Archive for 25/05/2010

Quick note on deflation

In a nutshell,  the following article is a good one for de-bunking the myth that gold doesn’t do well in deflation. Everyone seems to agree that gold does well anticipating inflation, which is the common argument for its current strength. However, in deflation physical assets decline. Yes but…

For one thing, deflation can hit some assets and not others. For another, deflation can make currency devlautation even worse as governments desperately print their way out of a deflationary spiral. Guess what, that’s what’s happening now.

http://seekingalpha.com/article/206557-deflation-and-economic-weakness-the-best-catalysts-for-gold?source=email

So far this week, gold seems to be doing a bit better than silver in forming a bottom, though both seem stable for now.

|