When Inflation is Away, Gold Doesn’t Play

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By Jacob Maslow

Investment In Gold As Gold Bullion And Gold CoinsYou really have to almost feel sorry for fundamental investors and value investors. It’s as if the traditional game plan for economic weakness and financial insecurity is not working out. Usually, when there is a global economic slowdown and a lot of economic uncertainty hanging in the air, investors would flock to gold. Well, thanks to the huge amount of cheap money flooding equities markets and financial markets in general, it seems that the old rules have been thrown out of the window.

While most investors agree that the current financial markets are overvalued, they differ sharply as to where one should park one’s assets. Traditionally, it’s a no-brainer: If you see the market overvalued, you would invest in gold. Well, thanks to the fact that inflation is almost negligible in the developed world, gold doesn’t get much play. In fact, short traders are hammering the price of gold downwards. It appears that the game in town is to invest in paper assets like stocks.

I’m not sure how long this trend would continue. Gold has been on a downward spiral for the past four years. Keep in mind that at its peak, it was $1,895 an ounce. Now, it’s barely over $1,200. The rules of the game in financial markets seem to have changed.

I highly suspect that the classic rules will come back. Right now, we’re in the age of funny money. I am of course talking about central banks flooding equities markets with stimulus funding. It’s only a matter of time until that strategy is finally abandoned and discredited.

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