Gold’s Inflation Utility

Gold is okay, but not yet unique

There are times when gold is an okay inflation hedge while under-performing the likes of industrial metals, oil/energy, materials, etc. During those times, if you’re doggedly precious metals focused you should consider silver, which, as a hybrid precious metal/industrial commodity, has more pro-cyclical inflation utility than gold.

But as I have argued for much of the last year, if the inflated situation is working toward cyclical progress (as it is currently) then there is a world full of trades and investments out there to choose from, many of which are trouncing gold (which, as I have belabored for the better part of 2 decades now, is not about price but instead, value) in the inflated price casino.

The latest ISM Report on Business shows one negative among the important areas as employment declined. Now, before we get too excited about that gold-positive reading let’s also realize that manufacturing employment is still growing, new orders are briskly increasing, backlogs are up and customer inventories are down. In short, manufacturing continues to boom.

ism report on business

But being inflation-fueled, the economic recovery also has a ‘prices’ problem… and a materials/supplies problem (unless you’re one of the 2 or 3 people out there with a deep desire to own Acetone. There are potential Stagflationary elements to this situation, which would come forward if the economy starts to struggle due to inflation and the economic pressures it is building.

commodities

Gold is a monetary metal (says Captain Obvious) and as such, its utility is more monetary. In some cases, this monetary aspect works against it, as in mid-2020 when the inflationary bull market in equities, commodities, and the inflated/reflated economy were getting off the ground (after gold had provided another of its important utilities, capital preservation during the COVID-induced deflation scare).

tyx

In some cases, gold can keep up a decent pace during inflation, as today with Treasury yields (10yr is currently 1.5%)…

1 2 3
View single page >> |

Subscribe to NFTRH Premium for your 40-55 page weekly report, interim updates and NFTRH+ chart and ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.