Can't that same sort of logic be applied to the price of gold? With the US facing a depression, 100s of thousands of jobs being lost left, right, and center - why has the POG yet to skyrocket?
Honestly, what would it take for it to hit the $2000 price goldbugs are calling for? Mass lines at the soup kitchens? The modern day US would simply not allow these levels of depression to be reached.
Wysiwyg, can I return the ball with this question?
We have to take the chart I posted in two sections. Pre-October and post-October. In the first section, we can see XAU and AUD behaving identically. As part of a longer overall trend, most favorable currencies trending up to all time highs against the USD. Some might see this as USD "weakness" but to me it seems obvious the US was exporting inflation, to all market sectors, through cheap credit and increase in the money supply via derivatives (net ~USD70trillion, gross several hundred trillion).
At this point the money markets get choppy due to this severe dislocation. Things are in an unnatural state, but nobody is really watching because they are all too excited about their +55% SP500 contract or
FMG shares.
Suddenly in July, the smart money begins to leave the market. By October end, 2/3 of the leverage in the money market has either evaporated or taken the remaining profits and run (depending on entry time). To illustrate the leveraged net long positions behaving similarly across a few instruments I have included a quick chart below.
Now we can consider the second part of the chart, where things get interesting. If we jump forward to the current day, we can see gold has taken back all its losses since the leverage left the market. This is despite an acknowledged net short position by the largest bullion and investment banks.
Can't remember if anyone posted this here yet. Barrick gold is one of the largest net short positions for gold on the market, they also loan out huge amounts of gold derivatives (more than they have physical) for others to lay OTC short positions.
Here is the CEO of that company professing gold will hit new all time highs due to debt monetisation. In fact according to him, Barrick have even stopped "hedging" gold (what they mean is shorting). He actually said "I'm not a gold bug, but it would be
dumb to hedge".
http://www.guardian.co.uk/business/feedarticle/8333051
So as you can see Nyden, gold could not rocket while leveraged positions were leaving en masse. The fact that previous losses are now essentially eliminated indicates
non-leveraged demand for gold is high anywhere near 682 and above (and can be supported by examining the net tonnage of SPDR, now the world 5th or 6th largest holder of physical gold).
Hope that helps.