Gold and inflation

When gold could rise during inflation

You know, I rag on inflationist gold bugs a lot. And it’s with good reason. They are usually wrong. It’s not as simple as “inflation is going to eat away at your purchasing power, buy gold!”

It’s when inflation is starting to eat you up and is no longer viewed as ‘good’, the way it was on balance coming out of the 2020 deflationary mini-crash that gold would come into play. When Stagflation hits the scene and its corrosive effects become evident to a majority, gold would have its time because things that corrode the economy are… Beuller? Counter-cyclical. They work to counter the cycle’s positive forces.

Anyway, another beneficial inflationary input would be if the CPI stops declining in relation to the 10yr yield. And what might work against yields today? Anyone? Yes, herds rushing out of inflated asset markets and into cash and Treasury bonds. Will inflation’s effects (e.g. CPI) just magically go back in the bottle the way the Fed would want? Unlikely.

By this and other pictures, gold is poised. Regardless of whether it goes now or later in 2022 I think it’s going, baby. But that’s just me, a gold bug trying to keep things real. The data here lags quite a bit. But check out the structures of each item. If the black line turns up the gold one probably will not ignore that.

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