Gold is at its highest levels ever in nominal dollars, though it’s still lower than in 2012 and 1980 when adjusted for inflation. Ed Harrison told Real Vision’s Daily Briefing today that he thinks the rise can be attributed to negative real interest rates, the strength of other asset prices, and inflation expectations.

Harrison said that when interest rates after inflation are losing investors’ money, they want to hold something that’s a store of value that doesn’t have a liability – and that’s gold. Another reason why gold is bid up is what Harrison called the “buy anything” thesis: all other asset prices are up, like housing, oil, high yield, and stocks, so why not precious metals as well? Finally, inflation expectations – signaled by the drop in the dollar – also help explain why gold is strong.

Harrison discussed the significant weakening in the dollar of late and said that the concept that the dollar is going to be a strong currency is off the table now. Despite the reality that the U.S. economy is underperforming, dollar weakness does suggest something positive: we are no longer in a liquidity crisis.

Harrison also said the weak dollar suggests a reflationary impulse to the economy, but that impulse could eventually come to a halt when the effects of recent policy decisions come into play.

He called the expiry of the enhanced unemployment benefit of an additional $600 per week a policy error and said he thinks this will be very bad for the U.S. economy.

“The way markets are playing out is reflationary in nature. The dollar is low, the liquidity crisis is long gone, and asset prices can rise. But the fly in the ointment is the potential policy error coming forward,” Harrison said.

He expects a significant drop in consumption and thinks the effects will snowball into September and October.

“We’re in a dicey period now and no one knows what will happen in another month and a half,” he said.