NIRP, Deflation, and Gold

I'll move myself and my family aside
If we happen to be left half alive
--The Who

Gold appears to have bottomed alongside recent central bank actions. The December FOMC rate hike corresponded to THE recent bottom in gold prices. Then gold took off like a scalded (yellow) dog after the BOJ announcement of NIRP.

What is particularly interesting here is that these central bank actions are inherently deflationary. What? "I get how raising rates is deflationary," you say. "But how is NIRP deflationary? Isn't the idea to push people out of cash and into spending?"

Perhaps, Grasshopper, but NIRP should cause less funds to be deposited with financial institutions. With less funds on deposit, there is less opportunity for banks to pyramid credit which is the essence of inflation classically defined.

While common wisdom is that gold is a hedge against inflation, it is better viewed as a bet against disorder. NIRP may be the ultimate monetary disorder--one with decidedly deflationary character.

Gold is a way to keep assets out of the system and side step disorder.

position in gold