Latest Atlas Pulse Gold Investor Report: late 2014 doesn’t seem like an unreasonable time to be betting the ranch on gold
Well, our good friends over at Atlas Pulse are out this week with their most recent monthly offering – which can be download here. And once again it doesn’t disappoint in terms of great gold charts and top-commentary on all things gold.
Whilst their core model still signals that gold is still in a cyclical bear market (with two out three indicators still signaling ‘bear)’, the focus of the report is to look at the bigger picture regarding gold – and specifically try and figure out when we will start to see real price inflation from all that money printing.
To that end Atlas Pulse looks at the USA Personal Income as a % of Personal Debt – since 1950. The reason Atlas Pulse is looking at this metric is that they are trying to find a good indicator to show when price inflation might pick up:
Atlas Pulse has been making the point since the outset, that inflation matters. Gold is a commodity and if you take that view, analysis of the price can be done rationally. If you believe it is money or a safe haven, good luck in coming up with any objective analysis. That there’s loads of debt, is no reason to buy gold. Neither is war, an earthquake or a run on a bank…
So why hasn’t there been more price inflation to date?
…The main reason that unparalleled money printing hasn’t caused broad inflation (art, Hong Kong property etc excepted), is that there is too much debt in the world. That debt is either owned by households, corporates or governments. Normally in a crisis, one group is doing well whilst the others suffer, but on this occasion, all three are heavily indebted. However since 2008, corporates (in many cases) have reduced their debts quit significantly, and broad measures suggest that debts are no longer excessive. Households have followed behind and are improving, albeit at a slower pace. That ’s unsurprising as it is government policy that the state should shoulder the burden whilst private balance sheets are given time to recover…
…Now imagine that the corporates and the households have repaired their balance sheets by paying down debt. Then there’s a cyclical upturn which naturally has higher inflation. The preceding downturn caused pol icy makers to overwork their print ing presses and hey presto, there will be inflation.
So when can we expect this price inflation to really start?
To measure when this might happen, we can look at USA household debt to income ratios . The 2000s over saw a debt bubble that built upon the great debt foundations created in the 1980s and 1990s . On current trends, households will be back to where they were in the 1990s by 2015. If 2014 is the downturn and 2015 is the upturn, it is easy to see how inflation could take off at this time. Gold is forward looking so will probably be six months to a year early. So if we guestimate mid 2015 for inflation, late 2014 doesn’t seem like an unreasonable time to be betting the ranch on gold.
Don’t mark your diaries, just keep reading Atlas Pulse each month and we’ll follow that scenario and see how it plays out
Chart note: Household debt to income shows how indebted households are. Post war, the US government had high debt, but households were in great shape. Now both are struggling but households are improving. At the current trend, households will be back into the 1990s equivalent zone by 2015. At that time, inflation could rise.
So there you go folks – once households have de-levered by late 2014, we will start to see huge price inflation, and it will be time to “bet the ranch on gold”.
Link to this article: : http://www.goldmadesimplenews.com/gold/latest-atlas-pulse-gold-investor-report-late-2014-doesnt-seem-like-an-unreasonable-time-to-be-betting-the-ranch-on-gold-12128/