What explains the disconnect between gold and Fed balance sheets since about 2013?

Discussion of the Gold portion of the Permanent Portfolio

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murphy_p_t
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What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by murphy_p_t » Thu Nov 18, 2021 5:39 am

fed v gold.jpeg
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I Shrugged
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by I Shrugged » Thu Nov 18, 2021 8:21 am

Off hand, I’d guess that it’s because inflation remained low. Secondly, negative real interest rates have been in place for the period. Gold didn’t have to increase to compete against cash since cash wasn’t earning a good interest rate.
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by Kbg » Thu Nov 18, 2021 9:18 am

That you think there is a relationship there that doesn't comport with history? The only thing we can really say about gold is its statistical correlation
with just about everything is weak.

It has been discussed elsewhere on the board so I won't go into it here, but maybe being a gold bug means you're just a boomer and all the cool kids who would have been gold bugs are now crypto bugs? IDK, maybe that's it?
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Hal
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by Hal » Thu Nov 18, 2021 3:34 pm

short answer - confidence
long answer - https://www.youtube.com/watch?v=sIziLPVPvkE

Good overview. However if there is a major credit collapse, the base money becomes more valuable.
Have a listen and post your thoughts ;)
Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by pp4me » Thu Nov 18, 2021 3:50 pm

Fed balance sheet? Is that an oxymoron or what? I understand gyroscopic investing but how do you "balance" anything with the word "Fed" in it? You can't. You just have to live with it and play the game as best you can.
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by boglerdude » Fri Dec 31, 2021 11:22 pm

Crypto. Folks wont buy negative bonds and the stocks/dot com bubble wont be repeated for a while (PE 40 with rates at 6%). Housing bubble is also too fresh in memory.

Recap of all the printing. I disagree that the Fed is stupid tho: https://thesoundingline.com/my-favorite ... from-2021/
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by seajay » Tue Jan 04, 2022 4:00 pm

Dixie indicates that the US$ has broadly strengthened relative to a basket of other currencies since 2013

Image

Gold is more inclined to rise in reflection of inflation arising out of a weaker US$

As we seemingly near a point where 'better value' is perceived elsewhere, and fear such as Covid declines, money flow out of US$ (and US stocks/bonds) into those other currencies/assets would be inclined to see gold priced in US$ rise.

Since around 2013 the price of gold has risen relatively more in GB Pounds and Euro's than it has in US$. Later and that deviation might be inclined to narrow/reverse/mean-revert.

Think of gold as a finite commodity currency being compared to fiat currencies, more inclined to 'gain' as a consequence of fiat currency devaluation (otherwise described as being one form of 'inflation').
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by johnnywitt » Fri Jan 07, 2022 4:39 pm

The FED does NOT want the average Joe or Jane to figure out that there is in fact a relationship between the USD and Gold. They want John Q to believe that Gold is a barbarous relic, or some sort of laughable pet rock. I believe this is one reason that they have stood by and done nothing with this Crypto B.S. Crypto is a safety valve for these evil bastards; after all, you couldn't have Gold shooting up like Crypto, or even the dullest dolts out there would become, all of a sudden, very 'Woke' individuals indeed.>:D

The USD was and is still tied to Gold, albeit at a much reduced ratio- something like 6-7%???.
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by boglerdude » Sat Jan 08, 2022 7:58 pm

We dont necessarily want everyone hoarding a deflationary currency under the bed. People risking their funds on companies is good for growth/innovation
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by seajay » Sat Jan 08, 2022 8:56 pm

boglerdude wrote:
Sat Jan 08, 2022 7:58 pm
We dont necessarily want everyone hoarding a deflationary currency under the bed. People risking their funds on companies is good for growth/innovation
And the taxman, and brokers, market markers, fund managers ...etc.

Print/spend money and that devalues all other notes in circulation, is a form of micro-taxation. Holding some of both fiat and commodity currencies helps hedge the other.

Japans central bank pretty much prints money and buys however much the treasury needs to have (buys up most of the bonds the treasury issue). When domestically held that isn't really a issue, the risk is when foreigners buy/hold large chunks. A way to reduce foreign holdings is to create multiples more 'debt' that the domestic central bank buys such that foreign held as a percentage of the total debt declines. Foreign however have to print to buy Japanese bonds to otherwise avoid seeing losses. A global downward spiral of devaluation, that sooner or later might see the price of commodity currencies soar.

Historically prior to largescale devaluations the likes of gold have been either prohibited or made very costly to trade (taxation). But gold isn't the only commodity currency, there's silver, valued paintings ...etc. Perhaps a wise precaution might be to further diversify the PP's 25% commodity currency beyond just gold alone?
murphy_p_t
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by murphy_p_t » Sun Jan 09, 2022 8:22 am

"Perhaps a wise precaution might be to further diversify the PP's 25% commodity currency beyond just gold alone?"


Agreed.

Silver, plat, precious metal mining companies.
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Re: What explains the disconnect between gold and Fed balance sheets since about 2013?

Post by seajay » Mon Jan 10, 2022 8:25 am

Same might be said for stocks. 100% S&P500 for instance still has a element of single stock index risk, such as perhaps being excessively tilted into a single sector (techs pre dot com bubble bursting, banks pre 2008/9 financial crisis). The Golden Butterfly in part addresses that for the stock holdings, SCV can have different correlation and/or magnitudes to TSM (the two combined are more diversified/lower-concentration-risk than either alone).
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