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Financial Times/Tommy Stubbington/8-24-2020
“Investors are worried about deflation. That might sound odd, given that the opposite fear — of rising consumer prices — has grabbed attention and fired up assets such as gold.”
USAGOLD note: “Deflation and inflation,” says FT, “are both on fund managers’ worry lists.” In both instances, the net effect is to erode the safety of assets via the presence of counter-party risk. Inflation undermines yields and the ultimate purchasing power of assets. Deflation undermines financial system stability and a counter-party’s ability to pay. Because gold is an asset that does not rely on a counterparty for value, it protects against either malady – inflation or deflation, and all the hybrids in between. That, in the end – and not the myriad of other reasons cited in the mainstream media – is the reason why so many fund managers are turning to gold under the current circumstances.