We think that the correction that began in September 2011 exhibits strong similarities to the mid cycle correction of 1974 to 1976. That phase was similar to the current one, especially with respect to the marked disinflation backdrop, the presence of rising real interest rates and extreme pessimism regarding gold-related investments.
And the trend of Miners Cash and "All in cash" Costs
belief that the gold bull market is over, must be accompanied by an
expectation of rising real interest rates. In order to validate this thesis,
one should ask oneself the following questions:|
- What would happen to currently already anemic GDP growth if central banks were to raise interest rates significantly?
- How would short and long term bond yields react? What would the effects on corporate bonds be, especially junk bonds?
- What would happen to valuation models (e.g. for stocks)?