Leading indicators from the superstars of resource investing

What are the early indicators that gold will rise, plummet or coast sideways? Is it Federal Reserve bond buying? China's growth rate? Lipstick sales? You may be surprised by the answers.

Watch the Dollar: John Williams

The best way to predict gold is to follow its inverse indicator, the dollar. That is why ShadowStats Editor John Williams is closely watching central banks. "There has been an effort to discourage people from owning gold because a rally in the price of gold is generally taken as an indication of poor performance by the central banks," he explains. The challenge with using central banks as an indicator, he warns, is that buying and selling by central banks is usually covert; it's done through third parties. That can lead to a confused and dysfunctional market that ignores fundamentals and reacts with extremes to headlines.

One example is all the controversy over tapering or not tapering. When asked about the Federal Reserve's announcement to begin tapering, Williams says, "I did not expect the Fed to back off in any meaningful way, and it did not. The minimal tapering likely was more politics in advance of the change in Fed chairmanship than anything else. The banking system remains in deep trouble, favoring ongoing quantative easing (QE3), and the economy remains weak enough to continue the needed political cover. Going forward, the Federal Open Market Committee (FOMC) allowed for expansion as well as further pull back in QE3, dependent on underlying conditions. Those conditions still favor expanded easing."

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