So What’s Behind Moves In Gold?
by ilene - September 2nd, 2009 1:21 pm
Mish, on gold, Robert Prechter and a few thoughts on socionomics. – Ilene
So What’s Behind Moves In Gold?
Courtesy of Mish
In response to How Will China Handle The Yuan? I received many emails regarding a single statement I made: "Prechter, who does not view gold as money, thinks gold will collapse. Thus, not all deflationists think alike."
The first half of that statement "Prechter, who does not view gold as money" is an inaccurate representation of Prechter’s views.
Inquiring minds pointed out that the title of Chapter 1 in Prechter’s Gold and Silver eBook (a publication you can download for free) is "Gold Is Still Money".
Apologies go to Robert Prechter.
That out of the way, there are many things worthy of discussion from the same eBook. Please consider the following image snip.
From the chapter: Does Gold Always Go Up In Recessions and Depressions?
Click On Image To Read Text
When Does Gold Act Like Money?
While Prechter states "gold is still money", the above paragraph shows that he thinks gold acts differently when "gold is officially money".
On the other hand, I think gold is money and gold acts like it as well, regardless of whether or not governments make it "official". Please see Misconceptions about Gold for a detailed explanation.
In the eBook, Prechter notes "All the huge gains in gold have come when the economy was expanding".
That is a true statement. However, this is a true statement as well: "All the huge losses in gold have come when the economy was expanding."
Please consider the following charts.
Gold 1980 To 1988
click on chart for sharper image
Gold 1988 – 2000
Instead of asking "Does Gold Always Go Up In Recessions and Depressions?" one could easily ask "Does Gold Always Go Up In Expansions?"
Gold does not always do anything. However, given that recessions make up minimal periods from 1980 through 2000, this is an accurate representation of the period.
Gold 1980 – 2000
click on chart for sharper image
Gold collapsed from over $850 to just above $250 during one of the biggest expansionary periods in history. That is the reality and the charts show it perfectly well. Thus the statement…