Gold has been going up on during what is otherwise a deflationary environment.
With fewer funds to spend, the world seems to upping it’s spending on gold,
with prices and production at or near the highs.

And (who would have thought) a laundry list of
Central Banks have been large buyers,
including the Bank of Greece, of all things.

When Central Banks buy gold,
they pay for it with what I call ‘off balance sheet deficit spending’
They spend by crediting the gold seller’s account,
which is the creation of new balances of their currency.
And they hold the gold as an ‘asset’ on their books as well.
Note that when the Treasury does this it’s called deficit spending,
and what they buy generally is not called an asset.
But functionally it’s all the same thing.

Though Central Banks don’t care much about price or budgets when they do this.

This central bank gold buying does add to aggregate demand, and not that the world isn’t starved for aggregate demand,
but this case it’s working to employ people mining and processing and delivering gold,
along with all the real resources employed to move that gold from one hole in the ground (the gold mine) to another hole in the ground (the central bank’s vault).

Whatever.

My point is the rising gold price is not a sign of a general underlying inflation,
just the tailings of a peculiar set of govt policies and biases.
And also included are our pension funds buying gold with their ‘passive commodity stategies’ I’ve previously discussed.

And it could just as easily reverse should said buying moderate,
and allow gold to fall back to it’s marginal cost of production as it did in 1980.

Or they could all keep buying, and drive up the price to whatever they want to pay.