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Some Sound Thoughts on Gold

Last update on: Feb 02 2017

Gold’s been tumbling for some time and took big slides Friday and today. What’s the story behind the decline? There are some stories about Cyprus and other countries with economic problems being forced to sell their gold supplies in order to bailout their financial systems. There also are stories of leveraged investors such as hedge funds being forced to sell to meet margin calls.

There’s some truth to both stories. But they don’t explain what brought us to this point. Gold’s been declining steadily for a while despite very easy monetary policies around the globe. Here are several good points from Mike Darda of MKM. They don’t paint a positive outlook for gold or other commodities despite expanding money supplies and continued economic growth.

3. In any event, gold and industrial commodity prices have de-linked from U.S. NGDP, inflation and inflation expectations over the last 12 years, meaning the most recent fall (and the previous run-up) likely do not have material implications for the U.S. business cycle.

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