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What Is Gold Telling Us About Central Banks, Debt and Inflation?

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Gold has had a nice run lately, trading around $1,325 per ounce as of this writing after briefly trading up to the $1,340 per ounce level last week. This has been an impressive rally off a base of $1,185 per ounce as recently as last fall.

The recent gold rally dynamics are captured in this article. I am frequently asked where gold prices are going next and for my analysis of the price of gold. My answer is that investors should spend less time forecasting the price of gold and more time discerning what the price of gold is forecasting for other markets.

Many factors go into the price of gold (real rates, dollar strength, safe-haven investing, central bank purchases, etc.). But, the gold price itself is a powerful leading indicator about other markets.

Gold’s recent rise says that central banks will remain on hold or even lower interest rates later this year. It says that inflation is not on the horizon, stocks will move sideways and economic growth will slow down. In that kind of sluggish, low-rate environment, the opportunity cost of owning gold goes down and therefore the price of gold goes up.

The price of gold can be considered to be in a “bear rally” (due to low growth) rather than a “bull rally” (due to inflation), but a rally is a rally.

Investors should not worry so much about the price of gold. They might worry more about what the price of gold is telling you about other markets and the economy ahead.

Institutional investors can schedule a proof of concept with the world’s first predictive data analytics firm combining human and artificial intelligence with complexity science. Check out Jim Rickard’s company at Meraglim Holdings to learn more.

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