In essence Summers' study on Gibson's Paradox claims to have found empirical evidence of an inverse relationship between the real price of gold and the real interest rate..
Have markets already lost confidence in the Fed’s ability and willingness to tighten? When loss of confidence becomes obvious money will rush to precious metals.
Since Fed officials have been wrong every step of the way in diagnosing the inflation problem, their attempts to cure it will likely fail as well. They were too late to act.
But something is starting to detach itself from the market. This week while the stock markets tanked gold reversed and went up. The DJI/Gold ratio is falling in favour of gold.
With the dollar’s days seemingly numbered, the two old friends contemplate the value of gold as a means of wealth preservation and capital appreciation.
