Talking about false beacons, is gold one? Are earnings reports?

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“Nature magically suits a man to his fortunes, by making them the fruit of his character.”
                                    Ralph Waldo Emerson

Commentary & Analysis
Talking about false beacons, is gold one? Are earnings reports?

You know how gold is supposed to work, right?

It maintains its value over time, despite the rampant central-bank-induced inflation of fiat money, right?

I guess it can do something else too – mere adherence to the rule of gold can make a person believe they are smarter, more dignified, better off and better looking; in much the same way PF Flyers were guaranteed to make a kid run faster and jump higher. This is from rule-of-gold adherent James Turk:

The purchasing power of gold basically remained constant over long periods of time. A Roman Senator could buy a toga with an ounce of gold and today you can buy a man’s suit with an ounce of gold. That’s the way the gold standard essentially worked.

I didn’t fact check the price of a toga during the time of the Roman empire, but Mr. Turk is right when he says “today you can buy a man’s suit with an ounce of gold.” In fact, after you sell the gold you can go buy one, two or even three suits with the cash proceeds.

Mr. Turk must assume the Roman Senators paid top aurum for a top-of-the-line toga candida, thus justifying his implication that one needs approximately $1,700 in order to buy a man’s suit these days. Perhaps he was merely comparing a Roman Senator to the lavishness of an average lifelong US Senator, because if he did not make this connection the fact that an average guy can buy more than one suit with $1,700 would suggest that gold has actually appreciated over the years.

So either Mr. Turk just revealed 1) gold is overvalued by at least double or 2) that adherence to the rule of gold instead brings about a feeling of intellectualism, elitism, wealth and decadence.

I have this weird feeling in my bones that Mr. Turk does not believe gold is overvalued; and he probably didn’t mean to say what I said about elitism and decadence.

I may be going out on a limb here, but I imagine Mr. Turk feels gold is a good buy right now.

I posed this question to my readers of Commodities Essential on Friday:

Is gold signaling business as usual?

I went into detail on why gold’s latest price action might be indicating the global monetary backdrop will be supportive of financial markets again. Basically, gold’s technical pattern looks far more bullish than any other major commodities. In fact, much of the others are still within a daily downtrend that began earlier this year. Not gold …

Gold futures, daily:

This disconnect (bullish gold, bearish other commodities) points me straight to one period of time immediately after the 2008 financial crisis hit, when gold bottomed out and rallied along with the US dollar; other commodities remained bogged down with stocks and risk appetite.

That period began in October 2008 and last till March 2009.

Back to today … after a scare in September, risk appetite appears to have returned (despite the fact that there is plenty to be scared about, there’s really nothing to be scared about.)

Considering everything, though, I don’t think we can feel good about the recent rally in that it might suggest even higher prices and a return to a longer-term uptrend. And neither do the guys at Elliott Wave International (EWI) …

With a better-than-expected third quarter earnings season in the US helping to ease the sting of a dysfunctional eurozone, EWI thinks relying on positive earnings in this environment is a trap … rather than a sign of blue skies ahead.

Below you can find one of EWI’s recent articles, Earnings: Stocks Market’s Brightest False Beacon. It is a quick but powerful read. They uncover one popular market myth. But if that’s not enough for you, they’re also offering a free book exposing ten market myths. Go ahead, read on, and get your free book …