Market Briefing: Gold

Market Briefing: Gold October 4, 216 Dr. Edward Yardeni 516-972-7683 eyardeni@ Mali Quintana 48-664-1333 aquintana@ Please visit our sites at www. blog. thinking outside the box

Table Of Contents Table Of Contents Gold Price 1 Gold Price: Nominal & Real 2 Gold vs. Dollar 3 Gold & Commodity Prices 4-5 Gold & PPI Inflation 6 Gold & CPI Inflation 7 Gold, Dollar, & Political Cycle 8 Gold Price and US Federal Deficit & Debt 9 Gold Price & Central Banks 1 Relative Gold Price 11-13 Gold Price vs TIPS Yields 14 Gold Price 15 October 4, 216 / Market Briefing: Gold www.

Gold Price 1 1 1 Figure 1. GOLD PRICE* IN DOLLARS (daily, ratio scale) 1/4 1 1 1 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 1 1 GOLD PRICE* IN EUROS (daily, ratio scale) 1/3 1 1 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 135 15 9 75 GOLD PRICE* IN POUNDS (daily, ratio scale) 1/3 135 15 9 75 45 45 3 3 15 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 15 18 16 14 12 1 GOLD PRICE* IN YEN 1/3 18 16 14 12 1 8 8 6 6 4 4 2 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 -day moving average Source: Haver Analytics. 2 Page 1 / October 4, 216 / Market Briefing: Gold www.

27 187 167 147 127 17 Figure 2. GOLD PRICE* (dollars per ounce, ratio scale) Gold Price: Nominal & Real 1/4 27 187 167 147 127 17 87 87 67 67 47 47 27 27 7 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 21 7 -day moving average Source: Haver Analytics. 1 Figure 3. GOLD PRICE*: NOMINAL vs. REAL 1 1 1 1 1 Gold Price/CPI Gold Price Aug 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 CPI = 1 on 1982-84. Source: US Department of Labor, Bureau of Labor Statistics and Haver Analytics. Page 2 / October 4, 216 / Market Briefing: Gold www.

1 1 Figure 4. FOREIGN EXCHANGE VALUE GOLD PRICE* (trade-weighted dollars per ounce, weekly) Gold vs. Dollar 1 1 6/3 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 * Gold spot price times JP Morgan trade-weighted dollar. Source: Haver Analytics and JP Morgan. 19 1 17 1 15 1 13 11 9 7 5 3 1 Figure 5. GOLD PRICE & THE DOLLAR (weekly) (dollars per ounce) JP Morgan Nominal Broad Effective Exchange Rate** (21=1) 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 9/3 1/4 13 12 11 1 9 8 * Cash price London gold bullion, PM Fix. ** Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Haver Analytics and JP Morgan. Page 3 / October 4, 216 / Market Briefing: Gold www.

19 1 17 1 15 1 13 11 9 7 5 3 1 Figure 6. GOLD PRICE & INDUSTRIALS COMMODITY PRICE INDEX Gold & Commodity Prices (dollars per ounce) CRB Raw Industrials Spot Price Index** (1967=1) 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 1/4 66 62 58 54 5 46 42 38 34 3 26 22 18 14 * Cash price London gold bullion, PM Fix. ** Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow. Source: Haver Analytics and Commodity Research Bureau. 225 1875 Figure 7. GOLD & INDUSTRIAL METALS PRICES (weekly) 225 1875 1725 1575 (dollars per ounce) 1725 1575 1425 1275 CRB Industrial Metals Spot Price Index** (1967=1) 1/4 1425 1275 1125 1125 975 975 825 825 675 1/3 675 525 525 375 375 225 75 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 225 75 ** Includes copper scrap, lead scrap, steel scrap, tin, and zinc. Source: Haver Analytics and Commodity Research Bureau. Page 4 / October 4, 216 / Market Briefing: Gold www.

19 1 17 1 15 1 13 11 9 7 5 3 Figure 8. GOLD PRICE & LIGHT CRUDE OIL PRICES (weekly) Gold & Commodity Prices (dollars per ounce) CRB Futures: Light Crude Oil (dollars per barrel) 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 1/4 155 145 135 125 115 15 95 85 75 65 55 45 35 25 15 5 Source: Haver Analytics and Commodity Research Bureau. 19 1 17 1 15 1 13 11 9 7 5 3 1 Figure 9. GOLD & CRB FUTURES PRICES (weekly) (dollars per ounce) CRB Futures Price Index (1967=1) 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 1/4 1/3 48 46 44 42 38 36 34 32 3 28 26 24 22 18 16 14 Source: Haver Analytics and Commodity Research Bureau. Page 5 / October 4, 216 / Market Briefing: Gold www.

