Precious Metals Edge Lower: Gold Performs Well in Both Inflation and Deflation

On Wednesday, gold (NYSEARCA:GLD) futures for April delivery declined $17.10 to settle at $1,731.30 per ounce, while silver (NYSEARCA:SLV) futures fell 49 cents to close at $33.70.

The U.S. dollar (NYSE:UUP) climbed higher as the Greek situation still remains uncertain.  Parts of a debt and bailout deal for Greece are supposedly in place, but a deal is still not finalized.  “During the last two years, many promises have been made. When you look at the result there is a big disparity. This creates a lot of mistrust,” said Diego Iscaro, at IHS Global Insight. “The lack of credibility has gone worse because of the lack of progress on all the promises.”

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In afternoon trading, the SPDR Gold Trust (NYSEARCA:GLD) declined .77 percent, while the iShares Silver Trust (NYSEARCA:SLV) fell .85 percent.  Gold miners (NYSEARCA:GDX) such as Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM) edged .40 percent and .25 percent lower.  Silver miners (NYSEARCA:SIL) such as First Majestic (NYSE:AG) and Endeavour Silver (NYSE:EXK) both declined more than 2 percent.

A new report from Credit Suisse (NYSE:CS) and the London Business School shows that gold serves as an excellent inflation hedge.  The report explains that over the past 112 years, “gold is the only asset that does not have its real value reduced by inflation.  It has a potential role in the portfolio of a risk-averse investor concerned about inflation.”  Even in periods of deflation, represented by a contraction greater than 3.5 percent, the real return on gold averaged 12.2 percent.

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To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com