NEW YORK: The specter of inflation and a bear market in equities is a powerful formula to rekindle investor interest in gold, which looks to be staging a catch-up rally after lagging other commodities in 2008.
Bullion, which has often moved in lock-step with oil because of the metal's appeal as a hedge against inflation, has in the last several months parted ways with the energy and grain markets, which have soared to record highs.
Yet, in the wake of US Federal Reserve's decision this week not to raise interest rates but its warning that inflation is a growing threat, a sudden resurgence in gold appears to have revived its positive correlation with oil. That should mean gold benefits as resurging inflation continues to wreak havoc for the stock markets, erode the value of the dollar and drive equity investors to seek returns elsewhere.
Bullion, which has often moved in lock-step with oil because of the metal's appeal as a hedge against inflation, has in the last several months parted ways with the energy and grain markets, which have soared to record highs.
Yet, in the wake of US Federal Reserve's decision this week not to raise interest rates but its warning that inflation is a growing threat, a sudden resurgence in gold appears to have revived its positive correlation with oil. That should mean gold benefits as resurging inflation continues to wreak havoc for the stock markets, erode the value of the dollar and drive equity investors to seek returns elsewhere.
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