Gimme Shelter

Oh, a storm is threatning
My very life today
If I dont get some shelter
Yeah, I'm gonna fade away
--Rolling Stones

From where I sit, the probability of a major deflationary period--perhaps on a worldwide basis--is increasing. If it occurs, then as credit contracts and prices generally fall, a pile of cash should feel pretty good.

But I'm wondering what happens to gold in such a scenario. On one hand, to the extent that the Yellow Dog has been bid up as part of the general speculative credit binge, gold price should decline during deflation as speculators unwind their leveraged trades on the path towards risk aversion. On the other hand, gold could be viewed as the real money that it is and hoarded big time as the ultimate safe haven. In this case, gold price should stabilize and perhaps rise.

I have not seen much data presented on gold's actual performance during broad deflationary events. I'll be digging into this more. Any data you might have would be welcome.

position in gold