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Thursday, December 8, 2016

Competetive revaluation

Remember when every central bank was cutting interest rates and while currencies stayed flat against each other, Gold rose? I remember that being labelled as competitive devaluation. 
I think the opposite might happen for some time, at least until real rates fall. 

For real rates to fall, inflation must rise faster than nominal rates.
For inflation to rise, energy costs, which are a very big driver of inflation, must rise.
Hence Gold cannot go up, unless oil rises substantially.

See what I did there?