Seeking Alpha Mutual fund manager, bonds, commodities Profile|
Send Message| ( followers)    In recent months, investors have
flocked to gold, helping to drive up its price to record highs.
Some market watchers have attributed the gold rally merely to
investors seeking a short-term inflation hedge or a perceived
“safe-haven” investment in the face of a slowing global economy,
ongoing global sovereign debt problems and Friday’s downgrade of
US debt. Gold prices, however, have been on the rise for a
decade and I believe there are a few key reasons why.  First,
high gold prices can’t be blamed on fears of near-term
inflation. While investors have historically paid a higher
premium for gold when inflation expectations are high, inflation
expectations have receded since a spring spike. In addition, the
last decade has been characterized by low inflation in most
developed countries.  But the rally in gold can be partly
explained by longer-term inflation fears tied to deficit-related
spending that would increase th