I Don't See Gross's Disinflation as Good For Gold, At All.
This subject requires a Round Table discussion, lasting several days. So, in the knowledge that a post on the subject cannot do it justice, let me say this: gold did a pretty good job both anticipating, and tracking, the global reflationary effort led by both Japan and the US. So went the last few years.
Gold now either needs a healthy extra dose of that particular action, or, a healthy failure of that effort.
Gross's disinflation is not strong enough medicine for gold. Gold needs either a desperate Fed fighting Deflation with enormous pumping, or, a robust systemic failure of that effort. A strong Deflation. The worst for Gold of course is a Volker style Fed, or just the hint of a Volker style Inflation Fighting Fed. (OK, we can agree that possibility is so remote its not even funny.) But Gross's Disinfationary call points to a grayer, plodding, chronic situation where the purchasing power of money is not damaged "enough", where the real returns on bonds is not damaged "enough" and where infaltionary pressures are never quite sustained "enough."
Gross is pointing to a chronic no man's land. Not good for gold at all, imo. But perhaps not dire, either.
LP
PS: Let's not forget Fekete's intriguing thesis that money flows between the two shores of Bonds, and Commodities. If we pair this with Gross's call, you get sort of a chronic half-tide. |
