction within the next couple of months, although I admit that the near-vertical rally since the Presidential Election has me ‘on edge’.

 news.goldseek.com >> 5 December 2016

The problem is a single central bank, not a single currency
By: Steve Saville, The Speculative Investor

The euro-zone appears to be on target for another banking crisis during 2017. Also, the stage is set for political upheaval in some European countries, a general worsening of economic conditions throughout Europe and widening of the already-large gaps between the performances of the relatively-strong and relatively-weak European economies. It’s a virtual certainty that as was the case in reaction to earlier crises/recessions, blame for the bad situation will wrongly be heaped on Europe’s experiment with a common currency.

 news.goldseek.com >> 2 December 2016

Every central bank wants a weaker US$
By: Steve Saville, The Speculative Investor

Unfortunately for the central banks that are now trying to prop-up their currencies relative to the US$, a central bank’s ability to weaken its currency is much greater than its ability to bring about currency strength. The reason is that weakening a currency can usually be achieved by increasing its supply, and if there is one thing that central banks are good at it’s creating money out of nothing. Actually, creating money out of nothing, and, in the process, engaging all the hidden forces of economic law on the side of destruction, is the ONLY thing they are good at.

 news.goldseek.com >> 29 November 2016

An economy can’t be modeled by simple equations
By: Steve Saville, The Speculative Investor

A modern economy typically involves millions of individuals making decisions about consumption, production and investment based on a myriad of personal preferences. It should be obvious that such a ‘system’ could never be properly described by any mathematical equation, let alone a simple one-line equation. And yet, many economists and other commentators on economics-related matters base their analyses on simple equations.

 news.goldseek.com >> 23 November 2016

Which of these markets is wrong?
By: Steve Saville, The Speculative Investor

In a 25th May blog post I wrote that an interesting divergence had developed over the preceding few weeks between these markets, with the C$ having turned downward at the beginning of May and the oil price having continued to rise. This suggested that either the currency market was wrong or the oil market was wrong. As I stated at the time, my money was on the oil market being wrong. In other words, I expected the divergence to be eliminated via a decline in the oil price.

 news.goldseek.com >> 21 November 2016

Where did all the money go?
By: Steve Saville, The Speculative Investor

The prices of US government debt securities have been falling since early-July and plunged over the past two weeks. This prompts the question: Where did all the money that came out of the bond market go? It’s a trick question, because not a single dollar has left the bond market. The reason is that for every sale there has been an exactly offsetting purchase. For example, if Bill sells $100M of T-Bonds, then $100M of cash gets transferred from the account of the buyer (let’s call him Fred) to Bill’s account.

 news.goldseek.com >> 16 November 2016

Gold and the Real Interest Rate
By: Steve Saville, The Speculative Investor

The real interest rate is one of gold’s true fundamentals, with a rising real interest rate exerting downward pressure on the gold price and a falling real interest rate exerting upward pressure on the gold price. However, it is important to keep in mind that the real interest rate is just one of several fundamental drivers of the gold price.

 news.goldseek.com >> 7 November 2016

Update on the Comex fear-mongering
By: Steve Saville, The Speculative Investor

This meant that the unusually-small amount of gold in the “Registered” category was almost certainly related to an unusually-low desire on the part of futures ‘longs’ to take delivery. To put it another way, the unusually-small amount of gold in the “Registered” category was nothing more than a natural consequence of bearish sentiment.

 news.goldseek.com >> 4 November 2016

How should the real interest rate be measured?
By: Steve Saville, The Speculative Investor

Despite the popularity of doing so, subtracting the percentage change in the CPI or some other price index from the current nominal interest rate will not result in a realistic or reasonable estimate of the current ‘real’ interest rate. The method of real interest rate calculation summarised above is wrong in two different ways, each of which is sufficient to render the result invalid.

 news.goldseek.com >> 1 November 2016

Interesting aspects of the current financial situation
By: Steve Saville, The Speculative Investor

The chart shows that FCBs stopped being net buyers of US government debt in December-2013 and have been relentless net-sellers since December of last year. This tells us that FCBs have made a concerted attempt over the past 10 months to weaken the US$. This, I suspect, is a reason that the Dollar Index has remained range-bound this year to date despite the upward pressure exerted by US$-bullish fundamentals.

 news.goldseek.com >> 28 October 2016

Chanting “it’s a bull market” won’t make it so
By: Steve Saville, The Speculative Investor

I’ve seen a lot of commentary in which the author assumes that this year’s rally in the gold price is the first rally in a new cyclical bull market. It probably is, but at this stage — as the saying goes — the jury is still out. At this stage it’s best to reserve judgment, because blindly assuming something that might not be true can lead to large losses.

 news.goldseek.com >> 18 October 2016

“Price inflation” is not the biggest problem
By: Steve Saville, The Speculative Investor

All else remaining equal, an increase in the supply of money will lead to a decrease in the purchasing-power (price) of money. Furthermore, this is the only effect of monetary inflation that the average economist or central banker cares about. Increases in the money supply are therefore generally considered to be harmless or even beneficial as long as the purchasing-power of money is perceived to be fairly stable*. However, reduced purchasing-power for money is not the most important adverse effect of monetary inflation.

 news.goldseek.com >> 11 October 2016

Most people want price controls
By: Steve Saville, The Speculative Investor

Anyone with rudimentary knowledge of good economic theory can explain why government price controls are a bad idea. It boils down to the fact that the optimum price is the price that naturally balances supply and demand, and to the related fact that forcing the price to be above or below the level at which supply and demand would naturally be in balance will lead to either a glut or a shortage. However, even though most people are capable of understanding why price controls are counter-productive, they still want them.

 news.goldseek.com >> 5 October 2016

Wearing blinders when analysing China
By: Steve Saville, The Speculative Investor

