Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

2nd Quarter | 2021

Market insights and analysis

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Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

Inflation warning

Gold broke down last week, testing January’s low at $1,800 per ounce before rallying back to close at $1,800.30 per ounce (see the following chart).

The Biden administration is now pushing a $1.9 trillion COVID relief bill through Congress. Even without these newly printed U.S. dollars flooding into the economy, inflation is already starting to move up. This increase is the result of previous stimulus spending, not a sharp recovery in demand.

According to Bloomberg, “Over the past 12 months core personal consumption expenditure rose 1.5%, higher than the 1.3% expected. Admittedly this is still low, but it’s likely to go up a lot further. The Fed is monetizing much of the government deficit; the monster amount of money that it created is finding its way out of the banking system; there are severe supply constraints in both manufacturing and services; and Asia is on fire. … Rapidly rising inflation will eventually force the Fed to rein in its lax monetary policy.”

With bonds worldwide now at either flat or “negative” interest rate levels, investors may want to consider gold as a hedge against this coming inflation. Gold tends to increase in value as the U.S. dollar and other currencies lose value due to inflation.

Rick Andrews is president of Avant Capital Management.



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