Dear Bernanke, Here's Your Guide To What's Really Making Gold Explode


Remember when Bernanke said he didn’t fully understand movements in gold prices?

Bernanke’s statement was a non sequitar to the average investor, who thinks the Fed is debasing the dollar and buying gold is the natural response. Actually the rally comes down to several factors, above all real interest rates.

Goldstock Analyst’s John Doody explained these factors in a presentation at the Hard Assets Conference in San Francisco.

Exhibit 1: The Gold Rally

Real interest rates are negative

The mountain of Fed purchases has been effective

Gold's rally coincides with the fall in treasury yields

Real interest rates have been mostly negative since Nov. 2007

This explains the gold rally

This theory holds up in the long view

Now what about stocks?

The Q-ratio shows an overvalued market

The P/E ratio also suggests a somewhat overvalued market

Will gold outperform stocks for the next two decades?

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.