Bill Fleckenstein wrote an interesting piece today. He argued that the spike in gold to $1,900 in 2011 probably represented the apex of global deflationary fears. But, since then, the world has gotten comfortable with the steps taken by central bankers and governments (i.e., massive amounts of money printing), blissfully unaware of any potential consequences, so the fear has dissipated. What we're left with is a world awash in liquidity, searching for yield, but not scared any longer of a debt deflation spiral. So, who needs gold.
I think he's probably right. For the most part, I have taken the position that deflation was the driving fear out there, as most people have a blind spot for inflation. And, at a minimum, do not see where inflation can be just as dangerous as its counterpart.
In any event, my takeaway is that those who hold gold will need to be patient. As long as the market climbs higher, and sovereign yields stay low, the cheerleaders will continue to drown everything else out. But, with great conviction, I do not believe that it will last forever.
