Thoughts on the gold price

It's quite something to watch with what's been happening with the gold price. The economic data could not be better for gold, yet the market is selling gold and embracing the US $ like we have never seen before. In my view, we are looking at the early stages of stagflation (when both growth and inflation are out of control simutaneously), if the data continues to trend in the current direction. The retail sales and housing figures are brutal – serious growth issues (switching to a lower priced operation like Walmart is nothing to get excited about – it means people are feeling the squeeze). At the same time, the inflation numbers are flying higher. All validated within the last couple of days (look it up!). It amazes me that we are seeing such a flight to the US $, especially under these circumstances. I think it's because the Euro economy is slowing down (and raising their interest rates), coupled with the market now expecting the US Fed to maybe raise US rates in order to fight off inflation (thus protecting the US dollar) – controlling inflation has always been their top priority. It still amazes me though, given that a rate increase will only negatively impact US growth (even futher) - the US Feb is stuck. I guess they are counting on the recent decrease in oil prices to be the saviour of everything. However, even with the substantial decrease, $114 oil is not quite the $60 (or $20) that they use to have. I would say that anything around $100 is quite damaging. Then again, is $100 even sustainable, given the ongoing tensions of all the many oil producing / shipping places in the world? It doesn’t take much for something to blow up, as we see all the time, be it Nigeria, Iran, etc (fyi, Iran is talking tough again, and the US no longer has Russia to step in as the "middle man”).

I was listening to an expert the other day and he was saying that there is a watch list out there of 95 US banks that could go under, due to the current crisis. This is a serious situation! Indymac recently went under and they weren’t even included in the list of 95. This person was saying that he was telling people that Freddie and Fannie were in trouble, and this was as early as 2 years ago – at the time, he was laughed at by the American media. The US Fed recent bail out of Freddie and Fannie will cost the American people dearly – the US printing press couldn’t be any busier. It’s not looking pretty long-term for the US economy. Who knows how much of this US $ recovery is due to US elections? Nevertheless, the fundamentals are not looking good for the US economy.