Summary
Contrary to popular opinion, gold tends to perform relatively poorly when inflation expectations are rising and relatively well when inflation expectations are falling.
A large part of the reason for the strong inverse relationship between gold's relative strength and inflation expectations is the general view that "inflation" of 2-3% is not just normal, it is beneficial.
Eventually the rate of "price inflation" will rise to a level where it starts being seen by the public as a major economic problem, and, as a result, the desire to maintain cash savings will enter a steep decline.
Editor's note: Originally published at tsi-blog.com on November 11, 2019.
In an earlier blog post I discussed the relationship between gold and inflation expectations. Contrary to popular opinion, gold tends to perform relatively poorly when inflation expectations are rising and relatively well when inflation expectations are falling.
The relationship outlined above is very clear on the following charts. The first chart shows that over the past 6 years there has been a strong positive correlation between RINF, an ETF designed to move in the same direction as the expected CPI, and the commodity/gold ratio (the S&P Spot Commodity Index divided by the US$ gold price). In other words, it shows that a broad basket of commodities has outperformed gold during periods when inflation expectations were rising and underperformed gold during periods when inflation expectations were falling. The second chart shows the same comparison over the past 12 months. Notice that inflation expectations bottomed for the year (to date) in mid-August and the commodity/gold ratio bottomed about two weeks later.
A large part of the reason for the strong inverse relationship between gold's relative strength and inflation expectations is the general view that "inflation" of 2-3% is not just normal, it is beneficial. In fact, most people have been conditioned to believe that it's a serious economic problem necessitating draconian central bank intervention if money fails to lose purchasing power at a slow and steady pace.
Eventually the rate of "price inflation" will rise to a level where it starts being seen by the public as a major economic problem, and, as a result, the desire to maintain cash savings will enter a steep decline. It is at this point that the relationship depicted above will stop working and the demand for gold will begin to surge in parallel with rising inflation expectations. In other words, at some point the relationship depicted on the above chart will reverse due to declining confidence in the official money. This point probably will arrive within the next 10 years, but probably won't arrive within the next 12 months. Over the next 12 months it's likely that gold will continue to be favoured during periods of falling inflation expectations and other commodities will continue to be favoured during periods of rising inflation expectations.
So, if you think that the recent inflation-expectations bounce is the start of a trend then you should be looking for opportunities to increase your exposure to commodities such as oil and copper, not gold. My guess is that inflation expectations bottomed during August-October of this year, but I'm open to the possibility that the bottoming process will extend into early next year.
Original post
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
Summary
Contrary to popular opinion, gold tends to perform relatively poorly when inflation expectations are rising and relatively well when inflation expectations are falling.
与普遍看法相反，当通胀预期上升时，黄金往往表现相对较差，而当通胀预期下降时，黄金往往表现相对较好。
A large part of the reason for the strong inverse relationship between gold's relative strength and inflation expectations is the general view that "inflation" of 2-3% is not just normal, it is beneficial.
黄金的相对强弱与通胀预期之间存在着强烈的反向关系，很大一部分原因是人们普遍认为，2-3%的“通胀”不仅是正常的，而且是有益的。
Eventually the rate of "price inflation" will rise to a level where it starts being seen by the public as a major economic problem, and, as a result, the desire to maintain cash savings will enter a steep decline.
最终，“物价通胀率”将上升到被公众视为一个主要经济问题的水平，因此，保持现金储蓄的愿望将进入急剧下降的阶段。
Editor's note: Originally published at tsi-blog.com on November 11, 2019.
In an earlier blog post I discussed the relationship between gold and inflation expectations. Contrary to popular opinion, gold tends to perform relatively poorly when inflation expectations are rising and relatively well when inflation expectations are falling.
在一个之前的博客帖子我讨论了黄金和通胀预期之间的关系。与普遍看法相反，当通胀预期上升时，黄金往往表现相对较差，而当通胀预期下降时，黄金往往表现相对较好。
The relationship outlined above is very clear on the following charts. The first chart shows that over the past 6 years there has been a strong positive correlation between RINF, an ETF designed to move in the same direction as the expected CPI, and the commodity/gold ratio (the S&P Spot Commodity Index divided by the US$ gold price). In other words, it shows that a broad basket of commodities has outperformed gold during periods when inflation expectations were rising and underperformed gold during periods when inflation expectations were falling. The second chart shows the same comparison over the past 12 months. Notice that inflation expectations bottomed for the year (to date) in mid-August and the commodity/gold ratio bottomed about two weeks later.
在下面的图表中，上面概述的关系非常清楚。第一张图表显示，在过去的6年里，RINF，与预期CPI方向一致的ETF，以及商品/黄金比率(标准普尔现货商品指数除以美元金价)。换句话说，它表明，在通胀预期上升的时期，一篮子大宗商品的表现优于黄金，在通胀预期下降的时期，一篮子大宗商品的表现逊于黄金。第二张图表显示了过去12个月的相同对比。请注意，今年(到目前为止)的通胀预期在8月中旬触底，大宗商品/黄金比率在大约两周后触底。
A large part of the reason for the strong inverse relationship between gold's relative strength and inflation expectations is the general view that "inflation" of 2-3% is not just normal, it is beneficial. In fact, most people have been conditioned to believe that it's a serious economic problem necessitating draconian central bank intervention if money fails to lose purchasing power at a slow and steady pace.
黄金的相对强弱与通胀预期之间存在着强烈的反向关系，很大一部分原因是人们普遍认为，2-3%的“通胀”不仅是正常的，而且是有益的。事实上，大多数人已经习惯于相信，如果货币不能以缓慢而稳定的速度失去购买力，这是一个严重的经济问题，需要中央银行进行严厉的干预。
Eventually the rate of "price inflation" will rise to a level where it starts being seen by the public as a major economic problem, and, as a result, the desire to maintain cash savings will enter a steep decline. It is at this point that the relationship depicted above will stop working and the demand for gold will begin to surge in parallel with rising inflation expectations. In other words, at some point the relationship depicted on the above chart will reverse due to declining confidence in the official money. This point probably will arrive within the next 10 years, but probably won't arrive within the next 12 months. Over the next 12 months it's likely that gold will continue to be favoured during periods of falling inflation expectations and other commodities will continue to be favoured during periods of rising inflation expectations.
最终，“物价通胀率”将上升到被公众视为一个主要经济问题的水平，因此，保持现金储蓄的愿望将进入急剧下降的阶段。正是在这一点上，上述关系将停止发挥作用，黄金需求将开始与不断上升的通胀预期同步激增。换句话说，在某个时候，由于对官方货币的信心下降，上图所描绘的关系将会逆转。这一点可能会在未来10年内到来，但可能不会在未来12个月内到来。未来12个月，在通胀预期下降的时期，黄金可能会继续受到青睐，而在通胀预期上升的时期，其他大宗商品可能会继续受到青睐。
So, if you think that the recent inflation-expectations bounce is the start of a trend then you should be looking for opportunities to increase your exposure to commodities such as oil and copper, not gold. My guess is that inflation expectations bottomed during August-October of this year, but I'm open to the possibility that the bottoming process will extend into early next year.
因此，如果你认为最近的通胀预期反弹是一种趋势的开始，那么你应该寻找机会增加对石油和铜等大宗商品的敞口，而不是黄金。我的猜测是，通胀预期在今年8-10月触底，但我对触底过程延续到明年初的可能性持开放态度。
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
编者注：本文的摘要项目符号是由寻找Alpha编辑选择的。
