Why isn't gold moving?

[glennds]

If you accept the idea that inflation is all around us, so much so that it's the mainstream talk, then why isn't gold moving?
My PP is down YTD, and the missing piece seems to be gold responding to what appears to be inflation. It rose some during the pandemic, and then came back down.
Maybe there is no inflation?
Maybe crypto is stealing some of gold's market as an inflation hedge?

During the last financial crisis, when the Fed flooded the market with liquidity, gold soared. So what's different now?

[I Shrugged]

Don't know, but I'm buying.

[perfect_simulation]

The fact that gold hasn't moved indicates to me that inflation isn't here. Meanwhile, rising interest rates put pressure on gold because gold doesn't pay you to own it

[boglerdude]

Short term fear moves it, long term real rates move it

[pp4me]

Gold works in mysterious ways, its wonders to perform.

[mathjak107]

Gold does not respond to normal inflation well at all ..to many other factors effect it .

But it does respond well to real return on cash going negative

[barrett]

Gold does not respond to normal inflation well at all ..to many other factors effect it .

But it does respond well to real return on cash going negative

Agreed on the first point. Regarding the second, real returns on cash have been negative for quite a while now, right? Do real yields just need to be even deeper into negative territory for gold to move up?

Harry Brown always said that gold would do well during high inflation, like somewhere up around 5% - 6%. Or maybe gold is just taking a while to react to present conditions much like what happened with long bonds in late 2008.

Been wondering the same thing, so thanks glennds for starting this thread.

[glennds]

Gold does not respond to normal inflation well at all ..to many other factors effect it .

But it does respond well to real return on cash going negative

What do you mean by normal inflation? The conventional measures like CPI, PPI?
Please explain,

[buddtholomew]

If I recall HB said “unexpected inflation” in the 5+ range not 2-3% transitory inflation.

Negative real yields are +ve for gold as a store of value instead of USD.

[Tortoise]

Short term fear moves it, long term real rates move it

Sounds pretty similar to how long-term Treasury prices behave.

[mathjak107]

Gold does not respond to normal inflation well at all ..to many other factors effect it .

But it does respond well to real return on cash going negative

What do you mean by normal inflation? The conventional measures like CPI, PPI?
Please explain,

Normal means not high ..gold has not done well tracking low inflation at all ..

See Tyler’s article on portfolio charts on gold for more detail

[Kevin K.]

Tyler's article on Portfolio Charts does indeed explain gold's role better than anything else I've read - by far. Here's one key quote:

"If you’re only focusing on the superficial inflation claim, then the CPI data clearly suggests that gold is not a reliable inflation hedge. But [Ray] Dalio is no fool, and the annual inflation data does hint at a deeper relationship under the surface.

You see, while inflation alone does not explain gold price movements, it’s a very important ingredient in a different metric that does — real interest rates."

Other posters here will have more insight into recent market movements than I do but the mode this year so far has been risk-on with stocks soaring, interest rates surging and a sharp spike in short-term inflation (accompanied by a much larger spike in inflation-hyping talk). None of this is good for gold, and of course it's been really bad for LTT's.

Meanwhile though the money-printing continues on unabated and no amount of increase in the national debt seems to be outside of consideration. I wouldn't be selling any gold just yet.

https://portfoliocharts.com/2020/08/21/ ... e-of-gold/

[glennds]

Tyler's article on Portfolio Charts does indeed explain gold's role better than anything else I've read - by far. Here's one key quote:

"If you’re only focusing on the superficial inflation claim, then the CPI data clearly suggests that gold is not a reliable inflation hedge. But [Ray] Dalio is no fool, and the annual inflation data does hint at a deeper relationship under the surface.

You see, while inflation alone does not explain gold price movements, it’s a very important ingredient in a different metric that does — real interest rates."

Other posters here will have more insight into recent market movements than I do but the mode this year so far has been risk-on with stocks soaring, interest rates surging and a sharp spike in short-term inflation (accompanied by a much larger spike in inflation-hyping talk). None of this is good for gold, and of course it's been really bad for LTT's.

Meanwhile though the money-printing continues on unabated and no amount of increase in the national debt seems to be outside of consideration. I wouldn't be selling any gold just yet.

https://portfoliocharts.com/2020/08/21/ ... e-of-gold/

Kevin,
Thanks, I can accept basically everything you're saying. I think sometimes the economy does not transition cleanly and discretely from one condition to another. There can be a phasing going on, and it could turn out that gold or another part of the portfolio will rise to the front but it will take a little time. I worry sometimes about the PP because modern monetary theory in the way that central banks practice it now was not happening when HB devised the whole concept. I'm not suggesting yet that the permanent portfolio is obsolete, but I find myself paying closer attention these days looking for confirmation that it isn't. Patience.