Some analysts who are usually astute and show a good understanding of economics seem to put on blinders before looking at China. It’s as if, when considering China’s prospects, they forget everything they know about economics and refuse to see beyond the superficial. A recent example is Doug Casey’s article titled “Chung Kuo“.

 news.goldseek.com >> 3 October 2016

Inflation has always been about theft
By: Steve Saville, The Speculative Investor

Regardless of whether it is implemented via an emperor surreptitiously reducing the precious-metal content of the coinage or by the banking system (the central bank and the commercial banks) creating new currency deposits out of nothing, monetary inflation is a method of forcibly transferring wealth from the rest of the economy to the first users of the new or debased money. In other words, it is a form of theft.

 news.goldseek.com >> 2 October 2016

A strange sentiment conflict
By: Steve Saville, The Speculative Investor

As the name suggests, the weekly American Association of Individual Investors (AAII) sentiment survey is an attempt to measure the sentiment of individual investors. The AAII members who respond to the survey indicate whether they are bullish, neutral or bearish with regard to the US stock market’s performance over the coming 6 months. The AAII then publishes the results as percentages (the percentages that are bullish, neutral and bearish).

 news.goldseek.com >> 27 September 2016

Will the Fed be able to fight the next recession?
By: Steve Saville, The Speculative Investor

If you are asking the above question then your understanding of economics is sadly lacking or you are trying to mislead. The Fed will never be completely out of monetary ammunition, because there is no limit to how much new money the central bank can create. The Fed will therefore always be capable of implementing some form of what Keynesians call stimulus. However, the so-called stimulus cannot possibly help the economy.

 news.goldseek.com >> 23 September 2016

Corporate America has been in recession since 2014
By: Steve Saville, The Speculative Investor

Economic weakness outside the US has almost certainly played a part in the US slowdown, but the biggest part has been played by the Fed. Monetary policy has simultaneously caused stock prices to remain high and underlying businesses to languish, with the most obvious evidence being the favouring of debt-funded stock buybacks over capital investment.

 news.goldseek.com >> 16 September 2016

What is/isn’t a risk to the global economy
By: Steve Saville, The Speculative Investor

The hundreds of trillions of dollars of notional derivative value and the associated counterparty risk is a potential life-threatening problem for some of the major banks, but if you believe that derivatives are like a sword of Damocles hanging over the global economy then you’ve swallowed the propaganda hook, line and sinker. The claim during 2008-2009 that the major banks had to be bailed out to prevent a broad-based economic collapse was a lie and it will be a lie when it re-emerges during the next financial crisis.

 news.goldseek.com >> 14 September 2016

Is the Fed surreptitiously tightening?
By: Steve Saville, The Speculative Investor

The following chart shows that on a monthly closing basis, bank reserves held at the Fed peaked in August of 2014 at $2.79T and by August-2016 had shrunk to $2.35T. This amounts to a $440B decline in bank reserves over the space of two years. Furthermore, $320B of this $440B decline happened since last October. Does this mean that while the financial world vigorously debates whether the Fed will/should take a ‘baby step’ along the rate-hiking path next week, behind the scenes the Fed has been tightening the monetary screws for 2 years and especially over the past 10 months?

 news.goldseek.com >> 9 September 2016

Explaining the moves in the gold price
By: Steve Saville, The Speculative Investor

If you read some gold-focused web sites you could come away with the belief that movements in the gold price are almost completely random, depending more on the whims/abilities of evil manipulators and the news of the day than on genuine fundamental drivers. The following two charts can be viewed as cures for this wrongheaded belief.

 news.goldseek.com >> 6 September 2016

Is the US economy too weak for a Fed rate hike?
By: Steve Saville, The Speculative Investor

Some analysts argue that the US economy is strong enough to handle some rate-hiking by the Fed. Others argue that with the economy growing slowly the Fed should err on the side of caution and continue to postpone its next rate hike. Still others argue that the economy is so weak that the Fed not only shouldn’t hike its targeted interest rate, it should be seriously considering a rate CUT and other stimulus measures. All of these arguments are based on a false premise.

 news.goldseek.com >> 1 September 2016

Hyperinflation is coming to the US…
By: Steve Saville, The Speculative Investor

As I mentioned in a blog post back in April of last year, I have never been in the camp that exclaims “buy gold because the US is headed for hyperinflation!”. Instead, at every step along the way since the inauguration of the TSI web site in 2000 my view was that the probability of the US experiencing hyperinflation within the next 2 years — on matters such as this there is no point trying to look ahead more than 2 years — is close to zero. That remains my view today. In other words, I think that the US has a roughly 0% probability of experiencing hyperinflation within the next 2 years.

 news.goldseek.com >> 19 August 2016

Is there really no alternative?
By: Steve Saville, The Speculative Investor

The most popular story used these days to explain why the US equity bull market is bound to continue despite high valuations is often called “TINA”, which stands for “There Is No Alternative”. The belief is that with interest rates near zero and likely to remain there for a long time to come it is reasonable to pay what would otherwise be considered an extremely high price for almost any stock that offers a dividend yield. There is simply no alternative!

 news.goldseek.com >> 15 August 2016

Increasing speculation in “paper gold”
By: Steve Saville, The Speculative Investor

Now, speculation in “paper gold” is both an effect of the gold price and an important short-term driver of the gold price. It is therefore fair to say that although changes in GLD’s gold inventory don’t cause anything, they often reflect changes in speculative sentiment that at least on a short-term basis do have a significant influence on the gold price. At the same time it is also fair to say that the influence of speculative buying/selling in the futures market is vastly greater (probably at least an order of magnitude greater) than the influence of speculative buying/selling of GLD shares.

