Gold News

Serious deflation 'unlikely'

The threat of a recession in the US economy will not necessarily impact negatively on the price of gold, it has been suggested.

David Galland and Bud Conrad of Casey Research claim that history dictates the price of gold will not necessarily fall if a recession should occur.

They note that while inflation is good for gold prices, the opposite - that deflation is always bad for the price of gold - is not necessarily true.

Considering the performance of the price of gold through periods of recession since the mid-1950s, the authors concluded: "There isn't a specific historical precedent that demonstrates that the price of gold will fall during a recession."

However, they added that there is a possibility that a general deflation could occur, which could put the gold price in a down cycle.

Meanwhile, commenting on the global economic situation, Frank Holmes of US Global Funds predicted gold could reach the $2,000-mark if current conditions continue.

He told Investor's Business Daily: "Whenever you get lack of neutrality in the market - great concern over deflation or inflation - gold is a wonderful form of financial insurance."


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