If there's deflation, what happens to gold?

Discussion in 'Economics' started by PlusMinus, Nov 26, 2009.

  1. Seems like gold too would experience significant corrections in a turbulent inflationary period in the U.S. True or false?
  2. the1


    The price of Gold has nothing to do with supply or demand, or deflation or inflation. Rather, it has everything to do with the loss of confidence in the dollar. At approximately $4,000 per ounce Gold becomes a real currency because the high price solves the limited supply issue. The higher it goes above $4,000 the less and less you need of it to conduct a transaction.

    I think China will introduce a reserve currency before Gold becomes a currency, however.
    P H likes this.
  3. to answer the thread titled question. gold would probably rise with deflation because it is economic and exchange medium uncertainty. technically we have deflation now but gold is rising.
  4. Do we really have deflation now?


    In any case, I'm talking about much more severe cases of deflation.
  5. it would go up in value because the fiat medium of exchange is not working properly.
  6. 2008

    Global stockmarket crashed
    Global banks bankrupt
    Commodities crashed
    Housing crashed
    currencies collapsed

    Gold was one of the few assets up year to year.

    Next to chocolate.

    There is your answer.
  7. not all currencies collapsed. USD exploded higher.

    expect a repeat of 2008 in the second leg of the collapse with gold going back to the 700 area.
  8. I understand what you try to say, but those 2 things doesn't make any sense in one paragraph.
  9. In the case of a turbulent inflationary period in the US, gold would increase in value relative to the dollar. As dollars became less and less valuable, more of them would be required to purchase goods- including gold, which people would begin to purchase from a desire to preserve their wealth, owing to its traditional role as a currency. This would increase demand, leading to further increases in its price.

    The current price of gold stems from inflationary fears caused by governments printing money.

    To go back to the future, just take a look at a gold chart from the 1970s, the last time there was rampant inflation in America.
  10. Sorry, that should have read *deflationary* period. What you said makes perfect sense and I believe is well agreed on for an inflationary period. But what of massive deflation, which many believe will happen after a debt collapse, and prior to hyperinflation.
    #10     Nov 27, 2009