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  • Gold is at an all-time high.

  • And this must mean something and probably nothing good

  • considering gold's long-held association with fear,

  • hoarding, inflation, and, to exaggerate slightly,

  • the collapse of the modern monetary system.

  • So why is the yellow metal so strong?

  • To begin with, gold is priced in dollars.

  • And the dollar has recently hit a two-year low.

  • So the question becomes, why is the dollar weak?

  • And the standard explanation for this

  • is low expected US economic growth.

  • This in turn depresses interest rates and bond yields,

  • diminishing investors' demand for dollars

  • with which to buy US assets.

  • And indeed, as we can see, bond yields

  • are stuck at a very low level, but it is worse than that.

  • Not only are bond yields low, but at the same time,

  • inflation expectations are rising

  • as the Federal Reserve keen to protect the American economy

  • is printing dollars and cramming them into the US economy.

  • This means that real yields, that

  • is, yields after inflation, are not just low.

  • They are falling.

  • And when real yields fall, gold which yields nothing

  • at all almost always rises.

  • So all of these factors fit together.

  • Gold, the dollar, bond yields, inflation expectations,

  • falling real yields - they all make a certain logical sense.

  • Should we therefore be buying gold today?

  • Well, in order for gold's ascent to continue,

  • real yields have to continue to fall.

  • This requires that inflation expectations

  • keep going up at the same time as low growth expectations keep

  • nominal yields pinned right where they are.

  • This is the dreaded stagflation.

  • Back in 2011, in the last crisis, like today,

  • the Fed was intervening strongly in a sluggish economy

  • and Washington was in turmoil.

  • Investors then made the same bet on stagflation and gold.

  • As it turns out, they were wrong.

  • The price of gold got cut in half

  • in the years that followed.

  • In fact, all predictions of inflation since the last crisis

  • have turned out to be similarly wrong.

  • And all efforts by the Federal Reserve

  • to get inflation up to its two per cent target have failed.

  • So a bet on stagflation and gold now

  • is a bet against recent history.

  • That many investors are willing to take that wager shows just

  • how frightened they really are.

Gold is at an all-time high.

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Gold is king but should you buy it? Charts That Count

  • 81 1
    洪子雯   に公開 2020 年 08 月 01 日
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