New Study: Gold Doesnít Always Protect Against Inflation Risk
New research shows that the widespread assumption that gold protects investors against excessive inflation because gold prices rise as inflation surges has come under attack in a new paper published earlier this week.
According to the researchers, the gold-inflation relationship hasnít been stable since 1982. One of the studyís authors, Dr. Cetin Ciner of the University of North Carolina, said there was a time, especially in the 1970s and 80s, that gold markets didnít have anything to do with inflation.
But as inflation continued, and central banks no longer had it under control, gold started becoming sensitive to inflation. Gold and inflation rates are part of a more complex relationship, which also involved U.S interest rates and the strength of the dollar.
The new paper found that interested rates also predict how sensitive gold prices will be to inflation in the future, which helps market traders in their directions. Even still, gold markets are becoming more concerned about the potential Federal Reserve slowing its bond-buying activity, influencing gold and the inflation rate even more.
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