Following a strong summer, gold has suffered in recent months. Some say it’s because bitcoin is the new gold. It isn’t. Gold always has, and likely always will, thrive when real interest rates are falling. Bitcoin, on the other hand, responds to straight forward risk on conditions. Both are inflation-sensitive assets, so by holding both, you can have a more balanced inflation hedge.
In this piece, I look at the moves in bond yields, and how long-term inflation expectations have so far failed to come through. I believe they will, but it will take time. There are some hugely bullish scenarios for gold, such as the implementation of yield curve control. Capping long-term rates while inflation rises, would be the perfect storm.
I also discuss fund flows into gold, and how they tend to follow gold’s fair value. That highlights how recent moves have been rational, and as soon as inflation expectations come through, the gold bull market will resume.
Read the full report here.
*Charlie Morris is a founder and the chief investment officer of ByteTree Asset Management and a specialist in digital assets. He developed a gold valuation model in 2013, which has been published by the World Gold Council and the London Bullion Metals Association (LBMA). Prior to his 23-year career in fund management, Charlie was an officer in the Grenadier Guards of the British Army.