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Gold Prices And Real Interest Rates

Tyler Durden's picture




 

Submitted by Erico Matias Tavares via Sinclair & Co.,

Are gold prices going to US$ 5,000 or US$500 an ounce?

Here's one important component that you might need to consider in your forecast: the direction of US dollar real interest rates.

Gold tends to perform well in US dollar terms when US real interest rates are trending lower, meaning that the spread between the interest rate and expected inflation is narrowing, and poorly when they are trending higher.

There are several ways to calculate real interest rates; the most insightful attempt to capture investors' future expectations based on actual market data. The US Treasury makes this easy for us, providing real yields on Treasury Inflation Protected Securities (“TIPS”) on a daily basis for maturities ranging from 5 to 30 years, as shown in the graph below.

Daily Real Interest Rates for Different Maturities: 2 Jan 03 - Today

The question now becomes which of these maturities, if any, is better suited to gauge the relationship with gold prices. In other words, do investors attribute greater weights to shorter-term inflation expectations, like five years, or to longer maturities? While these generally track each other, at times the differentials can be quite significant, as shown in the graph above.

Since theoretically we can argue either way, we decided to use the maturity with the lowest correlation coefficient (the lower the real interest rate the higher the gold price). The 10 year maturity was thus selected, with a value of -0.86 going back to January 2003, although the others were not that far off [Note: -1 is the lowest value, meaning perfect negative correlation].

Here’s how the two variables have performed over time. Gold prices have generally followed the opposite trend of 10 year real interest rates (which are shown in the following graph in reverse order), with the exception of 2005.

Daily Gold Price (Continuous Futures Contract)(LHS) and 10 Year Real Interest Rates (RHS): 2 Jan 03 - Today

Looking at the graph, it seems as if the high negative correlation coefficient is masking the fact that the magnitude of gold price swings appears to lead real interest rates, with its trends bottoming or topping in advance. One explanation is that gold might convey a stronger signal in terms of inflation expectations than the TIPS.

It should be noted that this is not the most extensive of datasets, given that the US Treasury only started publishing these real interest rates back in 2003. This period also coincides with the start of the bull run in gold prices, which may be skewing the correlation analysis. It would have certainly been wonderful if we had data going back to the last major peak in gold prices more than 30 years ago.

So where to from here?

With bond yields already being so low, if the US slips back into deflation this means that real interest rates will trend higher. As we have seen, gold will struggle to move higher in that environment. In fact, some studies show that bond yields tend to mean-revert to 2% in real terms over the longer term, which would be bad for gold from these levels.

But this is not the whole story. If deflation starts causing big problems across the financial system, investors may seek refuge in the yellow metal, thus providing some support.

Therefore, if gold prices materially decouple to the upside in relation to real interest rates, this would not be a great sign for the capital markets as a whole. We could all become "gold bugs" in the process.

 

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Thu, 03/05/2015 - 22:37 | 5859857 Slave
Slave's picture

Probably $50,000

Thu, 03/05/2015 - 22:45 | 5859884 Thirst Mutilator
Thirst Mutilator's picture

what kinda 'bux' r we talkin' about here?

Thu, 03/05/2015 - 23:04 | 5859945 SafelyGraze
SafelyGraze's picture

how this works is, is that we print a few trillion

we give it or lend it or whatever

but mostly to our friends who promise not to spend it on shit like salaries and metal

that keeps it from trickling down to the little people who might spend it on metal

it's sort of a win win win win win situation

the little people should have front-run us by buying 100 trillion of notionals a decade ago

nya ha ha ha

hugs,
the dark sith lords 

 

 

Thu, 03/05/2015 - 23:29 | 5860012 NidStyles
NidStyles's picture

This article presents itself well enough, but it's a false dichotomy.

 

If gold goes up that rapidly it will not stop at $5k. It will simply run away as the USD becomes completely worthless. For gold to go to $500, they would have to outlaw it's exchange and then there will be blood on the streets, as that would be essentially the outlawing of the Constitution completely.

Thu, 03/05/2015 - 23:46 | 5860067 jez
jez's picture

"For gold to go to $500, they would have to outlaw it's exchange and then there will be blood on the streets"

But possession of gold was outlawed between 1933 and 1974, and that right was given up without any bloodshed that I ever heard about.

". . . that would be essentially the outlawing of the Constitution completely."

I'm starting to think that you must be joking.

Thu, 03/05/2015 - 23:49 | 5860087 Bagbalm
Bagbalm's picture

". . . that would be essentially the outlawing of the Constitution completely."

You mean what's left of it?

Fri, 03/06/2015 - 00:15 | 5860170 NidStyles
NidStyles's picture

Meant more of that any pretenses of following it will be eliminated. Think it through and you will understand what I am talking about.

 

 

Military coup, marital law, outright dictatorship. Pick your term, as they are all the same thing. It should be obvious by now that this is the direction it's heading. Hope you've been getting ready. Fortune favors the bold, but probablity favors the prepared.

