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Today’s Haven is no Longer Gold

Investors have plenty to be concerned about: Russian-inspired insurrection in Ukraine, Occupy Central protests in Hong Kong, the spread of Ebola from Africa to Europe and the U.S., war in the Middle East. One thing they can leave off the list: inflation.

That’s what falling gold prices show. Turmoil like the kind currently sweeping the world often drives investors to the metal. Instead, the perceived haven today is the U.S., where a strengthening economy and low inflation are increasing demand for dollars and dollar-denominated assets. This refutes critics of the Federal Reserve’s monetary policies who say the central bank’s almost $4 trillion of bond purchases since 2008 will cause runaway inflation.

“Even in the scenario where growth accelerates in the U.S., inflation is really not that much of a threat in the current environment,” said John Bellows, a Pasadena, California-based portfolio manager for Western Asset Management Co., which oversees $471 billion. “We’re seeing a pretty notable and persistent divergence between what’s happening in the U.S. and what’s happening in the rest of the world.”

Bloomberg [1]

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