by Dennis Miller, Miller On The Money:
The price of gold has been swinging wildly over the last several months; from over $2,000 oz. in May, then dropped to around $1822 oz. early in October. The middle east war reignited and it quickly jumped back up around $50. What’s going on?
I Googled “Gold Price Prediction for 2023” and the responses were all over the place. Here is a screenshot of what popped up.
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The swing was a low of $1636 and a high of $2100, almost $500 oz differential. In January one of the pundits will claim victory for their prognostication (aka guess).
I started my writing career with Casey Research, a company chock full of gold experts. As good as they were, historical data was heavily relied upon; no one had a perfect crystal ball.
Why is gold so volatile and prices hard to predict? Prime XBT explains:
“Because gold is such a mature and established market, there are a number of factors that come into play when determining its price and how it is affected. Gold is also a rather unique asset compared to things like stocks and bonds, and that also makes it act differently. The fact that it operates as a hedge means one needs to look for factors that impact other assets differently.
A list of the factors to consider include: Consumption demand, Protection against volatility, Gold and inflation, Gold and interest rates, Good monsoon, Correlation with other asset classes, Geo political factors, Weakening dollar, Future gold demand.”
|In other words, pundits predict gold will hit a price range, by a future date, as long as there is not a bank bailout, pandemic, high inflation, oil crisis, another war, a meteor strike, a manufactured political crisis or an unforeseen event.
It’s time to check in with another real gold expert, Rich Checkan, President and Chief Operating Officer of Asset Strategies International. I’ve been a client since 2008.
In 2008, I felt the bank bailouts would inevitably lead to high inflation. I bought gold to hedge that risk. It took longer than any of us imagined, but it finally arrived.
This Macrotrends chart outlines what happened along the way.
On January 2, 2008 gold was $857.25 oz., in August, 2020 it reached $2,074.88, and has now dropped back down around $200 ounce. Over the long-term gold has done the job.
Rich, let’s look at the short term, beginning in September 2023. The price was still hovering near $2000 and then it quickly dropped around $150 oz. Inflation is still high, and the Fed is clear there’s a long way to go. It took a major world conflict to reverse the trend.
Can you explain how, with inflation still looming large, the price could drop so quickly?
RICH: Dennis, thank you for inviting me. We have long been fans of your excellent insights since the beginning.
I hear your question a lot. In my opinion, it comes down to two things… bad information and alternative investments.
First, the bad information…
The Fed wants you to believe inflation is getting under control and can be defeated with increases in interest rates. Both are false. Reported inflation may be down to just under 4%, but that is still high. High inflation continues, but, for whatever reason, people believe the Fed has the tools and the know-how to conquer it.
Their track record is appalling. Most importantly, they can’t beat inflation with interest rate manipulation alone. Congress must stop overspending… which seems unlikely to happen. No leaders in Congress have the courage or will to do what is right.
The Fed creates a false sense of security, and they are wrong.
Secondly, the biggest reason gold’s price has faltered is because bond prices are plummeting as interest rates rise. Short term, “safe” U.S. Treasuries are over 5%.
Foreign investors are piling in, creating significant headwinds for the gold price.
DENNIS: I’m sure you have seen the wild TV ads predicting gold will soon top $10,000 oz.; buy now, get rich before it is too late. You’ve been in the business a long time. How do you feel about these predictions?