Fri, 03/06/2015 - 01:04 | 5860271 Stuck on Zero
Stuck on Zero's picture

Did the Author forget that interest rates cannot go up?  If interest rates were to rise the government could not afford to pay the interest on the current debt. 

Fri, 03/06/2015 - 02:59 | 5860410 Pinto Currency
Pinto Currency's picture

 

 

Gold will go higher, however, palladium, platinum, and silver will show the way by blowing higher first.

The paper price scam in London only works while physical metal circulates and the above three have increasingly little in available  circulation.

BTW Deflation is marked by money buying more goods.  Silver and gold are premier money.

The real interest curves above are useless as they use the CPI which is a fraud.

See pg 9 & 10.

http://www.sharpspixley.com/uploads/BullionWeeklyTechnicals03032015.pdf

Fri, 03/06/2015 - 03:43 | 5860448 Keyser
Keyser's picture

If you follow the Keynsian, western hegemoic model, then gold will most likely go down... If you abandon this folley, as the BRICS are doing, then gold will likely double in the near term... I know which camp I am in and it's not the one that supports Bernanke Bux... 

Fri, 03/06/2015 - 05:23 | 5860519 GetZeeGold
GetZeeGold's picture

 

 

 

Are gold prices going to US$ 5,000 or US$500 an ounce?

 

Help us Jon Nadler.....you're our only hope.

Fri, 03/06/2015 - 05:37 | 5860528 pkrstr9
pkrstr9's picture

Summary of this article:

Will the price of gold be going up or down in the future? Well, it will probably go down, but then again it could also go up.

This guy is a real f*cking genius...

Fri, 03/06/2015 - 05:56 | 5860543 boogerbently
boogerbently's picture

Silver Eagle cheaper than a Maple Leaf.

I say price going down.

Fri, 03/06/2015 - 22:49 | 5863735 Haiku4U
Haiku4U's picture

"If the cards are cold, 
Don't go folding. 
Lady Luck is golden, 
She favors the bold..."

Geddy Lee...(et al)   RUSH


Fri, 03/06/2015 - 06:13 | 5860553 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

If government ban gold worldwide I will go the Bitcoin route and black market gold on dark exchanges...

Each time the government try to implement capitals control it fail, black markets take the relay.

Fri, 03/06/2015 - 10:25 | 5861059 SuperVinci
SuperVinci's picture

idiotic post. gold will never be banned worldwide you fool.

Fri, 03/06/2015 - 11:46 | 5861388 Bullionaire
Bullionaire's picture

"But possession of gold was outlawed between 1933 and 1974, and that right was given up without any bloodshed that I ever heard about."

 

Sigh...OK, one more time:

 

The US was on a GOLD STANDARD in 1933, meaning gold was part of the monetary system.  Big Brother FDR said it was citizens' patriotic duty to sell their gold to the Fed in order to stablize the dollar, and the sheeple bought it hook, line and sinker.  Then he turned around and showed them they'd been scammed by devaluing the dollar by 69%.

 

Since the US no longer bases its monetary policy on that barbarous relic the gold standard, there is no reason to confiscate gold from the citizenry.  And yet, TreasSec is authorized to confiscate ANY asset from ANY citizen at ANY time:

 

http://gata.org/node/5606

 

So there.

Fri, 03/06/2015 - 00:17 | 5860114 daveO
daveO's picture

$500/oz. implies a wipeout of about 75% of US Treasury debt. Not gonna happen! Hyperinflation always comes first, in fiats. Writers are always acting like the gold price varies against dollars, when it's actually the dollar price floating against gold. 100 yrs. ago, gold was $20/oz. The banksters can slow the 'gold in dollars' price expansion by naked shorting with dollar contracts, but they can't make that simple fact go away. Gold is money, all else is credit.

Fri, 03/06/2015 - 00:23 | 5860179 NidStyles
NidStyles's picture

No, it doesn't. It implies that the curtain comes down and any pretenses of governments being civilized gets thrown out the window. It means hard style dictatorship with open and outright enslavement.

 

Pretty sure the Russians never thought it would happen to them either, and look where that got them in the early 20th century.

Americans don't understand it if they have never left the US. The US is it man. There are no free parts of the world anywhere else.

Fri, 03/06/2015 - 00:40 | 5860224 Farqued Up
Farqued Up's picture

Styles,

Then explain why the USSA was recently rated as the 32nd best country for individual freedom? This is a bad country on a crash trajectory.

Fri, 03/06/2015 - 08:51 | 5860708 Againstthelie
Againstthelie's picture

What have you learned from the last years, nothing?

In 1929 the harvest on the fields in USA was burned down, because it would have cost more than harvesting and selling it. And that's a perishable, consumed product, necessary for life. All Gold ever produced is more or less still available. Maybe keep that in mind before making such childish and naive comments that the market could not do this or that. The market is bigger and stronger than anyone and he destroys everyone who believes he was in possession of the knowledge what it can or cannot do.

