Why Gold Is Crashing

BusinessWeek says:

A chart of the crashing price of gold looks like a wedding ring rolling off a table. Gold futures for June delivery closed at $1,361 an ounce on the Comex in New York today, a drop of more than $200 in two sessions. Gold’s fall of 13 percent since April 11 was the biggest two-session decline since 1980. 

Why is gold plunging? The most important factor is that global inflation is falling, reducing gold’s value as a hedge against rising prices. Gold bugs who were betting on an outburst of inflation are scrambling to reverse their bets and exit their gold positions at any price.

BW then goes on to justify this view by reporting data put together by banksters:

For consumers struggling to make ends meet, it may seem hard to believe that inflation is falling. But the evidence is clear from JPMorgan Chase’s (JPM) global consumer price index, which covers more than 30 countries that collectively represent more than 90 percent of world economic output.

It is difficult enough to buy into the accuracy of the U.S. CPI, that is put out by the BLS, but to imagine that a jumble of numbers put out by countries across the globe can be mixed together in any sane manner is something that can't be taken seriously.  Just off the top of my head, it's clear that two countries are low-balling their price inflation data, China and Argentina. There are likely many more.

As for the U.S., my favorite price inflation measure happens to be the same measure that Paul Krugman references regularly. It's going to be interesting to see how Krugman spins this, since the measure, the M.I.T. billion prices index, has gone vertical in recent weeks.

The price inflation threat is very real and should not be dismissed lightly. Indeed, it should not be dismissed as a result of commentary by an MSM mag built upon bankster data.

The main force that had been driving gold down was what I warned about in the EPJ Daily Alert back in January: There was a flight from "safety" into equities. Most recently, the decline triggered technical sell stops.

Price inflation, as the M.I.T. Billion Prices Index is signalling, is far from a threat that has passed. It's a very real problem that is likely to accelerate and result in an eventual much stronger gold price.