During the entire quantitative easing session of the last 2+ years where trillions of extra dollars have been injected into a broken system gold has fallen. How could this be? The dollar was continuously debased yet gold fell! The inflation that was supposed to accompany devaluing the dollar never materialized. The QE that was injected never made it into the M1 and M2 stream, the huge investment banks that received the QE continue to covet those dollars. The velocity of the dollar never increased. The US government in team with the FED sought to inflate the stock market which became the only game in town. Other world currencies also debased which artificially propped up the dollar. And so gold fell. In this hindsight it seems rational. Yet at the time gold’s descent seemed unfathomable.
So, for the future, will the seemingly irrational now come to pass? When tapering finally kicks in (Yellen most certainly will start, and soon), which boost interest rates and drive the dollar up – will gold ALSO rise, irrationally? Or will we finally see a return to historic expectations and see gold driven lower and lower. The equity markets seem indomitable. Or is this recent flurry of IPOs of companies with no income a sign that a 2001’esque venture capital exit strategy is now taking over? Will the stock market ever reset? Who knows. But the times of irrationality look to continue.