The Gold Report: After flirting with $1,300 per ounce ($1,300/oz) in January, gold has fallen to around $1,200/oz. What happened?
Olivier Tielens: Deflationary forces are still leading the game. There’s a 50% chance that we may go to a new low, very probably the final bottom, and a 50% chance gold will trade throughout 2015 in a tight range.
TGR: A few years ago, gold rose tremendously after the U.S. Federal Reserve began quantitative easing (QE). Since then, further rounds of QE from the Fed and, more recently, massive QE from Japan and the European Union have not buoyed the price of gold. Why not?
OT: QE is not working. Europe is in a depression. The velocity of money continues to decrease and is now lower than for decades. People are hoarding cash, and that’s deflationary. Zero and even negative interest rates continue, and that could help gold because even though gold doesn’t pay interest, at least bullion owners aren’t losing money by holding it.
Inflation will arrive after confidence in the central banks fades. Investors will then want out of the U.S. dollar and into gold. When will that happen? Nobody knows, but it always comes like a thief in the night. Or we could have another black swan event, but this is less likely than in 2008 because the powers that be have learned from that, and there is now so much liquidity in the system.
TGR: QE and zero interest rates are not helping gold, but they are highly correlated to growth in the broader equity markets, with the S&P 500 continuing to hit record highs. How long can this last?
OT: I can see the Dow Jones hitting 30,000. All that liquidity has to find a home. So I’m bullish on the broader equities.
TGR: So, if we haven’t yet …read more