False dichotomy. Jesus.

Fri, 03/06/2015 - 07:43 | 5860619 Abitdodgie
Abitdodgie's picture

This whole article is pointless the price of gold will be what the bankers want it to be , market forces mean nothing . In 2008 the price was around $1200 and in 2015 eight years later the price is still $1200 so no it not going anywhere until the bankers say so.

Thu, 03/05/2015 - 23:35 | 5860027 Harbanger
Harbanger's picture

"what kinda 'bux' r we talkin' about here?"

Gold is already doing exactly what it's supposed to.  It's been going up against every currency that is devaluing.  It's not rocket science folks.

Fri, 03/06/2015 - 02:35 | 5860388 A Nanny Moose
A Nanny Moose's picture

Starbux. Gold will be what it will be. Price rising/falling in FRN terms are irrelevant, since 1oz of gold has always, and continues to buy a nice suit. This means that gold @$500/oz still = that same, nice, fucking suit.

Fri, 03/06/2015 - 10:28 | 5861071 SuperVinci
SuperVinci's picture

1oz gold= suit = bullshit 

 

quit trotting that silly line out. when gold is unencumbered of paper falsities, gold's value will be far far higher than a fucking suit.

Thu, 03/05/2015 - 22:47 | 5859893 kliguy38
kliguy38's picture

Probably $50,000

 

you mean silver don't ya?

Fri, 03/06/2015 - 10:30 | 5861082 SuperVinci
SuperVinci's picture

no, if silver was meant, silver would be spoken. silver is the peoples stuff- which is a fancy way of saying it's common, cheap, and not what rich men store wealth in.

silver is bountiful and when it all seeks a bid from paper at once...whoo boy will it be cheaper yet.

Thu, 03/05/2015 - 22:50 | 5859906 Rootin' for Putin
Rootin' for Putin's picture

I would like it to go to $5 first, so i can buy lots.  Then it can go to $50,000

Thu, 03/05/2015 - 22:51 | 5859911 lakecity55
lakecity55's picture

Or fitty cent.

Only the Red Shield Knows...

Fri, 03/06/2015 - 09:05 | 5860736 rubiconsolutions
rubiconsolutions's picture

The more important question is what is the price of a loaf of bread and a pound of hamburger going to - in dollar terms I mean?

Fri, 03/06/2015 - 09:58 | 5860901 JerseyJoe
JerseyJoe's picture

All historical data does not include Chinese gold demand nor the demand of India's growing middle class.

Here is what is really happening that is not in the data used by this suits on WS:

 

http://d1w116sruyx1mf.cloudfront.net/ee-assets/gsd/yesterday/150306SGE.gif

 

That is over 8300 tonnes in just 6 years.   The Chinese government even advertises on TV advocating its citizens buy gold.  It is sold in 100s of thousands of locations throughout China - including all banks and post offices.

So regardless of the what the Keynesian brainwashers say...our gold is being Hoover up by China and India.

 

Fri, 03/06/2015 - 11:20 | 5861281 robertsgt40
robertsgt40's picture

The #1 difference between gold and fiat is gold will always have value.

Thu, 03/05/2015 - 22:47 | 5859888 Rock On Roger
Rock On Roger's picture

Its a bargain.

 

Stack On

Fri, 03/06/2015 - 04:22 | 5860477 winchester
winchester's picture

i will tell you what will happen, they will come one day to suppress all physical, note, money, pm to virtualize all.

 

to achieve this, fiat is not a problm, ebt, CB,  swift, all is already in place, for phys such pm, they cannot let price go up, if so, privates will never release they stacks,  they have to make it cheap so it is not interesting to possess some.

 

problem over decades, each time gold spikes, mass run to bank to buy... to prevent that and slowly drying the stock they must make it not attractive.

 

period.

Fri, 03/06/2015 - 07:06 | 5860592 new game
new game's picture

i prefer 9mm by the 500 lots blazer or rem. same curve but wtf is moar useable?

would you rather have 50000 9mm or 10 oz gold?

Thu, 03/05/2015 - 22:48 | 5859891 philipat
philipat's picture

Not forgetting also that interest rates on fiat are heading into negative territory and that fiat left in banks is also subject to bail-ins...so all of the mainstream arguments against Gold no longer apply?

Thu, 03/05/2015 - 22:50 | 5859905 Bossman1967
Bossman1967's picture

The buck wont be worth shit when gold goes to 5,000 rather have 500 gold and my dollars worth something. Now when the dollar collapses i would not trade for a million an ounce.

Thu, 03/05/2015 - 23:44 | 5860063 Harbanger
Harbanger's picture

Just know that you are hedging against the value of your particular fiat currency.  It's different depending on where you live.  If it goes to 5000 USD, then the USD is only worth about 25% of what it is now.  If it went to shit as you say, then you can't really put a number on it.

