Why is gold lower in the face of a global currency debasement race?

Skepticism about government fiat currencies now, if anything, is even greater, than it was three decades ago.  The Bank of Japan has embarked on a massive money-printing scheme that has lifted Japanese stock prices nearly 50% but effectively devalued the yen 20% since late last year when it became apparent that Abenomics — named for the new prime minister, Shinzo Abe — would be adopted.  (The outcome may be rather less salubrious than new Japan bulls expect, see Does Japan Face a Debt Apocalypse?.)  Meanwhile, the Fed continues on its trillion-dollar-a-year bond-buying program, joined by virtually every other central bank around the globe in expanding its balance sheet.  (The European Central Bank is a notable exception, letting its balance sheet shrink lately.  The next crisis, when — not if — it comes will assuredly spur the ECB back into action.)

So, it is incongruous that gold — money that can’t be printed, just minted — would enter a bear market Friday.  To be sure, a number of big Wall Street banks had declared the end of the bull market in bullion in recent weeks.  Yet, if the Street were a redoubtable forecasting indicator, analysts wouldn’t have been falling over themselves to boost price targets on Apple (ticker: AAPL) to infinity and beyond last year when the stock crested at $705 — before its long slide to $429.80 by Friday’s close.”

“Meanwhile, the global debasement race to the bottom has produced some absurdities.  Late Friday, the U.S. Treasury said that it is monitoring Japan’s monetary expansion and would press Abe to refrain from competitive devaluation.  With the Fed’s printing press operating in overdrive, it’s truly a case of the pot calling the kettle black.

The rush to the Bitcoin may have been a speculative bubble, but it may also represent an inchoate search for an alternative to government-controlled paper currencies.

Gold would fit that bill, but it appears caught up in a liquidation of commodities, such as base metals and petroleum products, and as a component in commodity indexes.  Commodities are produced to be consumed.  Gold isn’t consumed; virtually all the gold ever extracted still exists as a store of value or a thing of beauty.  That makes it fundamentally different from commodities.

Some day, an alternative to gold that doesn’t require the tedious and expensive mining, storage, and transfer of the metal may be conjured.  Those difficulties gave rise to paper money, which is being abused.  For now, gold no longer is loved, which, to an independent-minded contrarian investor, only adds to its allure.”