One of the sure signs of inflation uncertainty is gold hitting $900 per oz. Gold has not been a great inflation indicator over the last decade if you just look at its correlation with inflation, but the combination of a declining dollar and higher inflation in other parts of the world suggest that gold is now becoming a store of value alternative. Inflation may be rising in the United States but it is only slightly less in other countries. There is a breakdown in current inflation targeting as many central banks have focused on growth.
Euroland and Great Britain are facing slower growth prospects as well as above trend inflation so these currencies are not a safe haven. Japan is also facing slower growth and has been subject to wild swings in value. Emerging market currencies just do not have enough liquidity to be able to serve as a store of value, so the only alternative is gold. The market has bow moved up $100 in four weeks and $200 in the last year.
No comments:
Post a Comment