 news.goldseek.com >> 9 August 2016

Gold remains hostage to small changes in the expected FFR
By: Steve Saville, The Speculative Investor

The monthly US employment reports have no relevance except for their influence on the Fed and market expectations regarding future Fed actions. The moderately strong employment data reported last Friday, for example, provides no information about the current or likely future performance of the US economy, but was noteworthy because it led to a slight increase in the expected level of the Fed Funds Rate (FFR).

 news.goldseek.com >> 3 August 2016

Does the Fed support the stock market?
By: Steve Saville, The Speculative Investor

The answer to the above question is yes and no. If the question is does the Fed use the combination of monetary policy and ‘jawboning’ in an effort to push equity prices upward then the answer is definitely yes. However, if the question is does the Fed buy index futures or ETFs in an effort to elevate the stock market then the answer is almost certainly no.

 news.goldseek.com >> 2 August 2016

There will never be a “commercial signal failure” in the gold market
By: Steve Saville, The Speculative Investor

Some commentators have been anticipating a “commercial signal failure” in the gold market for more than 15 years. Moreover, whenever the gold price experiences a large rally the same commentators routinely cite the potential for a commercial signal failure (CSF) as a reason to maintain a full position, the argument being that the coming CSF is bound to result in massive additional price gains. The reality, however, is that whereas a CSF is an extremely unlikely event in any commodity market, in the gold market it is an impossibility.

 news.goldseek.com >> 29 July 2016

Helicopter Money
By: Steve Saville, The Speculative Investor

Once upon a time, the concept of “helicopter money” was something of a joke. It was part of a parable written by Milton Friedman to make a point about how a community would react to a sudden, one-off increase in the money supply. Now, however, “helicopter money” has become a serious policy consideration. So, what exactly is it, how would it affect the economy and what are its chances of actually being implemented?

 news.goldseek.com >> 22 July 2016

Bearish on T-Bonds
By: Steve Saville, The Speculative Investor

There is no evidence, yet, that the long-term bull market is over. Furthermore, such evidence could take more than a year to materialise even if the bull market reaches its zenith this month. The reason is that for a decline to be clearly marked as a downward leg in a new bear market as opposed to a correction in an on-going bull market it would have to do something to differentiate itself from the many corrections that have happened during the course of the bull market.

 news.goldseek.com >> 15 July 2016

Are central banks out of bullets?
By: Steve Saville, The Speculative Investor

Getting back to the worry that central banks are out of bullets, it would actually be good news if they were. This is because a central bank does damage to the economy every time it fires one of its so-called monetary bullets. The damage usually won’t be apparent to the practitioners of the superficial, ad-hoc economics known as Keynesianism, but it will inevitably occur due to the falsification of price signals.

 news.goldseek.com >> 11 July 2016

Gold is testing its 2011 high…
By: Steve Saville, The Speculative Investor

It is useful to follow gold’s performance in terms of the more-junior currencies, for two main reasons. First, gold tends to bottom in terms of these currencies well before it bottoms in terms of the senior currency (the US$). Second, money can sometimes be made by owning the stocks of gold-mining companies operating in countries with relatively weak currencies even when the US$ gold price is in a bearish trend.

 news.goldseek.com >> 6 July 2016

The hyperinflation and deflation arguments are both wrong
By: Steve Saville, The Speculative Investor

Most rational people with some knowledge of economic history will realise that the US$ will eventually be the victim of hyperinflation. The hard reality is that whenever money can be created in unlimited amounts by central banks or governments, it’s inevitable that at some point the money will experience such a dramatic plunge in its purchasing power that it will be at risk of soon becoming worthless. However, knowing this is only slightly more useful than knowing that the star we call the Sun will eventually die.

 news.goldseek.com >> 27 June 2016

Gold has peaked for the year
By: Steve Saville, The Speculative Investor

Gold has probably peaked for the year. Not necessarily in US$ terms, but in terms of other commodities. In fact, relative to the Goldman Sachs Spot Commodity Index (GNX) the peak for this year most likely happened back in February. The February-2016 peak for the gold/GNX ratio wasn’t just any old high, it was an all-time high. In other words, at that time gold was more expensive than it had ever been relative to commodities in general.

 news.goldseek.com >> 20 June 2016

Central bankers believe that they can provide free lunches
By: Steve Saville, The Speculative Investor

A lot of good economic theory boils down to the acronym TANSTAAFL, which stands for “There Ain’t No Such Thing As A Free Lunch”. TANSTAAFL is an unavoidable law of economics, because everything must be paid for one way or another. Furthermore, attempts by policymakers to get around this law invariably result in a higher overall cost to the economy. Unfortunately, central bankers either don’t know about TANSTAAFL or are naive enough to believe that their manipulations can provide something for nothing.

 news.goldseek.com >> 2 June 2016

Gold and another Fed rate hike
By: Steven Saville

The reason for bringing this up isn’t to brag about getting something right; it’s to point out that gold now appears to be stuck in a similar situation to the one we described on 4th November. As was the case back then, to ignite the next tradable gold rally it appears that the Fed will have to stop vacillating. Either the Fed will have to take its second step along the rate-hiking path or the economic/stock-market situation will have to become bad enough that all thoughts of a 2016 rate hike are wiped out.

 news.goldseek.com >> 18 May 2016

A simple relationship between gold, T-Bonds and the US$
By: Steve Saville, The Speculative Investor

A TSI subscriber recently reminded me of an indicator that I regularly cited in ‘the old days’ but haven’t mentioned over the past few years. The indicator is the bond/dollar ratio (the T-Bond price divided by the Dollar Index). The bond/dollar ratio not only does a reasonable job of explaining trends in the US$ gold price, it does a much better job of explaining trends in the US$ gold price than does the Dollar Index in isolation.

