I have read an item today being the thoughts of a Contrarian...

I have read an item today being the thoughts of a Contrarian Investor on the prospects for gold going forward. Interesting perspectives worth at least thinking about. See heading and following "Where I see the opportunity."

"As the stock/bond bull market nears the end of its cycle we need to consider where all that money will go once the sell-off begins. Traditionally, stock sell-offs are good for bonds as bonds are seen as a risk-off asset. However, with the two bull markets coinciding that may not necessarily be the case this time around.
I believe inflation and interest rates will ultimately be the catalyst that breaks the back of the bull market. In this article I will outline the reasons for this and summarise where I think the next bull market will be.

The chart below shows short-term US interest rates over the past 100 years. The two “hard landing” areas were the 1930s depression and the post-GFC era. These two periods of 0% interest bookended a period of secular increases in interest rates and inflation and the subsequent reversal.  (I could not copy the chart).
Inflation peaked in the 1980s. It subsequently decreased as global trade opened up and developed economies were able to outsource to countries with cheaper labour. The classic example of this is US-China trade.

The chart below shows the trade deficit between the two countries. It is no coincidence that inflation in the US trended down as is had more and more access to cheaper products out of China.

Where I see the opportunity.

As discussed above, I believe inflation and rising interest rates will ultimately cause the long overdue reversal in the stock market. The money coming out of the stock market needs to go somewhere. Given the bond market has had a coinciding bull market I cannot see flows into bonds occurring. Especially given that I believe a stock market correction will coincide with inflation. Inflation will cause interest rates to go up which is bearish for bonds.

I don’t believe the masses will simply hold US dollars. Especially given all the mandated funds that won’t be allowed to. Regardless, I believe holding cash will see an erosion of purchasing power. This is because in inflationary environments interest rates often lag inflation which results in a negative real return.

I believe the time will be right for gold. Gold is seen as a safe haven asset in times of trouble. That ticks the first box. The second major benefit is that gold protects against inflation. So if interest rates are actually providing negative real returns then gold will outperform.

The current situation looks rather interesting for contrarian investors. Net positions in the financial markets indicate that money managers are short gold and long the US dollar. This is directly inverse to the thesis I laid out earlier. A good place for a contrarian to be.

The more interesting position for money managers is that they are net short 10 year Treasuries. This means they anticipate interest rates will rise (the same as the thesis I outlined). I believe this is in sympathy of a stronger US dollar. Higher yields will make the US dollar more attractive which will likely lead to it strengthening further. I agree that traders have this position right, but I believe it is for the wrong reasons.

My thesis is completely different. I believe interest rates will go up because they will have to due to inflation. It is likely that interest rates will lag inflation which will result in negative real interest rates. This will be bad for the US dollar (and good for gold).
So as a contrarian I am comfortable being on the same side as consensus for this (although I am not actually trading the 10 year Treasury it is useful to gauge market sentiment).
I have been systematically selling off my higher PE growth holdings over the past 6 months so my cash levels are elevated. Holding cash is only a temporary measure given I believe inflation is on the horizion. I will look to re-enter stocks and add to gold positions once the market starts to move. So far I have been early and missed out on some upside in stocks, but I am comfortable that absolute returns in the future will offset this.