Should you buy Gold now?

Demand for gold as a hedge against geopolitical turbulence is currently countered by unexpectedly low inflation in the developed economies, and economic recovery in the U.S economy. Simply put, there are more interesting places for nervous investors than gold (which does not offer a yield). 

Market analysts do not expect a revival of inflation in the developed world over the coming five years, at least. The euro zone is struggling to avoid deflation, Japan has only very modest inflation despite a massive QE program of its own, while in the US CPI inflation of 2.0% in July is exactly in line with the Fed’s target rate. Long term inflation expectations are also low, with the five year/ five year forward rate for US CPI at 2.5%* 

Meanwhile, slower than expected economic growth in Asia has reduced demand for gold jewellery. 

With the non-inflationary recovery of the US economy well underway, it makes more sense to invest in American financial assets that generate a yield and possible capital return. In contrast, gold generates no yield. 


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