Skip to comments.Why Gold Can Surge, Even With Inflation Expectations At Zero (Not even an Inflation Hedge Anymore?)
Posted on 09/20/2010 7:30:11 AM PDT by SeekAndFind
A question we've heard lately is: why is gold rallying when inflation expectations are nil?
First of all gold historically has been a lousy inflation hedge, which should make you question whether its connection to inflation is at all warranted.
After all, let's think through what inflation expectations really mean. If investors saw inflation, it would mean they saw a scenario whereby too much cash was flowing into the economy, creating price increases in things like wages, rents, and normal consumer goods. Or to put it another way, it would mean they see very little slack in the economy.
But really, what about this scenario would make anyone want to buy gold? What good does gold do in this scenario?
Where gold could be valuable is in a scenario where the world's sovereigns are playing games with their balance sheets, running on the bring of insolvency, and aggressively engaging in competitive devaluations, basically threatening the stability of the fiat money system.
Then, it's easy to see where gold is a hedge. It's the ultimate non-money rising in value when money itself is feeling instable.
(Excerpt) Read more at businessinsider.com ...
You see, inflation is not at zero. It be like going outside and its raining and the government weatherman said its sunny
There might be zero inflation expectations today, but what will the expectations be say two years from today.
Smart money anticipates a trend and the likely scenario is inflation as the world’s economies print currency 24/7.
Gold is at $1282, Silver at $20.89. USAGX closed at $42.57 on Friday up 47.38% in the past year.
Gold like silver is not an investment tool. Its an insurance policy against the devaluation of your monetary assets.
It's a bubble.
Gold is a hedge against little green pieces of paper becoming worthless.
My grocery store tells me there is inflation.
My clothier shows me there is inflation.
My computer store demonstrates their is inflation.
My mechanic demonstrates there is inflation.
My appliance store shows inflation.
Cash for Clunkers caused inflation....
Only the Obamamedia is ‘saying’ there is no inflation and that the recession is over.
Where r the jobs?
Gold and silver prices continue to rise, not so much because of the expectation of inflation, where inflation is defined as the rise in price of goods and services brought about by excess demand over supply, but rather because many see the unavoidable near future severe devaluation of the dollar brought about by the coming collapse of confidence in the fiat dollar currency caused by the government and the Fed’s insane monetary actions to keep this current false market afloat.
I submit that gold is not always a hedge for inflation but it is always a hedge for currency collapse.
RE: I submit that gold is not always a hedge for inflation but it is always a hedge for currency collapse.
Do you believe that that is what the market is anticipating and that is the reason why the price of both Gold and Silver are going up?
Also, I notice another thing — the currencies RESOURCE and COMMODITIES based economies ( e.g. Australia and Canada ) have been STRENGTHENING vs. both the USD and the Euro.
Mail me to get on or off the Free Republic Goldbug Ping List.
Gold is constant.
The currency is losing value. The $$ is being devalued as are other currencies when measured against gold.
Also, there is inflation. It is not to the point of being problematic and the standard measures may not reflect it, but it is there.
Gold was at 250 right before 9-11-2001
After this attack the Fed Reserve went all out to stop a recession/depression from the 911 attack. Greenspan opened up the floodgates. Inflation manifested in the real estate sector and in the stock markets
Gold has been shooting up ever since 911-2001 due these inflationary actions of the Federal Reserve. There have been dips in AU. But gold stagnated downward for 20 years until that day Osama Bin Ladin attacked. Also invading Iraq and Afghanistan forced the Fed to ease money
We are seeing two trends: rises in staples such as food and energy because of continued strong demand as the emerging economies continue to grow and a fall in discretionary income as the US and other developed economies continue to struggle. The average of the two will result in no increase in prices and thus no inflation, The overall inflation (but not commodities) is therefore being held in check by a lower standard of living. This trend will continue as taxes rise in January and more money is taken out of the productive sector.
All according to plan by the neo-Marxists.