The price of Gold continues to look strong which leads to the fundamental argument that the market expects inflation. I really have not seen a chart that shows a correlation but a relationship may exist between gold and inflation. It is possible that Gold is strong because the US Dollar is weak and this has little to do with inflation. Money has been pouring into US Treasuries which points to relative strength of the US.
The chart below shows Gold appearing ready to make a new all time high, while the 10 Year Treasury yield and the US Dollar continue to drop.
The industries that make up this Copper index appear to have some strength but no where near the old high.
The industries that make up the Aluminum and Iron/Steel indices are very weak. Assuming inflation and with the US Dollar dropping, and I would expect those with money to buy up tangible goods. At this time only Gold is strong which leads me to believe that the limited supply of Gold is drawing in most of the money. This may be a good short term trade but I can’t imagine Gold holding high value while everything else is falling in price.
I remain in the deflation camp until I see a reason to move.
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Tags: Commodity Charts · Gold · Inflation-Deflation2 Comments
Gold is money and people want it when government is abusing the substitute for it, fiat currency. Gold can do well during deflation.
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Patricia