Gold is widely viewed as among the best hedges against inflation. It rose dramatically from $287 an ounce on September 11, 2001 to a record high of $1,895 during September 6, 2011. It’s down 37% since then. Gold bugs figured that the war on terror would widen government deficits and that central banks would help by keeping credit conditions loose. The financial crisis of 2008 unleashed the major central banks to experiment with various forms of ultra-easy monetary policy including NZIRP and QE.
Yet inflation remained subdued. The price of gold seemed to break when gold bugs were disappointed by the metal’s failure to rally on Abenomics, specifically the latest round of extremely easy money from the BOJ. So they started to sell.
I’ve observed that the price of gold tends to coincide with the underlying trend in the CRB raw industrials spot price index. If so, then the trend in both is more likely to be flat to down than to be up, in my opinion, given my outlook of secular stagnation for the global economy. That’s neither a boom nor a bust, just more of the same.
Today's Morning Briefing: Inflation Still MIA. (1) Diminishing inflation. (2) Un-COLA. (3) The forces of disinflation remain intact. (4) Lots of liquidity, yet not much inflation. (5) Unit labor cost inflation remains subdued. (6) Weak productivity growth doesn’t jibe with record profit margin. (7) Is Yellen waiting for Godot? (8) Fed study says cost-push inflation is a myth. (9) Inflationary expectations trending downwards with commodity prices. (10) Is gold really an inflation hedge or just another commodity? (11) Inflation is obviously key to bond and stock valuations. (More for subscribers.)
Yet inflation remained subdued. The price of gold seemed to break when gold bugs were disappointed by the metal’s failure to rally on Abenomics, specifically the latest round of extremely easy money from the BOJ. So they started to sell.
I’ve observed that the price of gold tends to coincide with the underlying trend in the CRB raw industrials spot price index. If so, then the trend in both is more likely to be flat to down than to be up, in my opinion, given my outlook of secular stagnation for the global economy. That’s neither a boom nor a bust, just more of the same.
Today's Morning Briefing: Inflation Still MIA. (1) Diminishing inflation. (2) Un-COLA. (3) The forces of disinflation remain intact. (4) Lots of liquidity, yet not much inflation. (5) Unit labor cost inflation remains subdued. (6) Weak productivity growth doesn’t jibe with record profit margin. (7) Is Yellen waiting for Godot? (8) Fed study says cost-push inflation is a myth. (9) Inflationary expectations trending downwards with commodity prices. (10) Is gold really an inflation hedge or just another commodity? (11) Inflation is obviously key to bond and stock valuations. (More for subscribers.)
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