 news.goldseek.com >> 25 March 2016

The Missing Link
By: Steve Saville, The Speculative Investor

The most important fundamental driver of the gold market that hasn’t yet begun to move in a gold-bullish direction is the US yield curve, represented on the following chart by the 10yr-2yr yield spread. The yield curve is bullish for gold when it is getting steeper, as indicated by a rising 10yr-2yr yield spread (a rising line on the following chart). With the 10yr-2yr yield spread having recently made a new 8-year low and not yet shown any sign of reversing upward, the yield curve remains unequivocally gold-bearish.

 news.goldseek.com >> 10 March 2016

Brazil Boom and Bust
By: Steve Saville, The Speculative Investor

Brazil’s experience over the past 10 years is another in a long line of real-world demonstrations of Austrian Business Cycle Theory. Rapid monetary inflation and the lowering of interest rates results in an artificial boom, during which the GDP numbers look good at the same time as wealth-destroying investing mistakes are being made on a grand scale. The boom sets the stage for a bust, which wipes out all of the preceding gains and then some.

 news.goldseek.com >> 25 January 2016

How much longer will the gold-mining bear market last?
By: Steve Saville, The Speculative Investor

One of the reasons that the bear market in the gold-mining sector has been unusually long is that the general equity bull market has been unusually long. The general equity bull market is probably over, but very few people know it yet. Enough people to provoke a major trend change in the gold-mining sector will probably know it after the SPX makes a sustained break below the August-2015 low.

 news.goldseek.com >> 5 January 2016

Are rising interest rates bullish or bearish for gold?
By: Steve Saville, The Speculative Investor

I’ve seen articles explaining that rising interest rates are bearish for gold and I’ve seen articles explaining that rising interest rates are bullish for gold, so which is it? Are rising interest rates bullish or bearish for gold? The short answer is no — rising interest rates are neither bullish nor bearish for gold. Read on for the much longer answer.

 news.goldseek.com >> 16 December 2015

Falling Dominoes
By: Steve Saville, The Speculative Investor

The decline in house prices that began in 2006 wasn’t the cause of the 2007-2009 economic bust. The cause was widespread mal-investment resulting from monetary inflation and the Fed’s interest-rate manipulation. However, the 2006 reversal in house prices set off a series of falling economic dominoes due to the fact that the housing market was where a disproportionately large amount of the mal-investment and associated debt happened to be.

 news.goldseek.com >> 27 November 2015

Stealing Deflation
By: Steve Saville

If you listen to the top central bankers of the world talk for long enough you will come away with the impression that central banks are attempting to give us “price inflation”, as if rising prices were beneficial. However, nobody wants to pay more for stuff. In fact, rational people prefer to pay less, not more. Therefore, when central banks claim to be giving us “price inflation” what they are really doing is stealing the “price deflation” from which we would otherwise benefit.

 news.goldseek.com >> 13 November 2015

Why hasn’t the Fed’s QE caused “inflation”?
By: Steve Saville, The Speculative Investor

One popular explanation is that the Fed’s Quantitative Easing (QE) adds to bank reserves, but not the economy-wide money supply. According to this line of thinking, the ‘money’ created by the Fed to purchase bonds remains trapped in reserve accounts at the Fed. However, this explanation can be immediately eliminated, because as previously explained every dollar of QE adds one dollar to bank reserves at the Fed AND one dollar to demand deposits within the economy. The fact is that the economy-wide money supply is now a few trillion dollars larger thanks to the Fed’s QE.

 news.goldseek.com >> 4 November 2015

Why governments can’t just print the money they need
By: Steve Saville, The Speculative Investor

Due to the nature of modern money, it would technically be possible to adjust the way the monetary system works such that governments directly print all the money they need. If this change were made then there would be no requirement for the government to ever again borrow money or collect taxes. This would have an obvious benefit, because it would result in the dismantling of the massive government apparatus that has evolved to not only collect taxes but to monitor almost all financial transactions in an effort to ensure that tax collection is maximised.

 news.goldseek.com >> 27 October 2015

What Is Gold?
By: Steve Saville, The Speculative Investor

In my two “Gold Is Not Money” posts (HERE and HERE) I explained why it is not correct to think of gold as money these days, and in a subsequent post I explained why it was not correct to view gold as an economic constant (there is no such thing as an “economic constant”). It is clearly also not correct to think of gold as “just a commodity”, because if it were just a commodity then its price would have collapsed relative to the prices of other commodities due to the massive size of its aboveground supply relative to its annual usage in commercial/industrial applications.

 news.goldseek.com >> 23 October 2015

There is no economic yardstick
By: Steve Saville, The Speculative Investor

My two “Gold Is Not Money” articles (HERE and HERE) provoked numerous disagreeing responses, the majority of which were polite and well-meaning. Despite presenting various arguments, these responses had one thing in common: they did not offer a practical definition of money that gold currently meets. As I mentioned previously, a practical definition of money cannot avoid the primary economic role of money, which is to facilitate indirect exchange*.

 news.goldseek.com >> 13 October 2015

Gold Is Not Money, Part 2
By: Steve Saville, The Speculative Investor

I opened a blog post on 7th October with the statement that gold was money in the distant past and might again be money in the future, but isn’t money in any developed economy today. I then explained this statement. The post stirred up a veritable hornet’s nest, in that over the ensuing 24 hours my inbox was inundated with dozens of messages arguing that I was wrong and a couple of messages thanking me for pointing out the obvious (that gold is not money today).

 news.goldseek.com >> 7 October 2015

Gold is Not Money
By: Steve Saville

Now, I acknowledge that it is possible to concoct definitions of money that lead to the conclusion that gold is money, but such definitions either aren’t practical, or are focused on a characteristic of gold that is shared by some obviously non-monetary assets, or are simply wrong.

