Falling Gold Is a Good Thing
In the last two days gold has plunged so deep that it’s being called the worst drop — at least in percentage terms — in 30 years. That brings us back to the early Reagan period, when falling gold was regarded as a good thing.
Back then, lower gold showed inflation coming down after the horrible 1970s. It also showed confidence in the economy recovering and greater respect for the dollar. Over the next two decades, in the ’80s and ’90s, gold basically dropped in round numbers from $800 an ounce all the way to $250. Stocks soared. So did jobs and the economy. It was one hell of a good period.
But markets have reacted a bit differently this time. On Monday, stocks fell over 200 points in tandem with gold’s $150 drop. Maybe it was tax-selling in the stock market. Or the constant rumor of Cyprus gold-selling to raise bailout cash. But investors aren’t happy. It doesn’t look like the ’80s and ’90s. And I’m hearing the usual cacophony of impending catastrophe.
But I’m not buying it.
Read my full column here.