Why Gold Popped

Gold popped. Why?

'Really Bad'

"The underpinnings of the gold bull case are really bad," Brian Barish, president of Denver-based Cambiar Investors LLC, which manages $7 billion, said in an April 15 phone interview. "The big move in gold, almost all of that, was based on a mistaken belief that the Fed's unconventional monetary programs were going to cause imminent inflation and potential hyperinflation in the U.S. and elsewhere, and nothing like that has happened."

Goldman Sachs told investors to sell the metal the same day, cutting its 12-month forecast to $1,390 from $1,550. The turn in the gold price cycle is accelerating after a 12-year rally as the recovery in the U.S. economy gains momentum, analysts Damien Courvalin and Jeffrey Currie wrote in an April 10 report. Lurching Gold ETF Veers From Metal Most in Year Amid Selloff - Bloomberg.

It is true that expected inflation didn't appear. Why didn't it? Well, those on the outside didn't know that the Fed's plan would be to allow banks to keep reserves in excess earning interest from the Fed. They didn't know that banks therefore wouldn't scramble to lend. A great deal of new lending would have overheated the economy under usury and caused significant price inflation. The Fed bailed the banks and has trickled the economic recovery.

The article also didn't mention the Korean issue, which timed with some gold-price drops too, although the degree of causality or contribution is debatable. See: "Gold bombs as Korean nuclear crisis shows dollar true safe haven," by Peter Garnham.

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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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