One commenter on today's daily commentary mentioned financialization as a reason we are seeing commodity prices through the roof. This makes a lot of sense since commodities are now an alternative asset class in the financial supermarket for investors and speculators alike. But it is also clear that funds have moved into alternative investments as yields have come down because the opportunity cost of holding these assets has diminished as fixed income assets yield next to nothing.
Gold has done well for just this reason. It is not that gold is an inflation hedge per se but rather it is a hedge against low and negative real rates. When real interest rates are low, the opportunity cost for holding gold is diminished and gold does well. When real yields are high, gold does not do well. Th...
As this site is now reader-supported via Patreon, the remainder of this article is only available to subscribers at a specific patronage level. Articles at patronage levels BRONZE, SILVER, and GOLD are denoted by the categories in blue capital letters above the post. Posts categorized DAILY are available to both SILVER and GOLD patrons.
Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.