 news.goldseek.com >> 13 September 2015

Gold’s true fundamentals are mixed, at best
By: Steve Saville

To paraphrase Jim Grant, gold’s perceived value in US$ terms is the reciprocal of confidence in the Fed and/or the US economy. That’s why the things I refer to as gold’s true fundamentals are measures of confidence in the Fed and/or the US economy. I’ve been covering these fundamental drivers of the gold price in TSI commentaries for about 15 years.

 news.goldseek.com >> 4 September 2015

The right way to think about gold supply
By: Steve Saville, The Speculative Investor

Here’s the wrong way to think about gold supply: “Although gold’s aboveground inventory is huge compared to current production, only a tiny fraction of this gold will usually be available for sale near the current price. Therefore, changes in mine supply can be important influences on the gold price.” I’ll now explain the right way to think about gold supply.

 news.goldseek.com >> 1 September 2015

Quick 10% declines aren’t extraordinary
By: Steve Saville, The Speculative Investor

During bull-market years and bear-market years, it is not uncommon for the US stock market to experience a quick decline of 10% or more at some point. For example, there was at least one quick decline of 10% or more in 1994, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2007, 2008, 2009, 2010, 2011 and 2012. In other words, 15 out of the 19 years from 1994 to 2012, inclusive, had quick declines of 10% or more. Only two of these years (2001 and 2008) had declines that could reasonably be called crashes.

 news.goldseek.com >> 31 August 2015

Wrongheaded thinking about China’s devaluation
By: Steve Saville, The Speculative Investor

In the case of China’s so-called devaluation, however, it isn’t just bombastic billionaires with a lust for political power who have misrepresented the situation. Anyone who has claimed that the Yuan’s devaluation was primarily about boosting exports has a poor understanding. The reality is that the Yuan is very over-valued and has begun to fall under the weight of this over-valuation. Furthermore, rather than deliberately devaluing the Yuan, as part of its effort to maintain the semblance of stability China’s government has actually been trying to prevent the Yuan from devaluing.

 news.goldseek.com >> 21 August 2015

The meaning of the 6-year low in GLD’s bullion inventory
By: Steve Saville, The Speculative Investor

In many TSI commentaries over the years and in a couple of posts at the TSI blog over the past year I’ve explained that changes in GLD’s bullion inventory are not directly related to the gold price. Neither a large rise nor a large fall in the gold price would necessarily require a change in GLD’s inventory, the reason being that as a fund that holds nothing other than gold bullion the net asset value (NAV) of a GLD share will naturally move by the same percentage amount as the gold price.

 news.goldseek.com >> 19 August 2015

Gold’s safe-haven status is not in doubt
By: Steve Saville, The Speculative Investor

Gold is very different from all other commodities. This is due to physical characteristics that caused it to be money for thousands of years and led to its aboveground supply becoming orders of magnitude greater than its annual production*. However, despite the huge size of its existing aboveground supply relative to the rate at which new supply is created, that is, despite its massive stocks-to-flow ratio, gold is still a commodity and its US$ price is still affected by the overall trend in commodity prices.

 news.goldseek.com >> 18 August 2015

Basic Gold Market Facts
By: Steve Saville, The Speculative Investor

Supply always equals demand, with the price changing to maintain the equivalence. In this respect the gold market is no different from any other market that clears, but it’s incredible how often comments like “demand is increasing relative to supply” appear in gold-related articles.

 news.goldseek.com >> 17 August 2015

Facts, Opinions, and Risk Management
By: Steve Saville, The Speculative Investor

The impossibility of knowing whether a bull/bear market or an up/down trend is going to continue, or even whether the market is currently in bull or bear mode, makes risk management essential. Someone who knew the future would never have to bother with risk management; they could, instead, risk everything on a particular outcome because for them it wouldn’t be a risk at all.

 news.goldseek.com >> 11 August 2015

Bearish divergences at gold-mining bottoms
By: Steve Saville, The Speculative Investor

A bullish divergence between the gold-mining sector of the stock market, as represented by the HUI and/or the XAU, and gold bullion involves the gold-mining sector having an upward bias while gold bullion has a downward bias or the gold-mining sector making a higher low while the bullion market makes a lower low. However, bullish divergences often don’t happen around major price bottoms. In fact, it is not uncommon for a major price bottom in gold-related investments to be preceded by a bearish divergence between the gold-mining indices and the metal.

 news.goldseek.com >> 10 August 2015

Can the US economy survive more of the Fed’s monetary support?
By: Steve Saville, The Speculative Investor

Everybody knows that the Fed will eventually hike its targeted interest rate. When it comes to rate hikes, the only unknowns involve timing. What hardly anybody knows is that the Fed’s interest-rate suppression has damaged the economy and that the longer it continues, the weaker the economy will get.

 news.goldseek.com >> 5 August 2015

The amazing inability to see the Fed’s money creation
By: Steve Saville, The Speculative Investor

The belief that the Fed’s QE (Quantitative Easing) does not directly boost the US money supply remains popular, even though it is obviously wrong. This is remarkable. It’s even more remarkable, however, that this wrongheaded belief is dearly held by some analysts who are generally astute, a fact I was reminded of when reading a recent post by Doug Noland.

 news.goldseek.com >> 4 August 2015

The gold supply-demand nonsense is relentless
By: Steve Saville, The Speculative Investor

In a blog post a couple of weeks ago I noted that it’s normal for large and fast price declines in the major financial markets to be accompanied by unusually-high trading volumes, meaning that it’s normal for large and fast price declines in the major financial markets to be accompanied by increased BUYING. I then wondered aloud as to why it is held up as evidence that something nefarious or strange is happening whenever an increase in gold buying accompanies a sharp decline in the gold price.