Fri, 03/06/2015 - 02:27 | 5860372 glenlloyd
glenlloyd's picture

Not any particular currency, against all of them....

Fri, 03/06/2015 - 06:48 | 5860585 graspAU
graspAU's picture

That's the thing, AU is probably already worth $5,000 without the suppression, meaning the $ are worth much less than percieved already. Just go to the grocery store and a couple bags are $80 :)

Thu, 03/05/2015 - 22:55 | 5859918 casfoto
casfoto's picture

who knows. it will go up if WW3 starts. It will go down if we loose.

Thu, 03/05/2015 - 23:00 | 5859936 Latitude25
Latitude25's picture

The reason gold has not gone to $500 has little to do with interest rates.  Asian demand and the cost to mine are what keeps it where it is.  If interest rates do go up then that means there is recovery and inflation is really starting up and in that scenario gold will shine.

Fri, 03/06/2015 - 00:12 | 5860163 TheReplacement
TheReplacement's picture

If interest rates go up it means we are truly at the precipice.  The economy will shudder (worse than now) and the last and best QE ever will occur.  That will be the end.  Gold will shine briefly, but probably illegally (as in confiscated/banned/taxed at 90%).  Then baser metals like lead and steel will carry more value.

Thu, 03/05/2015 - 23:01 | 5859938 exartizo
exartizo's picture

this analysis is too *simplistic* and does not take into account enough *relevant* variables to be *credible*.

Thu, 03/05/2015 - 23:05 | 5859949 pragmatic hobo
pragmatic hobo's picture

$500 ... i can only hope ...

Thu, 03/05/2015 - 23:13 | 5859975 kwatinhu
kwatinhu's picture

I'm no genius but it seems to me as the paper dollars buy less and less, that should boost the value of physical gold or silver, but with the goosed up rigged bullshit we have going on now with the market and the US economy in general, who the F knows? All bets are off at this point, everybody's guessing.

BUT, if you know, let me in on it, I won't tell, I swear.

Fri, 03/06/2015 - 00:14 | 5860168 TheReplacement
TheReplacement's picture

If you believe there will be a collapse it doesn't matter what value gold has in dollars today or tomorrow.  What will matter is will you be able to get at dozen eggs for dollars or metal.

Fri, 03/06/2015 - 04:34 | 5860488 winchester
winchester's picture

bingo,  99% do not get it.

 

they think stacking pm like fucktards but if they have nothing to exchange for eating...  they can put their gold in their ass to try to convert it to eggs...

real value to stack is seeds and knowledge.

nobody get it coz every body is ar15 hollywoodized, but when you have nothing to kill to  loot ... or nothing to scavange...then... you remain alone facing the mother nature... and you die :)
coz there is no 555-pizzaboy to delivery on couch your fucking Mc shit. and you realize it takes WEEKS to vegetables to grow... welcome back to the reeeeeeeeeel world...

 

i predict 85% of world erradication within end of century, no brain, no humanity, no sense of the world as it is.
only thoses we look at national geographics will continue to survive, the white man with his iphone on a forest to take pic of his exploit in 2015 to make fire without a light to post it on facebook once returned to
" civilization"  is gazelle in savana, a dead meat, a weak link in the animal food chain. the one who over consider himself in cities with weaponry thinking  on a collapse ammos make the difference is also a dead weight leashed on the surfer's calf. 50kg of ammos packed on back is not what i call efficienty.

 

anyway, cya in hell :)

 

Fri, 03/06/2015 - 07:50 | 5860622 bozoklown
bozoklown's picture

you should do stand up.

Fri, 03/06/2015 - 09:10 | 5860744 Thinkor
Thinkor's picture

The Soviet Union's population declined only 13% in World War II.

Germany's declined 17%, even counting as gone those Germans who no longer found themselves living in Germany.

Depressions are benign in comparison.

You will need a nuclear war, asteroid strike, or similar major catastrophe to get to a loss of 85%.

 

 

 

 

 

 

Fri, 03/06/2015 - 10:45 | 5861144 BeaverCream
BeaverCream's picture

Sounds pretty hollywood to me.

Thu, 03/05/2015 - 23:15 | 5859980 Dre4dwolf
Dre4dwolf's picture

Deflation will hit, prices will slump things will turn to shit and prices will shoot up IMO.

So BFTD wait till gold is like 700~890$ an oz and silver 9~12$ an oz and load up for the hell of it.

Silver seems more logical to me because it has more of an industrial use and gets used up . . ./discarded more but to each their own.

You always have the face value of the coins to boot with silver . . . which is nice.

Thu, 03/05/2015 - 23:52 | 5860091 atomp
atomp's picture

Face value. That was sarcasm, right? Because I was just overcome with the image of DHS rolling up onto your lawn in an MRAP, poking you in the forehead with the still warm barrel of a .308, saying, "Give us da silvah." Followed by you, sheepishly, handing over your coins to them in exchange for 1 Crispy Bernak Clownbux each.