19 1 17 1 15 1 13 11 9 7 5 3 1 Figure 1. GOLD PRICE & PPI Gold & PPI Inflation (dollars per ounce) Producer Price Index (yearly percent change) 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 Dec Sep 2 18 16 14 12 1 8 6 4 2-2 Source: Haver Analytics and US Department of Labor, Bureau of Labor Statistics. 19 1 17 1 15 1 13 11 9 7 5 3 1 Figure 11. GOLD PRICE & PPI (dollars per ounce) Producer Price Index Ex Food & Energy (yearly percent change) 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 Dec Sep 18 16 14 12 1 8 6 4 2-2 Source: Haver Analytics and US Department of Labor, Bureau of Labor Statistics. Page 6 / October 4, 216 / Market Briefing: Gold www.

19 1 17 1 15 1 13 11 9 7 5 3 1 Figure 12. GOLD PRICE & CPI INFLATION Gold & CPI Inflation (dollars per ounce) (1325.43) Consumer Price Index (yearly percent change) (1.9) 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 Sep Aug 18 16 14 12 1 8 6 4 2-2 -4 Source: Haver Analytics and US Department of Labor, Bureau of Labor Statistics. 19 1 17 1 15 1 13 11 9 7 5 3 1 Figure 13. GOLD PRICE & CPI (dollars per ounce) Consumer Price Index Ex Food & Energy (yearly percent change) 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 Sep Aug 18 16 14 12 1 8 6 4 2 Source: Haver Analytics and US Department of Labor, Bureau of Labor Statistics. Page 7 / October 4, 216 / Market Briefing: Gold www.

Gold, Dollar, & Political Cycle 243 213 183 153 123 Figure 14. Nixon Ford Carter Reagan Bush I Clinton Bush II Obama GOLD PRICE* (dollars per ounce, ratio scale) 1/4 243 213 183 153 123 93 93 63 63 33 33 3 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 3 * Cash price, London gold bullion, PM Fix. Source: Haver Analytics. 16 14 Figure 15. Nixon Ford Carter Reagan Bush I Clinton Bush II Obama TRADE-WEIGHTED DOLLAR (weekly) 16 14 12 12 1 1 9/3 8 8 6 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 Source: Haver Analytics. 6 Page 8 / October 4, 216 / Market Briefing: Gold www.

Gold Price and US Federal Deficit & Debt 15 Figure 16. GOLD PRICE vs. US FEDERAL DEFICIT Federal Deficit (12-month sum, billion dollars) 15 5 Aug 5-5 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 2 GOLD PRICE vs. US FEDERAL GOVERNMENT BORROWING 15 1 Federal Borrowing (as a percent of nominal GDP) Sep 15 5 5-5 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 9 8 7 6 5 GOLD PRICE vs. US FEDERAL DEBT Federal Public Debt Outstanding (as a percent of nominal GDP) Q2 15 4 5 3 2 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 Source: US Treasury Department, Board of Governors of the Federal Reserve System, and Flow of Funds. Page 9 / October 4, 216 / Market Briefing: Gold www.

Gold Price & Central Banks 8. 7.5 7. Figure 17. GOLD PRICE vs. US TREASURIES & AGENCIES HELD BY CENTRAL BANKS 9/28 1 6.5 1 6. 5.5 5. 4.5 4. (US dollars per ounce) US Treasuries & Agencies Held By Fed + Foreign Central Banks (trillion dollars, nsa) 1/4 1 3.5 3. 2.5 2. 1.5 1. 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 Source: Federal Reserve Board and Haver Analytics. 7 65 Figure 18. US TREASURIES & AGENCIES HELD BY FED AND US COMMERCIAL BANKS 9/21 1 55 (US Dollar/Troy Ounce) 1 5 45 Fed + US Commercial Banks (billion dollars, nsa) 9/3 1 35 3 25 15 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 Source: Federal Reserve Board and Haver Analytics. Page 1 / October 4, 216 / Market Briefing: Gold www.

