The Gold And Silver Bear Markets Are Not Over

Our gold and silver models state that the gold and silver bear markets are not over as of October 13, 2015. Here’s why.

There is no inflation

Inflation is the factor that drives gold and silver bull markets. The official CPI data is not a good measurement of the real rate of inflation. CPI’s calculation method is constantly being changed. This means that an inflation rate of “5%” today is very different from an inflation rate of “5%” during the 1980s.

Below is a chart from Shadow Stats. It illustrates what the current U.S. inflation rate would be if we use the 1990 calculation method. As you can see, current inflation would be much higher if we used the 1990 CPI calculation method.

inflation

One of the main reasons why our gold and silver models are incomplete is because we do not have an accurate inflation gauge. Our firm uses a combination of various inflation measurements to get the most accurate reading of inflation as possible.

U.S. inflation is very low as of October 2015 no matter what measurement of inflation you look at.

U.S. inflation is hovering around 0% according to the official CPI data. The commodity markets confirm this. Oil is stuck around the $40-$50 level, and other commodities including industrial metals and agricultural products have yet to bounce after massive declines in 2014 and 2015.

Deflation is now the watchword. If the U.S. slips into deflation (as defined by the CPI data), there’s a chance that the global economy may slip into a little bit of deflation as well. The European and German economies are stalling while the Chinese economy is already in a recession if you discard the “official” data. (German inflation was 0% for September 2015.)

Even the Federal Reserve is afraid of deflation. The Federal Reserve decided to postpone an interest rate hike in September partially because it was afraid that the current low-inflation environment might persist.