Is the gold price trying to tell us something? Is another 2008 lurking in the shadows?

monthlygoldchart

by Michael J. Kosares

This monthly gold chart is drawn on the logarithmic scale in order to remove some of the melodrama to the latest correction. Linear charts emphasize nominal price movement while a log chart emphasizes the percentage movement. By reviewing gold’s latest correction on a percentage basis, we can put things into a little bit better perspective. The 2008 correction was 26%; the current correction thus far has been 30%. In short, we’ve been here before though you wouldn’t know it from all the catterwauling at our favorite financial cable network and other media outlets (not to mention Wall Street itself). Granted we might not, as yet, have reached bottom, but then again, we could be close.

In preparing this chart, I couldn’t help but look for similarities between 2008 and the present. Although nothing has surfaced that should make us think another Lehman Brothers event might be in progress, it is difficult not to wonder if Marc Faber might be on to something.

Why, for instance, has the Fed stepped up its asset purchase program since the beginning of the year while simultaneously talking asset purchases down? We see the numbers but we don’t know exactly what is prompting the strange behavior.

This from Chris Martenson (Peak Prosperity) might end up being viewed months from now as early warning to a pending crisis:

“The early stage of any liquidity crisis is a mad dash for cash, especially by all of the leveraged speculators. Anything that can be sold is sold. As I scan the various markets, all I can find is selling. Stocks, commodities, and equities are all being shed at a rapid pace, and that’s the first clue that we are not experiencing sector rotation or other artful portfolio-dodging designed to move out of one asset class into another (say, from equities into bonds). . .

“[W]e look at the increasing number of flashing indicators warning that a 2008-style – but worse – sell-off is arriving. We say ‘worse’ because this time it looks like it will be accompanied by a vicious cycle of rising interest rates. Plus, governments and central banks have used up all of their major options already. There are no more white knights to hope for.”

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