Fri, 03/06/2015 - 00:15 | 5860173 TheReplacement
TheReplacement's picture

TP better than no TP.

Fri, 03/06/2015 - 11:14 | 5861255 Dre4dwolf
Dre4dwolf's picture

Yea at which point you hand them a sack of 4 ~ 5 coins while the rest is burried in the back yard under the shed.

Not everyone is a spineless coward.

Thu, 03/05/2015 - 23:22 | 5860000 wet_nurse
wet_nurse's picture

This is true in a somewhat normal world. Is the world gonna be normal five years from now?

Thu, 03/05/2015 - 23:22 | 5860001 Creepy A. Cracker
Creepy A. Cracker's picture

Going nowhere until the big money chases after it.  Right now the big money is in the stock markets.  When that will change who knows.  But, the central banks will do what they can to keep stocks going up forever.

Fri, 03/06/2015 - 00:09 | 5860126 Harbanger
Harbanger's picture

Stocks everywhere are going up because all Nations are printing at record speed.  At some point, reality will hit all the developed countries like in Greece and they will be forced to live within their means.  Unfortunately, your Govs will take you to war before they admit their failure.

Fri, 03/06/2015 - 08:24 | 5860667 SoilMyselfRotten
SoilMyselfRotten's picture

Almost like it was planned the whole time

Fri, 03/06/2015 - 10:17 | 5861018 GeezerGeek
GeezerGeek's picture

Forced to live within their means? How dare they! Gimme MOAR, Obama!

Thu, 03/05/2015 - 23:22 | 5860002 mijev
mijev's picture

This analysis may have been relevant 40 years ago. Financial/market analysts are one of the many jobs that have become totally redundant.

Thu, 03/05/2015 - 23:26 | 5860009 thinkmoretalkless
thinkmoretalkless's picture

In a time when laws are all relative to who or what is involved, and war appears a likely escape hatch to reshuffle the deck....what do you want in your wallet?

Fri, 03/06/2015 - 05:12 | 5860515 The Navigator
The Navigator's picture

what do you want in your wallet?

I'd like an AR10, full auto, that scales from 1% in my wallet to 100% in .01 secs

War will come, but before that, confiscation of retirement accounts, your Au/Ag/Pb and AR's to pay for the war and arm B. Hussein's "national security force that's just as powerful, just as strong, just as well-funded" civilian army.

What I want is to DrinkMore&ThinkLess, but it just ain't working so far.

Next weekend is the Del Mar gun show - I'll buy another 1,000 rounds of .308 and another 1,000 rounds of .223 - they ain't outlawed, yet.

Everyday another news story proves laws and taxes are for peons and peasants (this week, Hillary and her stupendous "private email" story) - Happy April 15th cometh soon.

http://www.dailymail.co.uk/tvshowbiz/article-2768873/Gwyneth-Paltrow-s-f...

https://www.marxists.org/history/england/peasants-revolt/story.htm

"only little people pay taxes" - Leona Helmsly - http://www.dailymail.co.uk/news/article-476587/Queen-Mean-billionaire-ho...

Are you getting it yet????? These fuckers think WE should pay taxes to pay for THEIR subsidies to the moar poor to buy votes that keep this cycle going.

OPT OUT. Like Freddie says, "no watch TV" (haven't seen Freddie lately - but like DoChen and myself, maybe getting tired of preaching to the choir, when no one in the choir seats).

Stack when $low, often, and in bulk. It's insurance of a different kind.


Thu, 03/05/2015 - 23:30 | 5860020 FieldingMellish
FieldingMellish's picture

$500? LOL! No way. Its going a lot lower than that. A lot.

Thu, 03/05/2015 - 23:34 | 5860029 Creepy A. Cracker
Creepy A. Cracker's picture

Chasing Bitcoin all the way to zero?

Fri, 03/06/2015 - 05:26 | 5860521 GetZeeGold
GetZeeGold's picture

 

 

Reap the air.

Thu, 03/05/2015 - 23:40 | 5860048 semperfi
semperfi's picture

I can't wait for free gold !!

Fri, 03/06/2015 - 00:09 | 5860145 divingengineer
divingengineer's picture

Negative gold prices.

Why not?

 

Fri, 03/06/2015 - 00:12 | 5860161 FieldingMellish
FieldingMellish's picture

Gold is always negative as it pays no interest and costs money to store it. I'm sure it will be "allowed" to be worth something in the future... say $50 an ounce?

Fri, 03/06/2015 - 00:21 | 5860184 in4mayshun
in4mayshun's picture

Wow, you don't read much about history do ya? It's funny you say gold pays no interest because neither do dollars anymore.

Fri, 03/06/2015 - 02:04 | 5860345 dark_matter
dark_matter's picture

Luckily there are no fees for gold stored at the bottom of lake Winnipisaukie.

