Lear Capital: Gold Investors Lick Their Chops as Global Tensions Rise

   on April 03 2013 9:35 AM

As gold prices drift lower, savvy gold investors ponder the true state of the economy, rising debt and the growing threat of a North Korean conflict.  At present, gold seems to be ignoring the huffing and puffing of North Korea.  Surely, though, if one shot is fired the world becomes a different place.  If no shots are fired, the cost of the military build-up will weigh heavy on our budget.

Herein lies the true concern of investors.  While we are being lead to believe deficit spending/rising debt is a friend to our economy, one cannot help but wonder, why there was a debt crisis to begin with?  One that wiped out $7 trillion of home and market equity in a blink.  If the economy is fine today with nearly $17 trillion of debt, why was it on the verge of collapse with just $10 trillion of debt in 2008?

It is on this concern that gold investors are taking advantage of lower gold prices.  Nothing has really changed for the better and the outlook for debt today is even more dire than it was in 2008.  It’s simple!  There is a 98% correlation between rising debt and rising gold prices.  This is what has gold investors licking their chops.  After all, aren’t we supposed to buy low and sell high?

I realize, that to suggest gold demand is rising, especially on a day like today, may be a bit bold.  The talking heads tell us the economy has turned the corner, stocks are rising in response and gold demand is falling.  But, here’s the reality.  You can’t have a seller without a buyer.  In that respect, demand is always at least equal to supply.  The question is, “who’s doing the buying and who’s doing the selling?”

At times like this, it is the weak hand who is selling and the true gold investor who is buying.  It is only on the sell side where you find those who must make a trade.  While on the buy side no one is ever forced into buying lest their own convictions tell them NOW is the time.

Is the gold market in perma-decline?  I continue to refer to central banks and the massive buying taking place between government and the central banks thereof.  I keep thinkin’ they know better than anyone.  Why would the people in control of our money be buying in record amounts if they believe the price trend has turned negative?

If I have learned anything in the years of tracking gold and the markets, it is that nothing is as it appears.  There is always a wrench ready to be thrown into the works.  Today there are many ready to be tossed.

That’s my opinion anyway.  What’s your opinion? For breaking gold news be sure to make regular visits to LearCapital.com and if you should be so inlcined follow me @DaveTheGoldDr

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