During the final phase of the last gold rally between 2008 and 2011 we heard a lot about any number of bullish catalysts for gold:

  • The long term decline of the US Dollar as the world's reserve currency
  • Insatiable Asian demand for physical gold
  • The specter of hyperinflation resulting from the Federal Reserve's quantitative easing policies
  • Negative real interest rates
  • Central bank accumulation of gold

And the list goes on......

As we sit here today in May 2014 none of these formerly bullish fundamental drivers appears to carry much weight in driving the day-to-day price of gold. When will this change? And what will be the next major fundamental driver in the next leg higher for gold?

While I believe that many of the aforementioned factors will continue to contribute to the long-term gold bull market. There is one scenario which seems more likely, and more bullish, than all of the others.

A steady push higher in the rate of inflation combined with continued interest rate suppression by global central banks could send real interest rates at the short end of the curve into deeply negative territory (more negative than they were during 2011-2012). This would add a double whammy to the dollar via negative real yields and soaring inflation. All of these factors are likely to be very bullish for the gold price.

So I ask you, what is the next bullish fundamental driver for gold?