Fri, 03/06/2015 - 06:33 | 5860569 odatruf
odatruf's picture

Now we know why Henry was On Golden Pond.

Fri, 03/06/2015 - 07:27 | 5860605 ParkAveFlasher
ParkAveFlasher's picture

lol...and wanted to keep his liberal daughter away.

Fri, 03/06/2015 - 02:16 | 5860356 Burnbright
Burnbright's picture

For someone with two supposed PHDs, that statement is fucking retarded on a level fit for a seat at the front of the short bus.

$50 gold!? Yeah, maybe in 1930's. You ain't no MDB fool.

Fri, 03/06/2015 - 04:38 | 5860492 winchester
winchester's picture

at some point  possessing gold could become illegal.

Fri, 03/06/2015 - 06:47 | 5860523 GetZeeGold
GetZeeGold's picture

 

 

What gold?

 

I don't have any gold...but I might know someone who does.

Fri, 03/06/2015 - 04:39 | 5860495 CHX
CHX's picture

The reason why gold IS valuable is because it DOES NOT HAVE any interst, because it is MONEY WITH NO COUNTER-PARTY RISK (if held appropriately). Shee, is this so hard to grasp?

Fri, 03/06/2015 - 05:27 | 5860522 fukidontknow
fukidontknow's picture

Gold pays interest it's call the lease rate.

Fri, 03/06/2015 - 05:55 | 5860542 gwar5
gwar5's picture

Nevermind everything else wrong with your statement, surprisingly gold does pay a dividend. If NIRP allows banks to charge depositors interest then the difference for holding gold is a net positive yield.

 

Fri, 03/06/2015 - 06:22 | 5860562 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

Don't worry soon it will cost more to "store" in your bank account than with physical in a safe...

Fri, 03/06/2015 - 07:35 | 5860615 1stepcloser
1stepcloser's picture

Like keeping your FIAT money stored in a bank during NIRP

Fri, 03/06/2015 - 10:24 | 5861055 GeezerGeek
GeezerGeek's picture

If you like your bank account balance you can keep (most of) it.

Fri, 03/06/2015 - 04:36 | 5860491 CHX
CHX's picture

It's negative for the miners already, mind you. Could it go even more negative? Absolutely. Will this be a sustainable price? Absolutely NOT, just as these prices are already too low... the paper PM Ponzi is failing, and the dropping prices are just sign of this. If it goes significantly lower from here, I expect an overnight reset... 500 to 5000 (?) and a cash market for bullion only from that point on... we'll see how it will play out. Good luck to all, we'll all need it soon.

Fri, 03/06/2015 - 05:55 | 5860530 JerseyJoe
JerseyJoe's picture

Beijing sets the kilo peg starting March 20th.  Do you think the 8400 tonnes sold through the SGE in the last 10 years is an indication of what would happen if gold gets cheaper?  Gold was selling at more than a half tonne per MINUTE in one mall in China in January.  China alone bought almost the entire global mine supply last year. 

With China in the equation, all back looking analysis of gold is a joke.  Add a the growth of the middle class in India to the equation and all bets are off.   China and India combined have been buying far more than the global mine output.  And China should know - they invented paper money.  (My Chinese neighbor lady once told me with great distain that paper money is worthless - they just print more - gold is money.  That would seem to tell me...the Chinese demand for the yellow metal will never end.  It is sold in banks and post offices in China...watch China and ignore these idiots.)    

Silver has been in a mine deficit 6 out of the last 10 years...just look at the data at the Silver Institute.  India bought something like 7000 tonnes of silver last year and the world only produces about 800M oz.  They bought close to a third of the global ouptut.  

Listen to Maguire's interview with Turf Fergusion - great interview about the new phyzz exchange.  

http://www.tfmetalsreport.com/podcast/6650/big-changes-coming-global-gol...

Fri, 03/06/2015 - 06:16 | 5860558 CHX
CHX's picture

I second all of that. I don't think PMs will go significantly lower, but they do, the rebound will be spectacular. Some freegolders think paper price needs to drop waaaay down low to break the paper PM ponzi... I don't think PM's will be allowed to trade higher in an orderly fashion... so maybe sub 1000 by/before march 20, then the bullion banks cover their massive short position, all contracts are settled in cash an boom, an entirely new market, multiples higher, dominated by the east, with only the holders of fizz aboard. 

Fri, 03/06/2015 - 10:31 | 5861087 GeezerGeek
GeezerGeek's picture

China (PRC) allowed its citizens to own gold when the USD price was around $1000. I don't recall the value of the yuan then, but I would suggest that there is a floor of some sort under gold because of the large number of people in China holding gold. Were their government to allow the POG to fall below that price I think China would face massive unrest. Would they let it happen?

