Wednesday, April 16, 2014

You're Not Even in the Ballpark- Inflation Misconceptions and Gold

The below video highlights many misconception concerning inflation and gold. Not from Schiff mind you, his Austrian-based arguments are spot on. Granted, I am biased.

A gold/VIX correlation, that is a new one for me. A relationship that I think I will have to test in the future, but I am fairly sure how the results will come out. That said, I have show in the past that there is no relationship between gold prices and changes in GDP or the overall stock prices. None what so ever, and I think you should seriously doubt the the talking heads perpetuating the myth of a relationship.

More so, the video highlights that the government statisticians and the Federal Reserve continue to win the day on inflation, more specifically the definition there of. Inflation is an increase in the supply of money and gold prices have, more or less, moved with the debasement of our currency.

Gold vs. M2

Gold vs. Base Money

Gold vs. M3 at least through 2006

Granted, gold prices are significantly influenced by supply/demand dynamics and the run out of the ETF complex last year significantly weighed on the yellow metal. That said, the continued debasement of currencies by the world's central banks- QE or not, should help provide a floor under the price of precious metals.

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