Credit Suisse's 12 bullshit charts that make a goldbug shake his head

UPDATE: someone has since sent me the actual Credit Suisse report. It is more well thought-out than the childish Business Insider article made it out to be.

I'll leave this original article here (after a relocated pagebreak) for those who've linked to it, but I'd much rather you read my newer writeup on what Credit Suisse actually said. CS does address some of the problems I bring up below; the real problem was that the BI article was nothing but a click-whoring gross over-simplification of their report.

However, I'm only partially disavowing what's written below. To some extent, BI's distillation of their report brings some of their obfuscatory tricks/blind spots into much sharper focus.

So read my newer writeup. There is now also a third writeup by me that is even more technical.





BI ran an article a couple days ago titled "12 Charts That Will Make Gold Bulls Furious".

They give themselves far too much credit.

Credit Suisse says it's the "beginning of the end for the gold era".

Here are their 12 charts demolished in order.

So? Seriously, so? Does this mean gold only goes up with US10Y decreasing? Cos 1980-2000 saw US10Y decreasing too. Yet gold collapsed. Seems like you're blathering about shit that doesn't even correlate.

First, have they never heard of a log scale? Second, did they not know gold price was repressed before Nixon? Third, how does an "average since 1971" mean anything with just 2 peaks and 2 troughs making up the average?

That's a pretty fucking weak dataset, and if you'd ever taken a University stats course your prof would probably have had you brutally tortured to death at the front of the class as a example for the others.

Fourth, can they explain why gold is going up or down at any point on this chart? Fifth, do they know mining grades are collapsing and nobody's going to profitably mine gold at $600/oz again? I mean, if they're arguing "reversion to the mean" here, they have to provide some vaguely believable way that the price can revert back.

Oh my god. As above. Except at least they have some sort of log scale, though fuck knows what the unit is, they still live in a parallel universe where there was never a gold standard, and... aw, what a fucking joke.

Are you serious? Are Americans buying houses with gold? Do Americans buy any gold? What does the gold price have to do with American housing prices? Can you explain the correlation? Provide a mechanism?

Well, that statement retained its relevance for about a week. Now the EUR is trending back down as fear returns. Which, if Europeans buy gold, is positive for gold to the extent they buy gold, which is not much.

Really? Those are how you draw standard deviation lines? On a linear y-axis chart, by simply offsetting a parabolic trendline by $250 each side?

And since CS has such a major hard-on for "reversion to the mean", doesn't that mean gold's about to snap back up to over $2000? I mean, since they haven't established the end of a trend with their other pathetic fucking excuses for charts....

Um... they might want to run a correlation with global industrial production and gold price. They'll find they've been running together. Cos gold demand is dependent on emerging market growth, which correlates with IP now.

No shit, eh? That looks good for gold.

I mean seriously dude, your fucking chart makes my case for me. When did gold back off, and since when has it been rangebound? Since, say, the reduction in global IP in 2011 or so?

Hm. Interesting. They're still negative. And if you hold to the bullshit fallacy that gold price is determined by real rates, that's still good for gold.

But I don't see India, China, and world central banks looking up the differential between US inflation and US treasury rates before deciding whether or not to buy gold.

OK... and US house prices cause gold prices how?

Here we go again with the magical trendlines. How's about you talk to a demographer about the real expectations for US household formation? And then explain how US household formation determines the gold price?

W...w...wait. Now you're saying inflation expectations don't correlate with the gold price?

Cos you've just been talking about forward inflation expectations.

You're now saying that gold price isn't determined by inflation?

I guess you should have realized that a while ago, when you drew your stupid magical trendlines of gold showing an accelerating gold price including through periods of decreasing inflation expectations.

Summary

My God, I just wasted a half hour of my life. There wasn't even an argument here. There was nothing.

I mean seriously, if I was a conspiracy theorist, I'd think that Credit Suisse got some highschool co-op student to slap together a bunch of really truly utterly meaningless charts that vaguely seem to hew to a narrative that gold is going to go down. Y'know, so they can try to drive the price down a few bucks and stake a long position.

Because there's nothing here on China or India demand, nothing on globalization, nothing on reserve currencies and global uncertainty, nothing on grades or capex or future production, nothing explaining the mechanisms that supposedly produce the correlations that are tangentially featured in their charts: nothing on anything to do with gold, really.

I quit, I'm not writing another word on this.