Conventional wisdom says that gold prices are a reliable indicator of the prevailing inflation winds. At best, that’s only a half-truth. The relationship between the precious metal and inflation is a two-way street. Yes, gold tends to rise when inflation’s trending higher. The linkage inspires the belief that the commodity’s price rises are driven solely by rising inflation. But gold prices can also increase during periods of disinflation and deflation. The lesson is that the crucial factor for gold prices is the real (inflation-adjusted) interest rate, which ebbs and flows over time.