The increase in the price of gold shows that investors are concerned and anxious, says Lakshman Achuthan, managing director of the Economic Cycle Research Institute.
While gold can remain an indicator of inflation, it may fail to be the best, he told Yahoo Finance TechTicker. The ECRI's Future Inflation Gauge doesn't include gold.
“While [gold] will react to moves inflation, it reacts to a lot of other stuff too ... [and] it gives you so many false signals. It's [also] a sign of anxiety,” Achuthan said.
Too many “tectonic shifts” in the economy worldwide, high unemployment rates and a lack of confidence in corporate and government institutions can push gold prices higher, he said.
“So you pull in and get defensive and I think gold is a key part of that,” Achuthan said.
The risk of deflation increases as more recessions occur, he predicts.
Gold saw a slight pullback on Monday as investors headed for other assets, Dow Jones reported.
"The flight to quality money is coming out of [gold] and going into riskier assets today. I think you're seeing the allure of gold is dampened," said Adam Klopfenstein, senior market strategist with Lind-Waldock, a division of MF Global, in Chicago
Unlike most fund managers, who allocate a small percentage of the portfolios they manage to gold, billionaire commodities magnate and Tigris Financial Group head Thomas Kaplan reportedly has gone all in on gold.
"I've reached a point where I feel the only asset I have confidence in is gold," Kaplan recently told The Wall Street Journal.
Reflecting his conviction that global economic instability could bring rising demand for gold, Kaplan has gone further than perhaps any other major investor, betting the majority of his wealth on gold and other precious metals.
"You've got a perfect storm with no apparent solution," he told the Journal.
"If the world does well, gold will be fine. If the world doesn't do well, gold will also do fine … but a lot of other things could collapse."
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