Originally Posted by Zygote
and headline CPI registered 3.8% for the last year. If we assume it averages 2% over the next 10yrs as the Fed, IN THEIR EXTREME OPTIMAL CASE, plans for, then we still have large negative real yields. Commodities look amazing versus sitting in cash or bonds even they can just upkeep with headline inflation.
This last year I believe a lot of the CPI increase was due to cost push inflation rooted in commodity speculation. 12 months ago there was speculators betting on inflationary pressures due to QE and bought up commodities. I don't hear too much about inflation any more as the deflation camp as won (for now at least)
Consumer Demand continues to drop and credit in the shadow banking system is in a free fall. If crude, copper, and other commodities continue to fall where is inflation going to come from? there won't be cost push or demand pull (the sustainable kind) inflation.
Gold may hold be a store of value relative to other assets but if the dollar continues to strengthen, and it will I believe, gold should comedown in price. In this environment of higher savings and debt deleveraging the money supply is shrinking. less dollars=higher relative value vs anything including gold.
Strong dollar will bring all sorts of further problems down the road which will ultimately force another QE of somesort but I think we are some time away from that. Corporate profits from abroad will be the first to get smacked then equities, jobs, etc etc.