Gold drifts marginally lower as the Fed shifts to quantitative tightening
Goldman says ‘there is no alternative’ to tangible assets for hedging macro risks and inflation

(USAGOLD – June 1, 2022) – Gold drifted marginally lower in early trading as the Fed officially launched its quantitative tightening program, and the markets processed the after-effects of yesterday’s Biden-Powell conclave at the White House. It is down $6 at $1833. Silver is up 9¢ at $21.69. Whereas Biden posed himself forcefully in press accounts as leading the fight against inflation, nary a word has been heard from the Fed chairman. The latter has said that there is not much the Fed can do about an inflation rate driven by tight supplies, shipping bottlenecks, and the like. Janet Yellen chimed in to admit that she got it wrong on inflation some months ago when she said it wouldn’t be a long-term problem. The reaction in financial markets to all of the maneuvering has been muted in the early going – but the day is young.

According to a MarketWatch report this morning, Goldman Sachs Jeffrey Currie sees the developing policy trends as very positive for real assets, going so far as to say “there is no alternative” for hedging macro risks and inflation. “As central bankers can drain liquidity faster than the economy can generate new production capacity, financial assets will continue to underperform physical assets like commodities.… As we have often shown before, commodities are the only consistent hedge for unexpected inflation.… Accordingly, even a small allocation to commodities can have a material impact on a portfolio’s performance during unexpected inflationary episodes.”

SPGSCI (Commodities Index) and Dow Jones Industrial Average performances
(%, year to date)
overlay line chart showing stocks and commodities year to day June 2022
Chart courtesy of TradingView.comn • • • Click to enlarge

Chart note: The Standard & Poors Goldman Sachs Commodities Index (black line) is up 40.5% year to date. The Dow Jones Industrial Average (green line) is down 13.85%.

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