7.5 7. 6.5 6. 5.5 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. Relative Gold Price Figure 19. GOLD PRICE* RELATIVE TO S&P 5 9/28 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 7.5 7. 6.5 6. 5.5 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. Source: Standard & Poor s Corporation and Wall Street Journal. 6.5 6. 5.5 5. 4.5 4. 3.5 3. 2.5 Figure 2. S&P 5 RELATIVE TO GOLD PRICE* 6.5 6. 5.5 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 9/28 2. 1.5 1..5. Source: Standard & Poor s Corporation and Wall Street Journal. Page 11 / October 4, 216 / Market Briefing: Gold www.

Relative Gold Price 9 Figure 21. GOLD PRICE* RELATIVE TO EXISTING HOME PRICES 9 8 8 7 7 6 6 5 Gold Price/Average Existing Home Prices Aug 5 4 4 3 3 2 2 1 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 1 Source: Wall Street Journal and National Association of Realtors. 9. 8.6 8.2 7.8 7.4 7. 6.6 6.2 5.8 5.4 5. 4.6 4.2 3.8 3.4 3. 2.6 2.2 1.8 1.4 1..6 Figure 22. GOLD PRICE* RELATIVE TO CRB PRICE INDEXES Relative to CRB Futures Price Index Relative to CRB Raw Industrials Spot Price Index 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 1 3 5 7 9 211 213 215 217 219 1/3 1/3 9. 8.6 8.2 7.8 7.4 7. 6.6 6.2 5.8 5.4 5. 4.6 4.2 3.8 3.4 3. 2.6 2.2 1.8 1.4 1..6 Source: Commodity Research Bureau and Wall Street Journal. Page 12 / October 4, 216 / Market Briefing: Gold www.

1.4 Figure 23. Relative Gold Price GOLD CASH PRICES* RELATIVE TO PLATINUM CASH PRICES 1.4 9/3 1.2 1.2 1. 1..8.8.6.6.4 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18.4 Source: Standard & Poor s Corporation and Wall Street Journal. 225 Figure 24. GOLD PRICE* RELATIVE TO SILVER CASH PRICES 225 175 175 15 15 125 125 1 1 1/3 75 75 5 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 5 Source: Standard & Poor s Corporation and Wall Street Journal. Page 13 / October 4, 216 / Market Briefing: Gold www.

19 1 17 Figure 25. GOLD PRICE & 1-YEAR TIPS YIELD Gold Price vs TIPS Yields -1.5-1. -.5 1 15 1 13 11 9 7 5 (dollars per ounce) (1283.3) 1-Year TIPS Yield (percent, inverted scale) (.) 6 7 8 9 21 211 212 213 214 215 216 217 1/3 1/4..5 1. 1.5 2. 2.5 3. 3.5 Source: Board of Governors of the Federal Reserve System. 19 1 17 1 Figure 26. GOLD PRICE & 5-YEAR TIPS YIELD -3-2 -1 15 1 13 11 9 7 5 (dollar per ounce) 5-year TIPS Yield (inverted scale) 6 7 8 9 21 211 212 213 214 215 216 217 1/3 1 2 3 4 5 Source: Board of Governors of the Federal Reserve System. Page 14 / October 4, 216 / Market Briefing: Gold www.

1975 1 Figure 27. GOLD CASH PRICE (dollars per troy ounce) Gold Price D A 1975 1 1625 1625 145 Price (1283.3) 145 1275 1/4 1275 11 11 925 925 75 75 575 575 225 16 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 -day moving average D = On July 26, 212, ECB President Mario Draghi pledged to do "whatever it takes" to defend the euro. A = On April 4, 213, Bank of Japan implemented "Abenomics" monetary policy. Source: Haver Analytics. Figure 28. GOLD PRICE & FED S MAJOR TRADE-WEIGHTED DOLLAR INDEX 225 14 12 * (dollars per ounce) Fed s Major Trade-Weighted Dollar Index* (March 1973=1) 1/4 15 1 9/3 5 8 6 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 21 * Index is the weighted average of the foreign exchange rates of the US dollar against the Euro Area, Canada, Japan, United Kingdom, Switzerland, Australia, and Sweden. The Euro Area includes Germany, France, Italy, Netherlands, Belgium/Luxembourg, Ireland, Spain, Austria, Finland, Portugal, & Greece. ** Cash price, London gold bullion, PM Fix. Source: Haver Analytics. Page 15 / October 4, 216 / Market Briefing: Gold www.

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