Friday, April 19, 2013

Gold and deflation


“The price of gold tends to follow the underlying trend in the more volatile CRB raw industrials index. So gold’s two-day free-fall of $203 per ounce to $1,360 is unsettling if investors see it as a harbinger of a widespread plunge in commodity prices resulting from a much weaker global economy. I don’t see it that way. Nevertheless, gold’s precipitous descent only one week after the Bank of Japan announced a massive QE program suggests that investors are losing their confidence in the power of central banks to stimulate economic growth. As a result, gold bugs may no longer be convinced that inflation will heat up, notwithstanding the monetary excesses of the central banks.  [Ed Yardeni, 4/15/13]


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