by Jim Rickards, Daily Reckoning.com:
Investors have long understood that gold is an excellent hedge against inflation. The analysis is straightforward.
Inflation is caused, in part, by excessive money printing. That’s something central banks can do in unlimited amounts. On the other hand, gold is scarce and costly to produce. It emerges in small quantities.
The total growth in global gold supplies is only about 1.5% per year…and has been slowing lately. Compare this to the 400% growth in base money that the US Federal Reserve has engineered since 2008. It’s easy to see how a lot more money chasing a small amount of gold can cause the dollar price of gold to rise over time.
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