Western-based gold investment demand continues to plummet as gold is being sold in order to buy equities. It is a continuation of the theme that has been in place for the majority of 2014. The surging stock market, coupled with a strong Dollar, is undercutting interest in the zero-interest paying asset.
Add to this recipe falling inflation expectations, and it is looking more and more likely that, barring some sort of unforeseen geopolitical event, gold is not going to be able to stay above the $1200 level.
Take a look at the following two charts which I post very regularly here. The first is the reported holdings of the giant gold ETF, GLD.
Holdings are now at 773.45 tons, the lowest reading of the year thus far and down some 24.77 tons from the starting point at the beginning of this year. One must go all the way back to December 2008 to find that amount of gold in the ETF! That is nearly six years ago. My oh my, how the mighty have fallen!
Here is the TIPS Spread chart and the price of gold overlaid upon it. Notice the near perfect relationship between the TIPS spread line and the price of gold. As inflation expectations in the market fall, so too is the price of the yellow metal
There is nothing in either of these charts that would suggest some sort of coordinated assault on the gold price as some still want to argue. The simple facts are that for now, the fundamentals favoring a higher gold price are not present. That could change at some point as all markets are indeed subject to shifts in sentiment, but to argue that gold would be multiples higher were it not for some sort of constant price manipulation scheme by the powers that be, is a colossal waste of time, energy and intellect.
Here is the most current Velocity of Money ( note I am using the M2 money measure ) through the end of the first quarter of this year.
As long as this line continues to move lower, inflation pressures are going to be rather elusive. I maintain that the jobs situation in this nation, especially wages, is going to have to change for this line to turn higher.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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