Small Allocation to Gold as a Hedge Makes Sense: JPMorgan’s Bell

The video discusses the role of gold as a hedge against inflation, highlighting its inverse correlation with US 10-year real treasury yields. It explores how fiscal stimulus, funded by quantitative easing (QE), can drive real yields down, supporting gold. However, if stimulus fails to generate inflation or if the economy improves significantly, real yields may rise, negatively impacting gold. The discussion also covers inflation expectations, noting that while inflation hasn't increased significantly, medium-term risks exist. The video concludes with a look at long-term economic policies and their potential effects on inflation and gold.

What is the historical relationship between US 10-year real treasury yields and gold?

• Direct correlation

• Inverse correlation

• No correlation

• Positive correlation

What could potentially drive real yields further into negative territory?

• Increase in nominal yields

• Fiscal stimulus funded by QE

• Decrease in inflation

• Financial repression

What scenario could lead to a rise in real yields, negatively impacting gold?

• Increase in fiscal stimulus

• Smooth economic reopening

• Decrease in nominal yields

• Deflationary environment

What is the central bank's dream regarding inflation?

• To maintain deflation

• To achieve high inflation immediately

• To lean towards inflation rather than deflation

• To keep inflation unchanged

What is a potential policy response to elevated unemployment levels?

• Decrease in QE

• Increase in interest rates

• Infrastructure programs and fiscal stimulus

• Reduction in government spending