Long-Term Gold Bull Market Still Intact, Says Howard Katz

Pooh-poohing short-term gold bears and people with "fancy titles," who tend to be bearish on gold period, Katz argues that a long-term chart of gold shows a still-impressive bull run. He hints that the commodities bull is fueled in part by excessive monetary growth in the '80s and '90s, which is finally making its influence felt in ordinary prices.


That hint does make a kind of sense. Money-supply growth does lead to higher prices. It's true that this sometimes leads to equity or asset bubbles, as has been the case over the last two decades, but those bubbles should be ironed out in the very long run. At that point, money supply growth translates into rising prices period. The uncharacteristic strength of commodities in this decade may be a sign that the bubble-inducing phase of money-supply growth has come to an end. (Residential real estate is a hard asset, which tends to appreciate in inflationary times.) Note that the lag effect, due to inflation being confined to prosperity-related asset bubbles, does explain stagflation. The stagflation comes when there's no asset bubble worth chasing anymore, and the excess money goes into ordinary price increases. At that point, high inflation coexists with a stimulus-exhausted economy.