Ignore Banks’ Bearish Statements on Gold

Posted on March 29, 2013 by MN Gordon

Ignore Banks’ Bearish Statements on Gold
By Jeff Clark, Senior Precious Metals Analyst

Goldman Sachs has lowered its gold price projections and says the metal is headed to $1,200.  Credit Suisse and UBS are bearish.  Citigroup says the gold bull market is over.

So I guess it’s time to pack it in, right?

Not so fast.  As we’ve written before, these types of analysts have been consistently wrong about gold throughout this bull cycle.  Another reason to disagree, however, is history; we’ve seen this movie before.  In the middle of one of the greatest gold bull markets in modern history – the one that culminated in the 1980 peak – gold experienced a 20-month, one-way decline.  Every time it seemed to stabilize, the bottom would fall out again.  From December 30, 1974 to August 25, 1976, gold fell a whopping 47 percent.

1976 had to be a tough year for gold investors.  The price had already been declining for a year – and it just kept on sinking.  Since that’s similar to what we’re experiencing today, I wondered, What were the pundits were saying then?  I wanted to find out. Continue reading →

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Fighting the Next War

Posted on March 26, 2013 by MN Gordon

The unemployment rate remains stubbornly high.  But other than that, the economy seems to be pleasantly improving.  Sure the dark clouds on the horizon from Cyprus could take some of the wind out of the stock market’s sails.  Nonetheless, the stock market’s needed an excuse to pause all year.

More will be revealed this week.  Later today, for instance, durable-goods orders, consumer confidence, and new home sales will be reported.  Then, on Thursday, 4th quarter GDP revision and weekly jobless claims will be announced.  Come Friday, consumer spending and consumer sentiment will be released.

Naturally, we’ll be monitoring the situation for you…looking for inklings and indicators for what’s next.  Have the negative moods fabricated by the 2008 financial crisis and Great Recession finally swung to the positive?  Are happy days here again?

Looking around, it sure feels like it.  Consumers are consuming.  Producers are producing.  Moreover, for the first time in years, confidence and assurance are returning to the economy like migratory birds to Southern California during springtime nesting season. Continue reading →

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Dark Clouds on the Horizon

Posted on March 22, 2013 by MN Gordon

Wow!  Just when we thought we’d seen it all, something fantastic happened.  What a delightful treat…

The tiny island nation of Cyprus has the whole European continent welcoming spring with the frosted hearts of a December blizzard.  For a brief moment, when the Cyprus legislature simultaneously told the EU, ECB, and IMF – and their “stability levy” – to go fly a kite, we were overcome with anticipation.  We thought we were going to bear witness to mass bank implosions.

Certainly the loss of deposits would be worth the price of relegating an entire nation’s banking class to the ranks of the unemployed.  Moreover, the private uproar, and lessons learned, would demand sound banking for three generations or more.  Future Cypriots would be bequeathed a financial system built on a foundation of granite rather than a sea of paper.

But, alas, it was not to be.  The politicians, we soon discovered, had other, less upright, ideas for fixing things.  From what we gather, one option involves going into deep hock to the Russians. Continue reading →

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On Price Distortions and Landmines

Posted on March 19, 2013 by MN Gordon

Former Federal Reserve Chairman Alan Greenspan told CNBC on Friday that the Dow’s new highs and 10-day run were not the result of “irrational exuberance.”  On cue, the Dow took a 25 point nose dive…closing out the day with its first loss since March 1.

If you recall, during the early part of the stock market bubble up period of the late 1990s, Alan Greenspan asked if irrational exuberance was at work.  On December 5, 1996, while speaking at the American Enterprise Institute, Greenspan asked…

“How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions, as they have in Japan over the past decade?”

“We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability,” continued Greenspan.  “But we should not underestimate or become complacent about the complexity of the interactions of the asset markets and the economy. Continue reading →

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