Despite trillions of dollars in monetary stimulus unleashed by major central banks in recent years, investors see deflation as a bigger threat than inflation over the next 12-24 months, according to a new survey.
Over 60 percent of the 912 global investors polled in Barclays’ Global Macro Survey view downward price pressures as a greater risk than inflation.
Deflation fears are reflected in investors’ outlook for gold, which is typically used as a hedge against inflation.
Around 25 percent of investors expect gold to fall below $1,200 an ounce by the end of the first quarter of 2014, while another 25 percent or so expect it will trade between $1,200 and $1,250, the survey showed. The yellow metal is currently trading at $1,239.
Mounting deflationary pressures in the euro zone, for example, have become a serious concern, prompting the European Central Bank (ECB) cut its benchmark rate to a record low of 0.25 percent in early November.
Euro zone inflation fell to 0.7 percent on year in October – its lowest since November 2009 – triggering worries that the region is at risk of a Japan-style deflationary rut.