InvestorQ : Will low inflation globally impact the demand for gold?
Archita Jajjoo made post

Will low inflation globally impact the demand for gold?

Answer
user profile image
vidhya Laxmi answered.
1 year ago


With abundant central bank liquidity and weak global demand, the world economy seems to be poised to enter a period of low inflation. A combination of low inflation and near-zero interest rates will mean that debt may not be an attractive proposition any longer. The world is already sitting on $10 trillion worth of negative yield bonds and investors are beginning to look for alpha. Equities are stuck in a high value zone driven by too much liquidity. Central banks are keeping the liquidity taps open and that has sustained equity valuations even at the risk of asset inflation. Low inflation and low interest will mean that that there is little margin of safety in equities. That is where gold comes in. Being a low return investment, it automatically becomes valuable in a low inflation environment. As gold increasingly emerges as an alternate currency, its dependency on the US$ will reduce giving a new formula for pricing gold altogether.