The chart below tells an interesting story
Firstly, it shows why gold’s bull market took off in 2001. Real interest rates (interest rates minus the CPI) we’re falling toward negative. Negative real interest rates are the most consistent signal for gold to rise in price. It means that cash is losing value even after earning interest, so the smart money looks for gold as it will hold its value.
Real interest rates stayed negative until 2006 and have been negative almost permanently since 2008. This is supposed to be wildly bullish for gold. However of late gold has not risen in sync with negative real interest rates.
When the history books are written about this era these few years will be seen as an anomaly. Gold got ahead of itself and was then thumped down by very deep pocketed short sellers. This process is coming to an end. With QE raging on, global mining costs now over $1,000 an ounce, interest rates pinned to zero in the worlds reserve currency until at least 2016, and annual gold demand way above annual mine supply, there will come a time when economic reality reassertion itself.
When will this be? My guess is about six months before inflation stats suddenly pick up, heralding a new era when all the new dollars, yen, pounds and other fiat currencies printed in recent times start driving prices higher and living standards lower.