Loading ...Given rising interest rates, a case could be made that the price of gold should be much lower. But gold has held its own against stocks and fixed income alternatives (not to mention Bitcoin and other high-flying speculations that compete with gold for investor dollars).
If inflation does not appear and rates retreat, gold will rally. If inflation does appear, rates may rise but gold will also rally on inflation fears.
We have been stuck in a rut where inflation expectations are driving rates higher but no sustained inflation has appeared. That’s a tough environment for gold. Still, gold has held its own.
Technically, this is what we call an asymmetric trade.
Downside is limited because of residual inflation fears, but upside is huge because gold prices have been moving inversely to interest rates and a plunge in rates is likely to occur.
You can call it, “Heads I win, tails I don’t lose.” When it comes to investing, that’s as good as it gets.
https://www.zerohedge.com/commodities/gold-heads-you-win-tails-you-dont-lose