In price inflation, the wealth redistribution is obscured more than in a price deflation. In a price inflation, creditors lose slowly as the money they receive on their loans loses purchasing power.

Opposition to falling prices can arise from debtors because their debt burden increases. The consequences of deflation are more concentrated than are the more diffuse effect of inflation. The debtors tend to be well organized. Today, governments are the largest debtor class. They are using their power to keep rates low and liquidity high. Few people realize that Obama has run up more debt than all US presidents in history combined. High rates and deflation would be very difficult for all governments, so they exercise their power to keep rates low through central banks. I see no change in this trend. 

The gold and the stock markets have different drivers. The stock market tends to rise year after year due to population growth, technological developments, and currency inflation. The commodity markets do not benefit from all three. Thus, the stock market tends to rally and then retrace part of its prior advance such as 38% or 50% of the previous bull market. Due to the lack of support from the same drivers, commodity markets can retrace 100% of their prior advance.
My experience since the mid 1969s is that a commodity bull market is seldom followed by a new bull market. Many years must pass before the basis for the next bull can be established. The commodity bear that began in 1980 lasted 19 years.

Gold already disappointed by closing the typically-strong August on the downside. September has been the strongest month in September, rising by only $6. When the seasonal strength is overridden by a stronger cycle as we see in these 2 cases, it can only be considered bearish. Looking at the next month, the dynamic cycle points down. The seasonal cycle peaks on the 10th. The second half of October has usually been corrective for gold. The 1250 area is the downside target.

The GLD/UGL relative price graph below shows a low reading. This tells us that traders are buying the more aggressive UGL double ETF over the GLD single ETF. I regard this as a sign of bullishness. Despite the lack of a September rally, traders remain very optimistic and aggressive. This typically leads to lower prices.


Cycles Research Investments, LLC does not guarantee the accuracy and completeness of this report, nor is any liability assumed for any loss that may result from reliance by any person upon such information. The information and opinions contained herein are subject to change without notice and are for general information only. The data used for this report is from sources deemed to be reliable, but is not guaranteed for accuracy. Past performance is not a guide or guarantee of future performance. The information contained in this report may not be published, broadcast, re-written, or otherwise distributed without prior written consent.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD hovers above multi-year lows amid coronavirus fears, ahead of ZEW

EUR/USD is trading just above 1.0820, the lowest since 2017, as the coronavirus outbreak is taking its economic toll on Apple among others. The German ZEW Economic Sentiment figure is eyed.


GBP/USD remains depressed below 1.30 as UK jobs figures miss expectations

GBP/USD is trading below 1.30 after UK wages decelerated to 2.9% yearly in December, worse than expected. Brexit concerns are also weighing and coronavirus headlines are eyed.


Forex Today: Coronavirus takes a bite from the apple, Gold gains, Bitcoin bounces

The coronavirus outbreak's economic impact is growing as Apple, the iPhone maker has issued a warning that it is unable to meet its guidance due to production and issues and closed stores in China. The tech giant's announcement has been weighing on the market mood, pushing gold and the yen higher. 

Read more

Gold: Positive beyond six-week-old falling trendline

Gold prices take the bids above $1585, +0.35%, during the pre-European trading on Tuesday. The yellow metal recently broke a downward sloping trend line stretched from January 08. Early-month top on the buyer’s radar.

Gold News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex Majors