 news.goldseek.com >> 3 August 2015

Is the Fed privately owned? Does it matter?
By: Steve Saville, The Speculative Investor

The answer to the first question is ‘sort of’. The answer to the second question is no. The effects of having an institution with the power to manipulate interest rates and the money supply at whim are equally pernicious whether the institution is privately or publicly owned. However, if you strongly believe that the government can not only be trusted to ‘manage’ money and interest rates but is capable of doing so to the benefit of the economy, then please contact me immediately because I can do you a terrific deal on the purchase of the Eiffel Tower.

 news.goldseek.com >> 26 July 2015

Steep price declines and increased buying often go together
By: Steve Saville, The Speculative Investor

In numerous TSI commentaries over the years I’ve written about the confusion in the minds of many analysts regarding what constitutes gold supply and the relationship between supply, demand and price in the gold market. I’ve also covered the issue several times at the TSI Blog, most recently on 24th June in the post titled “More confusion about gold demand“. I’m not going to delve into this subject matter again today other than to use the example of last Monday’s trading in GDX (Gold Miners ETF) shares to further explain a point made in the past.

 news.goldseek.com >> 22 July 2015

Beware of bogus “inflation” indices
By: Steve Saville, The Speculative Investor

Every attempt to come up with a single number (a price index) that reflects the change in the purchasing power (PP) of money is bound to fail. The main reason is that disparate items cannot be added together and/or averaged to arrive at a sensible result. However, some price indices are less realistic than others. In particular, some well-meaning private-sector efforts to come up with a consumer price index (CPI) that does a better job than the official CPI have generated some of the least-plausible numbers.

 news.goldseek.com >> 21 July 2015

A common currency is NOT a cause of economic problems!
By: Steve Saville, The Speculative Investor

Money is supposed to be neutral — a medium of exchange and a yardstick. It is inherently no more problematic for totally disparate countries to use a common currency than it is for totally disparate countries to use common measures of length or weight. On the contrary, there are advantages to the use of a common currency in that trading and investing are made more efficient.

 news.goldseek.com >> 7 July 2015

Can the Fed do more?
By: Steve Saville, The Speculative Investor

It’s not an overstatement to say that over the 6-year period beginning in September-2008, the US Federal Reserve went berserk with its Quantitative Easing (QE). The following chart shows that the US Monetary Base, an indicator of the net quantity of dollars directly created by the Fed*, had a gentle upward slope until around August of 2008, at which point it took off like a rocket. More specifically, the Monetary Base gained about 30% during the 6-year period leading up to September of 2008 and then quintupled (gained 400%) over the next 6 years. Is it therefore fair to say that the Fed has now ‘shot its load’ and will be unable to do much in reaction to the next financial crisis and/or recession?

 news.goldseek.com >> 2 July 2015

The “Inflation” Turnaround
By: Steve Saville, The Speculative Investor

Inflation expectations bottomed in January of this year, or, to put it another way, deflation expectations peaked in January of this year. The question is: did the January reversal mark a 1-2 quarter shift or a much longer-term shift? We think it will prove to be the latter, although we hasten to point out that we are not anticipating a dramatic increase in inflation fear within the next year -- just the dawning of a general perception that more "inflation" lies ahead.

 news.goldseek.com >> 30 June 2015

Large investors can’t buy US dollars
By: Steve Saville, The Speculative Investor

I was recently sent an article containing the claim that during the next financial crisis and/or stock-market crash there will be a panic ‘into’ the US dollar, but that unlike previous crises, when panicking investors obtained their US$ exposure via the purchase of T-Bonds, the next time around they will buy dollars directly. This is wrong, because large investors cannot simply buy dollars. As I’ll now explain, they must buy something denominated in dollars.

 news.goldseek.com >> 10 June 2015

There’s no such thing as “money velocity”
By: Steve Saville, The Speculative Investor

In the real world there is money supply and there is money demand. There is no such thing as money velocity. “Money velocity” only exists in academia and is not a useful concept in economics or financial-market speculation. As is the case with the price of anything, the price of money is determined by supply and demand. Supply and demand are always equal, with the price adjusting to maintain the balance. A greater supply will often lead to a lower price, but it doesn’t have to.

 news.goldseek.com >> 9 June 2015

Gold isn’t cheap, but nor should it be
By: Steve Saville, The Speculative Investor

Although it is not possible to determine an objective value for gold (the value of everything is subjective), by looking at how the metal has performed relative to other things throughout history it is possible to arrive at some reasonable conclusions as to whether gold is currently expensive, cheap, or ‘in the right ballpark’. In particular, gold’s market price can be measured relative to the prices of other commodities, the stock market, the price of an average house, the earnings of an average worker, and the real (purchasing-power-adjusted) money supply.

 news.goldseek.com >> 19 May 2015

BitGold: Great product, over-priced stock
By: Steve Saville, The Speculative Investor

A popular view is that gold has no monetary role to play in a modern, technologically-advanced economy. This view is wrong in many ways, including that, thanks to technological advances, gold is now better suited to being money than it has ever been. This is because technology has eliminated the inconveniences that would otherwise limit gold’s usefulness as money, with BitGold being the latest evidence.

 news.goldseek.com >> 7 May 2015

Gold and the US Employment Report
By: Steve Saville, The Speculative Investor

Last week we looked at how the US$ gold price performs around FOMC meetings, with a focus on the trading week leading up to the FOMC Announcement day. This week we have done the same with regard to the monthly US employment report. Here's what we found: The table presented below shows the date of every monthly employment report from the beginning of 2013 through to the present, the gold price at the end of the day prior to the report, gold's daily closing price 6 trading days prior to the report, and the difference between these two prices.

