Doug Eberhardt submits:

Frank Holmes, CEO and chief investment officer at U.S. Global Investors, recently wrote an article “Gold and Deflation.” In this article, Holmes came to the following conclusions;

  1. Interest earned on 90-day Treasury bills below the inflation rate is a signal for governments to try to stop deflation and reflate the economy.
  2. During these periods, governments usually need to increase their deficits by escalating their borrowings to support the economy.
  3. Both of these are occurring or being implemented in the U.S., and thus deficit spending puts downward pressure on the dollar. And when the dollar falls, investors tend to turn to gold.

In reading this article, I really didn’t see any conclusions as to deflation and how it relates to gold except for the fact that the effects of deflation causes more government intervention/printing, and thus inflation...which in turn can be good for gold.


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