Gold trading may be more profitable during deflationary periods

When an asset such as gold has reached historical highs it becomes a good time to trade, gold trading should be less risky in the long run and more profitable as we are in a period of deflation.

Gold prices have normally been strongly correlated to the inflation rate It has been thought that as inflation climbs and the dollar became weaker that gold would increase in value. However, gold prices have been also known to do well during times of deflation. In fact, the best gold bull cycles have been during deflationary periods.

As the dollar becomes weaker demand for gold goes up, the gold price, denominated in dollars, will rise. This is due to the flight to quality. Inflation eats away at the stock and bond markets because the value of the dollar becomes diluted, that's why the precious metals, theoretically, should do well during these periods. Gold is the flagship precious metal out of all the precious metals. Silver has shown similar cycles, however, gold prices have performed much better with more volatility than silver over recent history.

With that said, it should be known that inflation is not a requirement for increasing gold prices. In general, times of economic hardship and geopolitical instability also favor high performance from the precious metal. In fact, historically, deflationary periods have been  the most favorable for precious metals.