A Daily Reckoner writes in:
Question: How can you continue to expect gold to go to $1,000 an ounce when the world is entering a deflationary meltdown?
Answer: We don’t know what the world is doing… apart from shivering and shaking. It’s got a fever from excessive exposure to liquidity. How this illness will progress we are not sure. All we know is that the epizootic will have to run its course. And we presume it will include spells of hot flushes from inflation as well as cold, damp, teeth-chattering deflation. The inflation is likely to send the price of gold up. The deflation is likely to send it down. But at some point, the fever will break. Many paper assets will probably be dead by then.
As to the value of the dollar, relative to gold, we can’t say. But when you enter one of these periods of grave illness, the goal is to survive. Maybe you will be able to make some money out of the general suffering and cluelessness; maybe you won’t. But gold will probably help you survive, and probably leave you in better shape than most other investors. That is about the most you can hope for, in our opinion. As to the price of gold during and after the ailment – we can’t say.
Markets and Money