logo
  Join        Login             Stock Quote

Gold’s Inflation Problem (IAU, SLV, GLD)

 March 09, 2012 04:18 PM


Gold goes up with inflation. Except when it goes up regardless…  EVERYBODY'S fretting about inflation. Central bankers say there's too little, or will be (just you wait). Lesser mortals feel there's way more than the official numbers let on. And finance professionals think there's a lot more ahead.

"By the time inflation becomes evident," reckons John Paulson of the $14 billion Paulson & Co. hedge funds, "gold will probably have moved, which implies that now is the time to build a position."

[Related -Perfect Storm Driving Gold Higher]

"As inflation picks up, the real price of gold goes up," agrees Jeremy Grantham of the $97bn GMO in his latest letter to clients. And the only asset class with a positive correlation to inflation is gold, according to Credit Suisse's latest Global Investment Returns Yearbook.

So far, so bullish if you agree with Paulson, Grantham and pretty much everyone else that inflation is set to start rising. Because judging by the late 20th century – after gold prices were cut free from their $35-per-ounce peg in 1971 – gold goes up with inflation.

[Related -SPDR Gold Trust (ETF) (GLD): 3T Analysis: Target $1,400 but Box Bound]

Only problem is, gold has already moved – rising six-fold and more in nominal terms despite the quiestest decade for official US inflation since the 1950s.

What to make of it? First, and to repeat yet again, gold is not simply about inflation. It wasn't in the 1970s, nor the 1980s, and it isn't today. Gold is about inflation and interestrates. Because low or negative real returns on "risk free" bonds and cash force cautious savers to turn instead to a rare, indestructible home for their money.


Next Page >>12
iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageHealth Net, Inc. (HNT): Potential to Be Huge Winners Says Bank of America

As of this keystroke, Health Net, Inc. (NYSE: HNT) shares are up around 4% on the day. The managed health read on...

article imageHomeAway, Inc. (AWAY) Q2 Earnings Preview: Top and Bottom Line Bullish Surprise?

HomeAway, Inc. (NASDAQ:AWAY) will report its financial results for the second quarter ended June 30, 2014 read on...

article imageAmazon.com, Inc. (AMZN) Q2 Earnings Preview: Missing on the Top and Bottom Lines, Again?

Amazon.com, Inc. (NASDAQ:AMZN) will release its second quarter financial results after market close on read on...

article imageFord Motor Company (F) Q2 Earnings Preview: Light on the Top Line?

Ford Motor Company (NYSE:F) will release its preliminary second quarter 2014 results at 6:30 a.m. EDT read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.