How do you reconcile golds rising price with the TIPS markets low demand for inflation?
Zigler: We’ve established a disconnect between inflation and the price of gold in past HAI articles (last year’s Desktop series culminating with “A Picture’s Worth A Thousand Words,” for example). Gold’s not a perfect inflation hedge. Since much of the world’s economic health is keyed to oil prices, crude may be a better inflation hedge than gold. Oil isn’t money, however. Gold is. When the stuff hits the fan monetarily, people turn to gold as a safe haven. Monetary inflation – not to be confused with the price inflation measured by the Consumer Price Index – downtrended in 2008 along with gold’s price. TIPS yields are keyed off CPI, which didn’t start disinflating until much later in the year. Keep in mind that CPI is a monthly lagging indicator. Gold, and the sentiments about monetary inflation reflected in its price, is repriced daily. Our monthly Breakfast Index columns track the pass-through of wholesale price inflation to the consumer level. Take our last look, for example, “It’s
