There is some discussion in the blogosphere that this spike in gold reflects increased inflation expectations (possibly due to higher potential for Fed's QE3). That may be true, but that assumption is completely inconsistent with inflation expectations implied by TIPS. The 2x2 breakeven (2-year forward) inflation expectation came down hard today, dropping below 1%. This is an extraordinary correction from the peak - 1.36% drop in 80 days.
|2x2 breakeven inflation expectation|
The only explanation for the spike in gold is therefore "flight to quality", as other "safe assets" such as bunds trade near zero yields or even negative.