One of the dominant questions driving markets today is whether will see inflation or deflation as a result of quantitative easing and unprecedented levels of monetary stimulus.
Experts we have interviewed have stood on both sides of this debate. Where do you stand? Select your response in the survey below.
This question is important on many levels; not just does it determine sentiment on economic activity, but it also directly ties into gold prices.
Gold is famously known as not just a “safe haven asset,” but also an “inflation hedge.” Throughout history, gold prices have steadily risen in tandem with rising asset prices.
The chart above shows this positive relationship in the last 30 years. From 1990 to the present day, this positive relationship has held; the higher the inflation, the higher the gold price.
However, one notable and very important exception to this rule is this year, in 2020. As the circle shows, 2020 saw a massive decoupling in this relationship, as gold prices soared to all-time highs while the economy saw deflation as a result of the COVID-19 pandemic.
A decoupling of this relationship has shown that under extreme situations, gold has the ability to run on its own regardless of where inflation is headed; whether the relationship will return to normal again, or when it returns to normal, is yet to be seen.
Two veterans of the gold industry, Jim Rickards, best-selling author, and Peter Schiff, CEO of Euro Pacific Capital, spoke to Kitco News recently in a panel interview.
The two economists discussed the definition of inflation, as well as the likely outcome from Fed balance sheet expansion.
The discussion will be aired on Kitco.com on Monday, August 3.