Good clip here from the FT that looks at why Gold which has been getting up to record levels. Should we be buying gold today?
Gold’s ascent continues as real yields have to continue to fall. This requires that inflation expectations keep going up at the same time as low growth expectations keep nominal yields pinned right where they are – this leads to stagflation.
Back in 2011, in the last crisis, like today, the Fed was intervening strongly in a sluggish economy and Washington was in turmoil. Investors then made the same bet on stagflation and gold. As it turns out, they were wrong. The price of gold got cut in half in the years that followed. In fact, all predictions of inflation since the last crisis have turned out to be similarly wrong. And all efforts by the Federal Reserve to get inflation up to its two per cent target have failed. So a bet on stagflation and gold now is a bet against recent history. That many investors are willing to take that wager shows just how frightened they really are.