It seems to me that gold serves as a good "crisis insurance." But while doing a search of Google, I came across an article on seekingalpha.com challenging the PP thesis that gold is a reliable tool for countering inflation.
For details, see: http://seekingalpha.com/article/696911- ... hedge-ever
Comments would be appreciated.
Thank you,
Goodasgold
Gold not always good against inflation?
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goodasgold
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Re: Gold not always good against inflation?
Hello goodasgold, and welcome to the forum!
Check out these two threads for answers to your question:
Is gold actually an inflation hedge? Does it need to be?
Positive Real Interest Rates
Basically gold protects from "bad inflation". Bad inflation occurs when the yield on short term treasuries is below inflation, ie negative real interest rates. This means fiat money is behaving badly and therefore gold is attractive as an alternative store of wealth. If we have positive real interest rates, then gold is less attractive and likely to fall or remain flat.
Check out these two threads for answers to your question:
Is gold actually an inflation hedge? Does it need to be?
Positive Real Interest Rates
Basically gold protects from "bad inflation". Bad inflation occurs when the yield on short term treasuries is below inflation, ie negative real interest rates. This means fiat money is behaving badly and therefore gold is attractive as an alternative store of wealth. If we have positive real interest rates, then gold is less attractive and likely to fall or remain flat.