Inflation isn’t transitory – but what does that mean for markets?

MoneyWeek/John Stepek

Repost from 10-20-2021

“As John Authers puts it on Bloomberg, ‘there’s no longer any sensible way to dismiss this inflation episode as merely transitory.’ Even if you get rid of ‘volatile’ stuff like energy, food, housing and used vehicles (yes, I imagine you too may be wondering by this point what’s left), inflation is still above 3%, which is its highest level in 28 years, says Authers.”

USAGOLD note: Stepek offers a comprehensive overview of the inflation situation and what it might portend that makes its way eventually to endorsing gold as a hedge. “[T]he reason that gold tends to do well in inflationary times,” he says, “is not because of inflation as such, it’s because when inflation goes up, ‘real’ interest rates (that is, interest rates adjusted for inflation) go down. Gold historically does well when real interest rates are falling.”

overlay line chart showing the real rate of return and the gold price 2017 to present
Chart courtesy of Merk Investments • • • Click to enlarge

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