Yet, in periods when both budget deficits and monetary aggregates have rapidly grown, gold has historically outperformed—and it is doing so now. At such times, gold also adds diversification benefits to portfolios.
Over the past few years, we have argued in numerous pieces that gold has started a bull run. And once they start, gold bull markets tend to run until either the US dollar strengthens meaningfully, and/or the Federal Reserve tightens monetary policy. Right now, neither of these two outcomes is likely. Hence, the gold bull market looks set to continue.
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The Dollar declined in a meaningful manner as soon as combined monetary and fiscal stimulus kicked off in March. It staged a modest rebound in September when doubt arose about the persistence of the fiscal portion of that program.