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Thursday, May 23, 2013

The gold breakdown

In GLD and GDX 4/15 I wrote "If gold has topped and broken down the most logical reason for that would be a deflation event is coming."  Take a look at this chart.

Source

EM is emerging market inflation and DM is developed market inflation.  That is quite a tumble in the developed world inflation rate.  That looks like the break down in gold could be for real.  Maybe we are headed for another deflation event.  Could that happen while central banks around the world are printing money like mad.  What if it does?  That is a scenario that very few people would consider even possible.  Japan has experienced deflation for close to 20 years now no matter what they do.  Is that coming to developed markets?  This is a key question because the deflation in Japan has not been kind to their stock market.  Gold may give us a clue.  If it breaks down to new lows again it could be trouble.  Stay tuned.

Bob

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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.