Inflation Road
Fed policy has been designed to be inflationary, because the Fed’s governors believe they can handle inflation better than deflation.
The massive printing of money helped cause the price of gold to soar to a peak of $1,900 in 2011. But as noted above, the anticipated inflation never came.
However, all of those dollars floating around in the system may be put to a different use now that the banks’ balance sheets have been repaired. The inflation threat has not gone away -- its coming may have just been delayed.
The Fed’s desire for introducing some inflation into the economy may be fulfilled, but as they say, “Be careful what you wish for.” Although the Fed may be confident that it can handle an inflationary spiral, it may not be as painless to control as hoped. “Real” inflation tends to lead to “inflation expectations,” a fear of future inflation that often defies policy countermeasures and becomes self-fulfilling.
Gold On “Inflation” ROAD
Gold’s historical role as a hedge against inflation was confirmed by a recent study of inflationary periods. From January 1, 1973 to June 30, 2013, gold proved to be the best performing asset class at 10.1% over Equities (7.0%), Treasury bonds (6.7%), Commodities (4.7%) and the Dollar (-0.5%). (Source: “The role of gold in investment portfolios,” Nov 2103, Flexible Plan Investments, Ltd.)
Whichever road the U.S. economy takes, “INFLATION” ROAD or “DEFLATION” ROAD, it seems that bringing along some gold will help make the journey more survivable.
Rick Andrews, president of Avant Capital Management LLC, located in Sarasota, Fla., is the creator of The Gold Bullion Strategy Fund (QGLDX) structure. There are two patents pending on the Fund’s structure and management process.