Could Inflation Be Gold’s Long-Lost Friend Coming Home?: Chart
Two hundred and fifty gram gold bars sit stacked in this arranged photograph at Solar Capital Gold Zrt. in Budapest, Hungary, on Thursday, March 10, 2016. Gold advanced to the highest level in a year after the European Central Bank indicated it wouldn't cut interest rates further, boosting the euro and making dollar-denominated bullion less expensive for investors.
Photographer: Akos Stiller/BloombergGold bulls, nervous that the metal will lose out as tighter U.S. monetary policy favors interest-bearing assets, may be forgetting a traditional source of strength for the metal: inflation. Bullion could get a chance to reprise its role as a hedge against rising prices amid signs of firming wages and a higher cost of living in the U.S. “If you’re raising rates at a fairly fast speed, but not as fast as they should, gold takes off as the inflation rate runs higher,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview.