The price of gold fell some 10 percent in 2015, leaving many investors, analysts, and financial-market pundits despondent about the prospects for gold in this New Year but the tide may now be turning what with equity markets here and abroad stumbling out of the 2016 gate.
By Jeffrey Nichols of roslandcapital.com (This post is an edited & abridged version of the original article to provide a fast & easy read.)
Surprisingly, the extreme monetary stimulus from the U.S. Federal Reserve and other major central banks around the world did not trigger and support a bull market in gold. Common sense had suggested that the unprecedented creation of new money “out of thin air,” so to speak, would have lead to massive inflation and devaluation of the dollar’s purchasing power.
Contrary to expectations, however, consumer prices have been relatively stable while producer and commodity prices have actually declined. Instead of inflation fears, economists and policy-makers are now worried about price deflation and slowing economic activity around the world.
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Looking back over the past few years, we can see that all this new money has fueled another form of inflation, not consumer-price inflation, but an inflation of equity prices on Wall Street and other major stock markets along with rising prices for real estate, fine art, antiques, rate coins, and other esoteric assets.
Meanwhile, gold has been left out of the inflationary mix, after all, the thinking goes, why hold an inflation hedge when inflation is hardly visible. Instead, better to hold equities and other assets that are rapidly appreciating and that, more than anything else, explains the massive flow of funds out of gold in favor of equities and other inflating assets and, therefore, why gold has fared so poorly in recent years.
The tide may be turning now, though, with equity markets here and abroad stumbling into the New Year . . . while gold prices have recovered some lost ground in early-January trading. A period of day-to-day gold price gains and simultaneous declines in the broad stock-market averages could be evidence of a shift in investor attitudes away from stocks in favor of gold – signaling a new era for the yellow metal. Moreover, when markets do turn, we would not be surprised to see gold prices rise briskly – continuing to new historic highs over the next few years…[The original post by Jeffery Nichols (roselandcapital.com is presented here by the editorial team of munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample here – sign up in the top right corner) in a slightly edited ([ ]) and/or abridged (…) format to provide a fast and easy read.] Related Articles from the munKNEE Vault:
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