VelocityShares Daily Inverse VIX Medium Term ETN (ZIV)

[gldtimer]

Paradox...QE is deflationary, ending it is inflationary.

Since Sept. 2012 with infinite QE announced by the Fed gold and miners have headed in one direction...down, until the announcement in mid-Dec. 2013 that QE will be tapering down.

Gold and miners have put up a nice move since then, so what gives? Why didn't QE produce the hyperinflation everyone expects and why will the absence of QE boost inflation around the world.

It all has to do with the USD and carry trades, as the QE dollars were exchanged...selling USD and driving down the USD while buying emerging market currencies driving them up keeping inflations in both developed and underdeveloped nations roughly equal.

That is changing however as QE winds down, reversing the USD carry trake.

Reversing the flow we have developed countries now with very low inflations as their currenices strengthen but emerging markets with rapidly increasing inflation rates as their curriencies weaken. The emerging markets are the canary and higher prices for their goods will push up the inflation rates eventually for developed countries. Gold prices will first be pushed higher by emerging markets... esp. China and then by developed.