All we keep hearing is that the Fed’s monetary policy measures are a “stimulus” and some say that they cause inflation or are even hyperinflationary and that’s why you should own gold.
Well, if you look at the ratio of gold to the S&P 500, you’ll see anything but that relationship.
During QE, gold barely stayed even with stocks and during Op-twist, gold got crushed.
Only in the brief time that the Fed was NOT INVOLVED did gold go up. And it’s easy to understand why…the Fed’s monetary ops remove income from the economy and, therefore, it can’t be inflationary.
2 comments:
Clearly, both gold and QE cause hyperventilation.
Now, if we could manage to hike deficit spending while gold is heading for sub 1k, we could claim that gov't spending causes gold to go down. I betcha a lot of austereians would fall for it too.
I think it might be more complicated than simply 'removing income from the economy'.
If you're getting next to zero interest from bonds or cash you're more likely to move into other, riskier assets - even more so if you've bought the idea that the fed's 'money printing' is leading to massive inflation.
Post a Comment