Thu, 03/05/2015 - 23:48 | 5860084 Pogo5187
Pogo5187's picture

The analysis ignores the 10-ton Bankster with his greasy thumb on the scales, and proceeds as though gold were not a rigged market. NO attempt to forecast future price moves based on ANY legitimate metric will succeed as long as TPTB are free to cap the prices of precious metals at will. Period.  All such speculation is beyond idle, it is a colossal waste of the readership's time. Precious metals prices will only do what TPTB want them to do, as long as they have the power to do so, and that will be until Mr. Market awakens from his nap and sets things aright.  Amen?

Thu, 03/05/2015 - 23:59 | 5860111 tailgunner
tailgunner's picture

It amazes me that no one mentioned China and Russia going to gold backed currency.  Putin has mentioned this as a last resort to smash the dollar for all the sanctions.  Any morning it could happen now that US troops are arriving tomorrow to  train  soldiers on Ukrainian soil.  Wait and see.

Fri, 03/06/2015 - 00:05 | 5860129 daveO
daveO's picture

Yea, the west intends to bleed them dry. Good luck with that plan. /sarc

Fri, 03/06/2015 - 00:30 | 5860205 10mm
10mm's picture

Would be nice if it was tommorow morning. 

Fri, 03/06/2015 - 00:26 | 5860198 andrewp111
andrewp111's picture

If US interest rates remain positive during deflation, gold should drop in price and the dollar soar to the moon. The real quettion is: will the USA be forced to adopt NIRP?

Fri, 03/06/2015 - 03:43 | 5860449 SilverMoney1
SilverMoney1's picture

This.

Fri, 03/06/2015 - 01:09 | 5860279 seek
seek's picture

No one is going to sell actual physical gold at $500. At that level even mines with high grade ore aren't going to be profitable. They'll mothball operations well before that point.

The price of gold is largely going to be whatever TPTB decide it to be, until they can't do that anymore (e.g. paper and phyz decoupling.) Discussions like this one are pretty academic, as any correlation can be obliterated with a few phone calls from the Fed... again, until that doesn't work.

At this point, I'm convinced gold is a long, long game with a payoff that happens in a very short period of time. How to handle things post-payoff is a question, if we somehow got another Volker to appear and force hard medicine, it might actually make sense to trade some AU for the newly devalued dollars. (I doubt this will actually be the case, but it's something to plan for.)

Fri, 03/06/2015 - 07:05 | 5860591 Bopper09
Bopper09's picture

If I were trading paper gold for fiat, though, this would be an excellent article for the short term trading

Fri, 03/06/2015 - 22:31 | 5863693 Haiku4U
Haiku4U's picture

sell just enough Phyzzz to payoff my mortgage.

Fri, 03/06/2015 - 01:16 | 5860288 KashNCarry
KashNCarry's picture

Bet these guys aren't too worried about the price of gold... http://controversialtimes.com/news/armed-robbers-steal-4-8-million-in-go...

Fri, 03/06/2015 - 01:40 | 5860321 joego1
joego1's picture

As soon as the faith in fiat drys up pm's will rule the day.

Fri, 03/06/2015 - 02:59 | 5860419 basho
basho's picture

the world is buying the stuff up like popcorn.

soon it will irrelevant what the price is in $$

the $$ is on its way out. 

who gives a s*it what the $$ price will be.

file this report w/ the one by rothschild.

Fri, 03/06/2015 - 03:42 | 5860447 SilverMoney1
SilverMoney1's picture

"If deflation starts causing big problems across the financial system, investors may seek refuge in the yellow metal"

 

Deflation is a huge problem for commodities when the commodity is traded in that currency.

 

A better sentence would of been "If people lose faith in money, investors may seek refuge in the yellow metal".

 

IMO.. a lot lower before a lot higher.

Fri, 03/06/2015 - 03:55 | 5860458 Nafets93
Nafets93's picture

I think that when governments all around the world are at the brink of collapse and they have to service their vast amounts of debt, they will NOT default, but print up as if there's no tomorrow. When that happens, gold will keep it's value, problably, as already discussed, in much higher nominal terms.

And, in my opinion, when shit hits the fan and governments are starting to inflate huge amounts of debt away and deflating confidence in the currency at the same time, China will come out and announce their official gold holdings to stabilize the confidence in their currency.

As for the US, people will ask more seriously about the "gold in US vaults", only to find out that those chambers have already been empty for a long time....

 

Go PM's.

Fri, 03/06/2015 - 04:14 | 5860471 JPMorgan
JPMorgan's picture

I just look at gold valued in Yen or Ukrainian Hryvnia to understand why you would want to hold gold.  

All fiat currencies come and go, not one has stood the test of time.   
Fri, 03/06/2015 - 04:54 | 5860500 Firewood
Firewood's picture

The future use and price of real gold will not be determined by suit wearing thugs on Wall St or the City of London. When that becomes obvious to the sheeple all the Western prattle will become as meaningless as their IOU fiat petroscrip "currency" protection rackets.

