Stick A Fork In It

The recent sell-off in gold and silver has apparently brought out hordes of retail buyers, attracted by the dip in prices. Fair enough, of course – if you think that prices will continue higher it only makes sense to buy on a pullback.

Personally, I think it is more likely to be a continuation of the downtrend established since the 1800s high in July of 2011. Entirely consistent with the rest of the commodity complex, gold’s decline looks to me like just another symptom of deflation. The bellwether commodity, beloved of Chinese pig farmers inter alia, Dr. Copper, (so called because he has a Ph.D. in economic forecasting) is down again today, even though stocks are higher as the pumps were turned on after the regular morning bad news. That hated asset class is higher, too. One might be forgiven for wondering if that big drop in gold prices was orchestrated as a “for sale” sign. Nobody would do that, would they?

Despite much angst over supposed mistakes by Reinhart and Rogoff, there doesn’t seem to be much growth resulting from furious deficit spending. Yes, there’s been a lot of talk about austerity but very little real austerity and of course debt monetization continues at a furious pace. Seems to me that their basic premise is holding pretty well, but remember that concluding anything from economic data is dangerous, because without a tested theory there is no way of distinguishing correlation from causation. Epistemology is sadly out of fashion, I’m afraid, particularly when politics and propaganda rule.

The Dr. Copper thing is clearly a correlation thing, but I’m good with that. Gives a good read on demand, that’s all.

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