[Kevin K.]

Tyler's article on Portfolio Charts does indeed explain gold's role better than anything else I've read - by far. Here's one key quote:

"If you’re only focusing on the superficial inflation claim, then the CPI data clearly suggests that gold is not a reliable inflation hedge. But [Ray] Dalio is no fool, and the annual inflation data does hint at a deeper relationship under the surface.

You see, while inflation alone does not explain gold price movements, it’s a very important ingredient in a different metric that does — real interest rates."

Other posters here will have more insight into recent market movements than I do but the mode this year so far has been risk-on with stocks soaring, interest rates surging and a sharp spike in short-term inflation (accompanied by a much larger spike in inflation-hyping talk). None of this is good for gold, and of course it's been really bad for LTT's.

Meanwhile though the money-printing continues on unabated and no amount of increase in the national debt seems to be outside of consideration. I wouldn't be selling any gold just yet.

https://portfoliocharts.com/2020/08/21/ ... e-of-gold/

Kevin,
Thanks, I can accept basically everything you're saying. I think sometimes the economy does not transition cleanly and discretely from one condition to another. There can be a phasing going on, and it could turn out that gold or another part of the portfolio will rise to the front but it will take a little time. I worry sometimes about the PP because modern monetary theory in the way that central banks practice it now was not happening when HB devised the whole concept. I'm not suggesting yet that the permanent portfolio is obsolete, but I find myself paying closer attention these days looking for confirmation that it isn't. Patience.

Hi Glen,

Thanks for your thoughtful comments. I share your concerns about the endless money printing by central banks. I also doubt Browne would've prescribed 25% in cash paying nothing and an additional 25% in LTT's with laughable nominal returns and close-to-zero real. Still the robustness of the PP under all kinds of market conditions and the fundamental logic of owning truly uncorrelated assets makes sense to me and as a risk-averse retiree with way too small of a nest egg I don't plan on straying far from some iteration of the PP (GB in my case albeit with ITT's instead of the barbell).

[ppnewbie]

It'll be a genius play if you have a 20 year time horizon. I do wonder about how crypto's will affect gold though, because I feel like essentially crypto (in this case BTC) is essentially gold. IMHO - In golds case its commodity value is it's beauty and in the case of a crypto is its portability.

[I Shrugged]

Moving now. it's up a hundred bucks over recent lows.

[yankees60]

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[Don]

It's good again.

[jalanlong]

Tyler's article on Portfolio Charts does indeed explain gold's role better than anything else I've read - by far. Here's one key quote:

"If you’re only focusing on the superficial inflation claim, then the CPI data clearly suggests that gold is not a reliable inflation hedge. But [Ray] Dalio is no fool, and the annual inflation data does hint at a deeper relationship under the surface.

You see, while inflation alone does not explain gold price movements, it’s a very important ingredient in a different metric that does — real interest rates."

Other posters here will have more insight into recent market movements than I do but the mode this year so far has been risk-on with stocks soaring, interest rates surging and a sharp spike in short-term inflation (accompanied by a much larger spike in inflation-hyping talk). None of this is good for gold, and of course it's been really bad for LTT's.

Meanwhile though the money-printing continues on unabated and no amount of increase in the national debt seems to be outside of consideration. I wouldn't be selling any gold just yet.

https://portfoliocharts.com/2020/08/21/ ... e-of-gold/

Kevin,
Thanks, I can accept basically everything you're saying. I think sometimes the economy does not transition cleanly and discretely from one condition to another. There can be a phasing going on, and it could turn out that gold or another part of the portfolio will rise to the front but it will take a little time. I worry sometimes about the PP because modern monetary theory in the way that central banks practice it now was not happening when HB devised the whole concept. I'm not suggesting yet that the permanent portfolio is obsolete, but I find myself paying closer attention these days looking for confirmation that it isn't. Patience.

I have never questioned the PP until now. It's easy to say that I am falling into the "this time it's different" trap but in some instances this time really IS different. I am not sure putting 50% of my funds into cash at 0% and long term govt bonds at historically low rates is a great idea. I am closer than ever to going back to my grandparent's old time investing ways. No Bitcoin. No NFTs. No Modern Portfolio Theory. Back to basics. 10% of my funds in cash and the rest in "safe" dividend paying stocks like JNJ or UNP etc. I will ignore the daily fluctuations, live off of the (hopefully) increasing dividends and leave the principal for my heirs. That is my plan. But I haven't pulled the trigger on it yet. I am sure the moment that I do long bonds will take off, although I don't know what the catalyst for that would be right now.

