"In the long run the fundamentals usually prevail, but in the short term the technicals can dominate," Tangent Capital exec Jim Rickards says of gold's correction in a May 2 interview.
"To me, what's going on is there's a transition from weak hands to strong hands. The weak hands are Comex traders who have margin calls and stops, hedge funds that have non-permanent capital and mark to market, newbies in GLD -- they're all wrung out now. The strong hands are Russia, China, and actually the people around the world -- they lined up to buy physical beginning on April 16. So, we're back up 10%, so I think the technicals have been wrung out, the fundamental story is intact, and the trend is higher from here. ... Gold does very well in inflation and very well in deflation, which is a surprise to a lot of people. The 1930s were the greatest sustained period of deflation in United States history. Gold went up 65%. The problem is when central banks fear deflation more than anything, they try everything to defeat it, so currency wars, money printing, zero-interest-rate policy, forward guidance, a Twist -- they do everything they can. When they can't win the battle against deflation, they devalue the currency against gold because gold's the only thing that can't fight back. So if the Fed wins, we'll get inflation and gold will go up. If deflation prevails, they'll just say, they'll wake up one day and say, 'Gold's $4,000 an ounce. We're a buyer at $3,995, a seller at $4,050, and we're just going to make a market.' ... It's actually going to go sideways for most of the rest of this year; I think it will go up toward the end of this year. There are some seasonal factors. Inflation's coming with a lag. It's really been a long haul for the Fed. They got their bubbles -- they got their stock bubble and the housing bubble. They don't have (monetary) velocity going yet. They're just going to print more until they do."
"To me, what's going on is there's a transition from weak hands to strong hands. The weak hands are Comex traders who have margin calls and stops, hedge funds that have non-permanent capital and mark to market, newbies in GLD -- they're all wrung out now. The strong hands are Russia, China, and actually the people around the world -- they lined up to buy physical beginning on April 16. So, we're back up 10%, so I think the technicals have been wrung out, the fundamental story is intact, and the trend is higher from here. ... Gold does very well in inflation and very well in deflation, which is a surprise to a lot of people. The 1930s were the greatest sustained period of deflation in United States history. Gold went up 65%. The problem is when central banks fear deflation more than anything, they try everything to defeat it, so currency wars, money printing, zero-interest-rate policy, forward guidance, a Twist -- they do everything they can. When they can't win the battle against deflation, they devalue the currency against gold because gold's the only thing that can't fight back. So if the Fed wins, we'll get inflation and gold will go up. If deflation prevails, they'll just say, they'll wake up one day and say, 'Gold's $4,000 an ounce. We're a buyer at $3,995, a seller at $4,050, and we're just going to make a market.' ... It's actually going to go sideways for most of the rest of this year; I think it will go up toward the end of this year. There are some seasonal factors. Inflation's coming with a lag. It's really been a long haul for the Fed. They got their bubbles -- they got their stock bubble and the housing bubble. They don't have (monetary) velocity going yet. They're just going to print more until they do."
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