Inflation Expectations and the Price of Gold

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By Jeffery Nichols May 14, 2009

From a long-term perspective, gold is a bargain at recent prices in the $900 to $930 an ounce... and will remain so even as it begins to move into a higher trading range.

Recent gold-market developments and technical price action — along with broader economic and financial-market developments — suggest that gold is bracing for a resumption of its long march upward and a retest of its historic high in the months ahead. For more, see our recent posts on NicholsOnGold.com, particularly Risk/Reward Ratio Favors Long Side and Gold: A New Monetary Role.

First and foremost, the bullish outlook for gold rests on the increasing likelihood of accelerating U.S. inflation in the years to come — and an associated unprecedented rise in investor demand for the yellow metal.

This nascent inflation has not yet been reflecting in world financial markets. But, judging from anecdotal evidence and the financial press — and the warnings of a growing number of institutional investment managers — we believe a gradual, subtle, but important, upward shift in inflation expectations is already underway

Inflation Expectations and the Price of Gold -- Seeking Alpha

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