Wealth cannot be printed..by 3D printers or by the Federal Reserve pre$$.

"The reaction of global USDollar rejection in response to Quantitative Easing, otherwise known as hyper monetary inflation, will go down in US history, even world history, as the greatest self-inflicted gunshot wound to the head and chest in two thousand years."

 

http://www.gold-eagle.com/article/strategic-backfire-us-government-policy

Fri, 03/06/2015 - 04:52 | 5860501 Clowns on Acid
Clowns on Acid's picture

To what level of formal education did the author complete ?

Fri, 03/06/2015 - 05:50 | 5860536 JerseyJoe
JerseyJoe's picture

March 20 Beijing owns the Kilo fix...and it is a phyzz only exchange with 11 insured vaults around the world to support the transactions.

 

http://www.tfmetalsreport.com/podcast/6650/big-changes-coming-global-gol...

 

Fri, 03/06/2015 - 05:53 | 5860539 JerseyJoe
JerseyJoe's picture

Why is JP Morgue, the largest silver shorter on the planet, buying so much silver?  

Fri, 03/06/2015 - 07:00 | 5860590 Bopper09
Bopper09's picture

I think you just answered your own question.  I know if I could lower prices on things I buy, I would.

Fri, 03/06/2015 - 08:29 | 5860681 JerseyJoe
JerseyJoe's picture

Rhetorical - get it.

Fri, 03/06/2015 - 08:04 | 5860634 Lumberjack
Lumberjack's picture
GOLD MINE: HILLARY CLINTON’S BROTHER GRANTED SUPER-RARE MINING PERMIT FROM HAITI AFTER STATE DEPT. SENT COUNTRY BILLIONS

 

http://www.breitbart.com/big-government/2015/03/05/gold-mine-hillary-clintons-brother-granted-super-rare-mining-permit-from-haiti-after-state-dept-sent-country-billions/

The tiny North Carolina company, VCS Mining, also included on its board Bill Clinton’s co-chair of the Interim Haiti Recovery Commission (IHRC), former Haitian Prime Minister Jean-Max Bellerive.

 

-----

Cattle futures anyone?

Fri, 03/06/2015 - 08:25 | 5860669 realWhiteNight123129
realWhiteNight123129's picture

THIS ARTICLE MISSSES THE BIGGEST POINT: LETTING DEFLATION HAPPEN WILL MAKE REAL INTEREST RATE SKYROCKET. THIS MAKES THE GOV (THE BIGGEST DEBTOR) BANKRUPT (GREECE DOES NOT PRINT ITS OWN MONEY)...

WHERE HAVE YOU SEEN IN HISTORY THAT THE GOV WILL GO BANKRUPT WHILE THEY CAN CHEAT BY RESPONDING TO DEFLATION BY PRINTING MORE MONEY.

Sorry for shouting, but this is idiotic.

There is never ever real steep deflation in ealstic money, deflation can always be fought with enough money printing, the thing incontrollable and chronic since 1933 is inflation.

Before 1933, teh prices were swinging in both ways with steep deflation during credit cunches (with actual bank bankruptcies) and steep inflation when credit was booming again..

 

Fri, 03/06/2015 - 08:27 | 5860674 Dr. G
Dr. G's picture

I'd love to see this graph with the shadowstats inflation numbers.  My real return on bonds is in the toilet so I'm stackin'

Fri, 03/06/2015 - 09:07 | 5860739 Its_the_economy...
Its_the_economy_stupid's picture

you mean you're not in a 100x Long Bond ETF??

Fri, 03/06/2015 - 08:28 | 5860679 Fix It Again Timmy
Fix It Again Timmy's picture

In regards to the Constitution in today's environment - the only thing the Constitution is, is "on display..."

Fri, 03/06/2015 - 08:50 | 5860706 snr-moment
snr-moment's picture

Are gold prices going to US$ 5,000 or US$500 an ounce?

 

Hope so.

Fri, 03/06/2015 - 09:52 | 5860892 GMadScientist
GMadScientist's picture

500 loaves of bread, 5000 would be unrealistic

Fri, 03/06/2015 - 10:41 | 5861126 Farmer Joe in B...
Farmer Joe in Brooklyn's picture

Too long, didn't read

The REAL reason to own gold is a hedge against a collapse in the fiat-based financial system.  Short-term fluctuations mean nothing to me.

Fri, 03/06/2015 - 22:25 | 5863674 Haiku4U
Haiku4U's picture

"...if the US slips back into deflation this means that real interest rates will trend higher..."

Which would bankrupt the U.S. by increasing the interest payments on $18+ trillion worth of debt. 
Which would cause the value of the dollar to crash and the value of the yellow metal to rise.

Not really too hard to figure this out.  Interest rates CANNOT go up....EVER!

(just waiting on someone to blow up so this (FIAT) system can come to an end...I've got 12 years til retirement) 

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