Stagflation and Gold

You're calling my name
But I gotta make it clear
I can't say, baby
Where I'll be in a year
--Aerosmith

Stagflation is a period of economic malaise the combines stagnant economic growth with rising prices. The last major period of stagflation in the US occurred in the 1970s. Some will recall those gas lines.

Chatter about pending stagflation is getting louder.

Here is an interesting analysis that considers gold in a prospective stagflationary environment. The basic thesis is that, in a stagflationary environment, gold is one of the last commodities bought. As inflation picks up, businesses and speculators first buy consumable commodities that they need (e.g., oil, ags, base metals). 

However, as business prospects dim (the 'stag' part) and there is still worry about inflation, buyers turn to gold.

What about Bitcoin as an alternative to gold? As proposed in the piece, Bitcoin is likely to benefit more from 'risk on' environments with ample central bank money printing. In 'risk off' situations with tighter monetary policy, then the focus turns to gold.

We've certainly seen Bitcoin bid higher over the past few years of gargantuan central bank money printing. More recently, we've seen 'usable' commodities bid to the moon while gold has languished.

All of this is consistent with the above propositions, and suggests that gold's time is approaching.

This is an interesting thesis--one that I might put to work.

position in gold