[Tortoise]

I have never questioned the PP until now. It's easy to say that I am falling into the "this time it's different" trap but in some instances this time really IS different. I am not sure putting 50% of my funds into cash at 0% and long term govt bonds at historically low rates is a great idea. [...] But I haven't pulled the trigger on it yet. I am sure the moment that I do long bonds will take off, although I don't know what the catalyst for that would be right now.

Ditto. I've been fully invested in the PP for over 10 years and have never questioned it until now.

I'm getting much closer to pulling the trigger, though. My plan at the moment is simply to shift my LTT allocation to stocks, so my PP would become 50% stocks, 25% gold, and 25% cash. It would be a bit more volatile than the PP, but not significantly so.

I just keep asking myself how I can justify holding LTTs when their max upside (assuming a 0% rate floor) is now ~70%, their max downside is much bigger, and we're virtually guaranteed to have double-digit inflation (actual inflation, not fake CPI-based inflation) for years going forward due to the trillions of dollars being printed right now. And I keep reaching the conclusion that I just can't.

But yes... the moment I pull the trigger and convert my LTTs to stocks, the stock market will temporarily tank and LTTs will temporarily spike. Guaranteed. I guess I just need to take the plunge.

[buddtholomew]

I have never questioned the PP until now. It's easy to say that I am falling into the "this time it's different" trap but in some instances this time really IS different. I am not sure putting 50% of my funds into cash at 0% and long term govt bonds at historically low rates is a great idea. [...] But I haven't pulled the trigger on it yet. I am sure the moment that I do long bonds will take off, although I don't know what the catalyst for that would be right now.

Ditto. I've been fully invested in the PP for over 10 years and have never questioned it until now.

I'm getting much closer to pulling the trigger, though. My plan at the moment is simply to shift my LTT allocation to stocks, so my PP would become 50% stocks, 25% gold, and 25% cash. It would be a bit more volatile than the PP, but not significantly so.

I just keep asking myself how I can justify holding LTTs when their max upside (assuming a 0% rate floor) is now ~70%, their max downside is much bigger, and we're virtually guaranteed to have double-digit inflation (actual inflation, not fake CPI-based inflation) for years going forward due to the trillions of dollars being printed right now. And I keep reaching the conclusion that I just can't.

But yes... the moment I pull the trigger and convert my LTTs to stocks, the stock market will temporarily tank and LTTs will temporarily spike. Guaranteed. I guess I just need to take the plunge.

“Jumping from the frying pan and into the fire” comes to mind when considering a switch from LTT to stocks. Perhaps consider shortening duration and choosing something in the 5-7 or 7-10 year range.
Inflation is not guaranteed and printing certainly hasn’t resulted in much over the last 13 years.

[whatchamacallit]

This must mean the PP's time to shine is soon.

Sentiment is so low for gold and bonds.

I too am having a harder time stomaching it while also just wanting to simplify.

If you are still accumulating then just leave what you have in place and just put new contributions in preferred assets.

That is my plan. Then if there is a big drop that comes to this never ending bull market you can go all in then.

I was thinking if LTT got close to 5% I would go almost all in on them. I don't know what price gold would have to be for an all in.

[flyingpylon]

I'm seeing an increasing amount of stories (or videos) saying that although we're seeing price increases in some areas, we are not actually seeing inflation. Instead, we are on the verge of deflation. Of course I realize that for every one of those I click on, The Algorithm shows me four more.

I don't pretend to really know what's going on, nor do I assume the people I read or watch do either. But I'm not ready to do anything drastic like sell my bonds. All I can do is stay the course and maybe read about bond convexity.

[Mark Leavy]

I'm seeing an increasing amount of stories (or videos) saying that although we're seeing price increases in some areas, we are not actually seeing inflation. Instead, we are on the verge of deflation. Of course I realize that for every one of those I click on, The Algorithm shows me four more.

I don't pretend to really know what's going on, nor do I assume the people I read or watch do either. But I'm not ready to do anything drastic like sell my bonds. All I can do is stay the course and maybe read about bond convexity.

I’m also sticking with my bond allocation.

But this was on my company chat today. Completely non political and in a non sexy tech niche.

2468BA92-3B71-4041-89A0-09D8D163F292.jpeg (342.84 KiB) Viewed 19726 times

[buddtholomew]

I'm seeing an increasing amount of stories (or videos) saying that although we're seeing price increases in some areas, we are not actually seeing inflation. Instead, we are on the verge of deflation. Of course I realize that for every one of those I click on, The Algorithm shows me four more.

I don't pretend to really know what's going on, nor do I assume the people I read or watch do either. But I'm not ready to do anything drastic like sell my bonds. All I can do is stay the course and maybe read about bond convexity.

I’m also sticking with my bond allocation.

But this was on my company chat today. Completely non political and in a non sexy tech niche.



2468BA92-3B71-4041-89A0-09D8D163F292.jpeg

Golds always the last to know haha