AndrewF

The Bedrock Case for the Return of the Gold Bull

Regarding "If deflation catches the world in a vice grip, gold will skyrocket relative to fiat alternatives as all paper currencies get debased." But if widespread deflation (which is the destruction of money or credit) dominates, and given that the central bankers will then be "pushing on a string", how can paper currencies then get debased?

With spiralling deflation, cash grows in purchasing power, so the real interest rate (interest rate minus inflation rate) becomes positive again, and gold tends to go up when the real interest rate is negative. Doesnt this mean gold will go down if a deflationary spiral takes hold?

This is what confuses me. My perception right now is that a deepening global depression / recession could present a fine line between circumstances that are bullish for gold and those that are bearish for gold, depending on who wins, the central bankers printing money and private banks sucking it out of the system...