 news.goldseek.com >> 7 April 2015

The problematic comparison with the 1970s
By: Steve Saville, The Speculative Investor

We suspect that the gold bull market that began in 2001 is, in very rough terms, an elongated version of the 1971-1980 bull market. Part of our reasoning is that there is evidence in the performance of the gold-mining sector of a bullish gold trend beginning in the early-1960s, with gold itself being unable to reflect this bullish trend until 1971 when it was officially untethered from the US$.

 news.goldseek.com >> 12 February 2015

2015 forecasts for gold and gold-mining stocks
By: Steve Saville, The Speculative Investor

In 2014 gold performed roughly as expected in US$ terms during the first half of the year, but then fell to a new bear-market low during the second half. The problems for the US$ gold price during the second half of 2014 were the perceived strength of the US economy (linked to the continuing upward trend in the S&P500 Index), the flattening of the US yield-curve (related to the perceived US economic strength), and the Dollar Index's upside breakout from a long-term basing pattern.

 news.goldseek.com >> 20 January 2015

How Money Vanishes
By: Steve Saville, The Speculative Investor

Changes in asset prices or any other prices do not cause changes in money supply, although many of the people who comment on the financial markets and economics believe otherwise. We were recently reminded of this mistaken belief when reading an analysis of oil's large price decline that included the assertion that hundreds of billions of dollars had been eliminated from the economy as a result of this price change.

 news.goldseek.com >> 14 January 2015

Gold stocks during an equity bear market
By: Steve Saville, The Speculative Investor

The historical record indicates that the gold-mining sector performs very well during the first 18-24 months of a general equity bear market as long as the average gold-mining stock is not 'overbought' and over-valued at the beginning of the bear market. Unfortunately, the historical sample size is small. In fact, since the birth of the current monetary system there have been only two relevant cases.

 news.goldseek.com >> 16 December 2014

Is the end of QE bearish for gold?
By: Steve Saville, The Speculative Investor

The conventional view is that Fed money creation is necessarily bullish for gold and that a tightening of monetary conditions beginning with the cessation of Fed money creation is necessarily bearish for gold. It's strange that this view is popular given that gold was clearly hurt more than helped by the QE program that extended from October of 2012 through to October of this year. If gold is now going to be hurt by a 'tighter' Fed, the implication is that regardless of what the Fed does it's bearish for gold.

 news.goldseek.com >> 10 December 2014

Any quantity of money is just fine
By: Steve Saville, The Speculative Investor

In conclusion, we are inclined to say that money-supply stability is the ideal, but that wouldn't be completely correct. Although it could reasonably be argued that a stable money supply would be a vast improvement on what we have today, it would not be the optimum situation. For example, the current monetary system is so unstable that maintaining a constant money supply while keeping everything else in place would quickly lead to monetary and financial-system collapse.

 news.goldseek.com >> 5 November 2014

Gold, Inflation Expectations and Economic Confidence
By: Steve Saville, The Speculative Investor

As a result of what happened during just one of the past twenty decades (the 1970s), most people now believe that a large rise in "price inflation" or inflation expectations is needed to bring about a major rally in the gold price. This impression of gold is so ingrained that it has persisted even though the US$ gold price managed to rise by 560% during 2001-2011 in parallel with only small increases in "price inflation" (based on the CPI) and inflation expectations. The reality is that gold tends to perform very well during periods of declining confidence in the financial system, the economy and/or the official money, regardless of whether the decline in confidence is based on expectations of higher "inflation" or something else entirely.

 news.goldseek.com >> 20 October 2014

Why is gold mining such a crappy business?
By: Steve Saville, The Speculative Investor

That gold mining has generally been a crappy long-term investment for almost five decades is evidenced by the following chart. The chart, much of the data for which were provided by Nick Laird of www.sharelynx.com, shows the ratio of the Barrons Gold Mining Index (BGMI) and the US$ gold price from 1920 through to the present*. More specifically, it shows that, relative to gold bullion, the group of gold-mining stocks represented by the BGMI has been in a secular decline since 1968 and is now close to its lowest level since 1948. The question is: Why have gold mining stocks performed so poorly for so long relative to the metal?

 news.goldseek.com >> 7 October 2014

Why the US$ is rallying
By: Steve Saville, The Speculative Investor

As long as a market is in a strong rising trend almost any bullish argument could appear to have a ring of truth about it, even a completely baseless one. A case in point is the deluge of baseless, bullish-slanted US$ analyses prompted by the strong rise of the past few months in the Dollar Index.

 news.goldseek.com >> 29 September 2014

Gold vs Silver during Precious-Metals Bull Markets
By: Steve Saville, The Speculative Investor

It is widely believed that silver outperforms gold during bull markets for these metals, but that's only partially true. It's true that silver tends to achieve a greater percentage gain than gold from bull-market start to bull-market end. It's also the case that silver tends to do better during the final year of a cyclical bull market and during the late stages of the intermediate-term rallies that happen within cyclical bull markets. However, the early stages of gold-silver bull markets tend to be characterised by relative strength in gold. This is a point we've made in the past, including in TSI commentaries earlier this year, but warrants revisiting due to the recent price action.

 news.goldseek.com >> 26 August 2014

The “Escape Velocity” Myth
By: Steve Saville, The Speculative Investor

In February of 2009 we wrote that if the story unfolded as we expected then a lot of future economic commentary would begin with the word "despite", but that in most cases the commentary would be a lot closer to the truth if "despite" were replaced with "because of". Our 2009 assessment remains applicable in that most commentators still don't get it and still say "despite" when they should be saying "because of".

 news.goldseek.com >> 13 August 2014

Future “inflation” and the Fed’s madness
By: Steve Saville, The Speculative Investor

