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Gold Is Not A Sure Bet

The new Macro Watch video discusses how and why the price of Gold has moved up and down since 1970; and it warns that an investment in Gold is not a sure bet.

Gold is a hedge against inflation.  The price of Gold goes up when people fear there will be significantly higher rates of inflation.  But, it goes down when people become less concerned about inflation.

During recent decades, the deflationary forces of Globalization have overpowered the inflationary forces caused by an enormous increase in the Money Supply.

When there was no significant Inflation following the Crisis Of 2008, despite all the money the Fed had created, the price of Gold crashed 43% between its 2011 peak and 2015.  If there is no Inflation following the Coronavirus Crisis, despite all the money the Fed is likely to create this year and next, it is possible that the price of Gold will crash again from whatever peak it reaches this time.

The Fed is creating an enormous amount of money.  So, the price of Gold probably will continue moving higher during the months ahead.

But it is NOT certain that it will.

If it doesn’t, the price of Gold could fall significantly, as it has many times in the past.

The purpose of this video is to warn that there are risks associated with investing in Gold.

Gold is not a sure bet.

For all the details, Macro Watch subscribers can log in and watch this video now.  It is 11-minutes long with 24 slides that can be downloaded. 

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  1. Carmen Reinhart, incoming Chief Economist for the World Bank: “Without being melodramatic, COVID-19 is like the last nail in the coffin of globalization…The 2008-2009 crisis gave globalization a big hit, as did Brexit, as did the U.S.-China trade war, but COVID is taking it to a new level”
    My question is:
    no globalization + enormous increase in the Money Supply —-> significant inflation —-> higher rates —> more sofisticated QE —–> more inflation —-> rates even higher
    and so on.
    It might be the end of creditism, a new great depression and maybe a consequent war between nations.
    Could automatization and AI replace globalization as a Deflationary Supply Shocks: kill gold price but save the world?

    1. Since the fall of the Berlin Wall and Soviet Union 30yrs ago, international trade has exploded, and the global economy came fully into its own. The headwinds facing globalism that you address may reverse these trends a little, but I don’t believe we’re getting much of that toothpaste back in the tube. Also consider how deflationary both demographics and technology are: there are nearly 2B baby boomers that will come of retirement age in the next decade, there impact as consumers in the developed world will surely decline which is very deflationary. Technology, by its nature in extremely deflationary, just consider your smartphone as an example. all the things it provides that we used to have to pay for, are now virtually free. No longer any need for anyone to buy maps, encyclopedias, cameras, calendars etc. On top of that, digital technology (which is rapidly pervading every industry) rides on the back of Moore’s Law, which means it follows an exponential growth curve. The deflationary pressure it creates therefore follows that same curve. That globalism May regress some I think is a fair assumption, however I believe the deflationary pressures of demographics and technology will likely May up for the loss. It’s the Age of Deflation, and the biggest risk (IMO) is a deflationary spiral triggering an even greater depression than the 1930s. I’m not a fan of Fiat money nor money printing, but given the severity of our predicament I think the disease is far worse than the cure….

  2. Great video. Thanks for sharing the information and you are right. There is no sure thing with gold. Too many unknown factors regarding the currency printing.

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