I am curious if you view this scenario (rising inflation, real rates going above zero) as bullish for Gold. If not, why? (ignoring the looming deflation question)
The deflation question is tough. I think we would have a real deflationary environment right now were it not for the excess liquidity and low real FED Fund rates. Assuming that we can still get that deflationary environment (a very real assumption if oil ever backed off) what would policy makers do to combat it?
It would seem to me that the US has one important weapon that Japan - for example - did not have. If the US re-instated trade tariffs, it would likely eliminate deflation instantly. Not that this would be good for the economy, but inflation is much easier to deal with than deflation.
How much probability do you assign to a deflationary scenario in, say, the next 12-24 months. I would guess very low, myself.
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