Prior to 2002 the Fed would tighten monetary policy in reaction to outward signs of rising "price inflation" and loosen monetary policy in reaction to outward signs of falling "price inflation", but beginning in 2002 the Fed became far more biased towards loose monetary policy. This bias is now so great that it seems as if the Fed has become permanently loose.

 news.goldseek.com >> 30 July 2014

Currency devaluation: The most destructive policy of all
By: Steve Saville, The Speculative Investor

It seems that Keynes understood the problems wrought by policies designed to debauch (devalue) the currency, but such understanding is nowhere to be seen among his modern-day followers. Instead, the modicum of sense contained in the writings of Keynes has been discarded by the Keynesians of today in favour of a total focus on "aggregate demand".

 news.goldseek.com >> 22 July 2014

Setting the stage for the next collapse
By: Steve Saville, The Speculative Investor

When the central bank pumps money into the economy and suppresses interest rates it creates incentives to speculate and invest in ways that would not otherwise be viable. At a superficial level the central bank's strategy will often seem valid, because the increased speculating and investing prompted by the monetary stimulus will temporarily boost economic activity and could lead to lower unemployment.

 news.goldseek.com >> 24 June 2014

US money pumping, past and present
By: Steve Saville, The Speculative Investor

A large increase in the money supply will always lead to large increases in prices somewhere in the economy. However, monetary inflation affects different prices in different ways at different times, so the pertinent question is: which prices? The answer to this question is important from the perspective of almost everyone and is always obvious with the benefit of hindsight, but it is often difficult to determine ahead of time. Also, depending on which prices are affected the inflation will sometimes be widely perceived as a problem and at other times be widely perceived as a benefit or a non-issue.

 news.goldseek.com >> 29 April 2014

Gold during booms and busts
By: Steve Saville, The Speculative Investor

The boom/bust cycle is caused by fractional reserve banking. Rather than eliminate this practice, that is, rather than prevent the commercial banks from creating money out of thin air, central banks were established to 'backstop' the commercial banks. This paved the way for longer booms and more severe busts. Gold tends to do relatively well during the busts and relatively poorly during the booms.

 news.goldseek.com >> 15 April 2014

US Monetary Inflation Slowdown
By: Steve Saville, The Speculative Investor

On the US monetary inflation front, the news is that there isn't much in the way of news. As depicted below, the year-over-year rate of TMS (True Money Supply) growth hit a 5-year low of around 7% at the end of last year and has since edged a little higher.

 news.goldseek.com >> 1 April 2014

Gold versus Silver
By: Steve Saville, The Speculative Investor

First, silver tends to perform better than gold -- causing the gold/silver ratio to decline -- during the late stages of intermediate-term precious-metals rallies and especially during the late stages of cyclical precious-metals bull markets. It does so for the same reason that highly-speculative junior gold-mining stocks tend to be much stronger than their larger/lower-risk counterparts during the late stages of multi-year advances. As a rally progresses, speculators are emboldened to take more risk and go further down the food chain in search of the proverbial killing.

 news.goldseek.com >> 25 February 2014

Most gold bulls will be right for the wrong reasons
By: Steve Saville, The Speculative Investor

An interesting aspect of the gold market is that most analysis is off track, with the reasons put forward for being bullish generally being further off-track than the reasons put forward for being bearish. That's despite gold bulls having the long-term price trend and fundamentals in their favour. The problem is that most gold bulls pay scant attention to the real fundamental price drivers and focus on things that don't matter. A good example is the current focus on the possible reduction in annual gold production stemming from the combination of rising costs and last year's decline in the gold price.

 news.goldseek.com >> 18 February 2014

Economics Myths
By: Steve Saville, The Speculative Investor

Our original intention was to explain where we agreed and disagreed with the article by Cullen Roche at "Pragmatic Capitalism" (is there any other kind of capitalism?) titled "The Biggest Myths in Economics". Instead, while we are still going to refer extensively to the Roche article we will do so within the context of our own list of economics myths. We would have preferred to have kept our list to ten items, but it was a challenge just to restrict it to twelve. Unfortunately, our list is by no means comprehensive.

 news.goldseek.com >> 10 February 2014

Random thoughts about the year ahead
By: Steve Saville, The Speculative Investor

1) The monetary backdrop continues to be very different in the US today than it was in earlier post-bubble periods. This is slowing the corrective process and introducing new price distortions that will have to be 'resolved' via another devastating economic bust. When will they ever learn?
2) Economic declines will become progressively more serious and economic recoveries will become progressively weaker until there is wide recognition that the central bank is a big part of the problem as opposed to part of the solution.

 news.goldseek.com >> 2 February 2014

Hyperinflation and Capital Controls
By: Steve Saville, The Speculative Investor

The US will eventually experience hyperinflation, but "eventually" could be long after we are all dead. Therefore, rather than making the case that hyperinflation will eventually happen, it is more useful to ask the question: What is the probability of hyperinflation happening in the US within the next two years? We have asked that question every year for more than ten years, and up until now the answer has always been: So low as to not be worth worrying about. We are now asking the question again.

 news.goldseek.com >> 21 January 2014

US Monetary Inflation Slowdown
By: Steve Saville, The Speculative Investor

The US monetary inflation rate continues its downward drift. As at the end of December the year-over-year (YOY) rate of growth in US True Money Supply (TMS) was 7.2%, its lowest level since November of 2008. Refer to the following chart for details. Last year's slowdown in US monetary inflation, from 11.4% at the beginning of the year to 7.2% at the end of the year, happened despite aggressive money-pumping by the Fed. That the rate of money-supply growth slowed materially in parallel with the Fed's aggressive monetisation program is partly because of money leaving the US. However, the main reason is illustrated by the chart displayed below.