Gold Forecast: Fed Watching Can Be Bad For Your Wealth

Gold fell heavily last week as forecast. Our long awaited fall to lower lows seems finally to be underway. Contrary to most opinion this fall is not a case of manipulation by dark forces, but is simply a resumption of a long term trend we have been modelling for over a year now.

The sharpness of this drop is entirely due to the pre game hysteria surrounding the recent Federal Reserve meeting. The amount of attention devoted to a meeting of academics who believe it is within their capacity to know what the price of money should be is frightening. In many ways the irrational exuberance prior to the meeting sums up how much of the financial system is devoted not to rational logical decisions but to the unwavering belief in an entity that has continually failed.

The Federal Reserve has as much idea as to the correct market rate of interest today is as it did in the mid 2000’s credit bubble but further than that thanks to faith invested in it by mindless market participants it thinks it can move markets by merely hinting at a course of action whilst all the time sitting on its hands.

In our opinion the Fed is as vulnerable to the complex forces driving markets as any other participant; they control nothing in the long term and are impotent in the face of Adam Smith’s Invisible hand. The simple fact is the Fed does not move markets in any meaningful may; it is a complete irrelevance over the long term, the Fed is always and everywhere wrong, they never see bubbles forming and they never anticipate recessions or credit events.

These academics cannot control the complex actions or understand the motives of many thousands of market participants, only the financial industry reacts to their decisions – they create the short term noise. But the reality is the vast majority of economic participants have no idea what the Fed does or says and will make their individual economic decisions based upon their unique personal preferences and longer term individualistic goals.

The last few weeks is a case in point, gold spent the summer consolidating and then began to decline but the couple of weeks before the Fed meeting the so called masters of the universe hedge funds and speculators actually thought the Fed mattered and bought excessive amounts of gold on the basis that the Fed was somehow going to be able to vanquish the deflationary forces it has been fighting with for over a decade. The Fed and Wall Street would do well to remember the lesson of King Canute who on failing to halt the tide said “Let all men know how empty and worthless is the power of kings, for there is none worthy of the name, but he whom heaven, earth, and sea obey by eternal laws.”

The fall of the last couple of weeks has been met with cries of manipulation, but the fact is the manipulation was the extreme counter trend move in price prior to the Fed meeting created by funds with access to cheap money and fancy terminals that became horribly bullish. They were always going to get slaughtered as the market structure in no way warranted such an accumulation.

The might of the Fed and the hedge funds moved the market for a week or so and drove it up by an extra percent or two but the market prevailed as it always does. In our opinion this fall was entirely predictable it fitted perfectly with our long term gold price forecasts and it is vindication of our multi timeframe analysis.

The last few weeks simply proves to us that a substantial part of the managed money financial system is utterly clueless and possibly extremely dangerous to their client’s wealth. We simply cannot understand what charts they were looking at or what logic they were using to justify their excessive accumulation of an asset so clearly in a bear market continuation.

Nothing can get in the way of the market not the Fed not hedge funds and not the might of the financial industry and its media mouthpiece. Contrary to perceived wisdom news doesn’t move markets but markets move the news.

During the last year we have consistently forecast lower prices we have never deviated from this long term gold forecast. All our analysis has shown that we spent the last two years in a bear market consolidation and we are now continuing the bear market that began in 2013. Unusually for most analysts you can see our track record right on our front page and you can sign up to get our 30 day forecast sent to your inbox every weekend.

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To view one of the most accurate and unique gold price forecasts available visit us at: http://www.kenticehurst.com