During 18 of the last 22 years, gold has rallied between US Labor Day and Christmas.  Will the pattern this year follow the historical pattern?  We will analyze the fundamentals, look at some charts and try to draw a conclusion.  The charts in this report are courtesy Stockcharts.com unless indicated.

First a quote by President Andrew Jackson:  “Gentlemen, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in breadstuffs of the country.  When you won, you divided the profits among yourselves, and when you lost, you charged it to the bank.  You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families.  That may be true, but that is your sin!  Should I let you go on, you will ruin fifty thousand families, and that would be my sin!  You are a den of vipers and thieves.  I intend to rout you out and by the Eternal God, I will rout you out.” (Spoken to a delegation of bankers requesting the extension of the 1832 Bank Renewal Act).
Several news items during the past ten days were very bullish for gold.  The first was an announcement by the Swiss National Bank that they were planning to buy Euros with Swiss Francs.  This action effectively removes the Swiss Franc as a convenient alternative to gold, and it moves the SNB into the camp of the money printers. 

The second item concerns an announcement by five major central banks (FED, ECB, SNB, BOJ and BOE), to provide dollar liquidity for a number of European banks that suffer from exposure to Greek banks.

This dollar liquidity operation will last until the end of the year and will enable dollar funding for European banks, which were struggling.  It shows that the Federal Reserve, the ECB and also British, Swiss and Japanese banks have the will and the ability to cooperate at sensitive times, whenever they feel the system needs a ‘nudge’.

Another factor that is very bullish for gold is the current ‘negative real interest rate’ environment.  Regardless of whether we believe the ‘official’ CPI numbers, or the more realistic numbers provided by Shadowstats.com, anyone with money in the bank, or holding short-term Treasury notes, is losing money to price inflation. 10-year Treasuries are paying a miserly two percent. With inflation at 4.8%, these ‘so-called investments’  are losing 2.8% of their value over 12 months According to J. M. Keynes, and many other economists, whenever ‘real interest rates’ turn negative, gold will rise.  Keynes called this “Gibson’s Paradox”, and stated that there are no exceptions.