High-yielding assets are enjoying outright bubbles. The bond market is still showing negative interest rates. Japan and the United States plan to flood the world with a liquidity injection of almost $2 trillion dollars over the next 12 months. And, not one G20 country has a balanced budget.
Patience will be rewarded; we’ve seen all this before.
The macroeconomic case for gold is as strong as it has ever been and now investor sentiment has reached a negative extreme. The farther away from fair value any asset becomes, the more likely it is to show dramatic volatility in both directions.
The physical buying of gold and silver worldwide has increased dramatically. Yet the paper short selling has dramatically increased with hedge funds and momentum speculators entering in the short side by the famous Goldman Sachs recommendation in the New York Times.
Presently, there are many people who are on the short side of gold. To these speculators these trades are considered “easy money,” which is always a bad omen – because anything which looks easy is always anything but.