How modern monetary theory could spike a new bull cycle in gold


By Chad Slater
Australian Financial Review, Melbourne
Monday, August 19, 2019

The year is 2003 and a long argument has ensued over gold and inflation. Gold is trading at $US370 an ounce, having recently traded at lows of $US250. I am locked in a debate with an analyst colleague who is adamant that gold is going to soar on the back of the coming inflation from interest rates near zero.

I have been lucky enough to work with a diverse range of personalities. Without naming names, one ex-sell side analyst taught me how to model stocks in such a lucid and coherent way that my analysts now dare not stray from the colour coding I was taught.

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At the other end of the spectrum, I learnt just as much from the aforementioned analyst who retrained from being an engineer after reading The Australian Financial Review and deciding "I could do this" -- as you do. He is an out-of-the-box thinker and a natural contrarian, someone who thinks of things well ahead of others, sometimes to his own financial detriment.

I argued that there can be no inflation without deflation. What I meant was that with independent central banks having stable inflation mandates, they would halt any rise in inflation. Only if they either removed or were forced to remove this (by virtue of losing independence) could we have inflation.

He of course had the last laugh, as gold has quadrupled since. But on the inflation point, there’s early and then there’s early. He was at least 16 years early on the inflation argument, but we may be getting to that point soon. ...

... For the remainder of the commentary:

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