by Ahmed Alsajadi
FX Street
Gold prices have recently surged to multi-year highs, driven not only by geopolitical concerns but increasingly by a deeper macroeconomic theme: stagflation. As inflation remains elevated while economic growth shows signs of stagnation, investors are turning once again to traditional safe-haven assets. But in this environment, is gold truly regaining its status as the ultimate hedge, or is the narrative more nuanced?
Stagflation: The market’s worst case scenario
Stagflation—defined by high inflation and slow or negative economic growth—is a rare but powerful threat to financial markets. In contrast to typical inflationary periods where central banks raise interest rates to cool the economy, stagflation limits their flexibility. Higher rates risk deepening the slowdown, while lower rates could fuel further price increases.