A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Jun 03 2014

Gold: A Cyclical Perspective

Almost six years after the Global Financial Crisis triggered unprecedented monetary easing worldwide, inflation fears are petering out, as concerns over “lowflation” and persistent stagnation take hold. As such, the allure of gold as an inflation hedge has dulled, with its price in a downward trend since 2011 and remaining more than 30% below 2011’s high. With recent indications that central banks around the world will remain highly accommodative for some time to come, what are the implications for gold in the context of managing cyclical risk?

ECRI recently completed an in-depth study about the price of gold in conjunction with international inflation cycles, including India and China, who are major consumers. The study reveals that gold has certain cyclical characteristics, making it feasible to examine the risk of directional changes in its price. At the same time, the study also offers critical insights into whether the gold price will fall further from here or soon turn the corner.

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