Our Gold Summit was this week here at Southbank Investment Research, and it’s been brilliant.
And the timing has been perfect, just as the gold price has regained some vigour.
And because halfway through this week, on Wednesday, we saw some big inflation news coming out of the US. The US’ monthly inflation figures (the CPI, Consumer Price Index) were released and were sharply above what had been forecasted by those clever chaps running around on Wall Street.
If only someone had recently gone in-depth on two great historic inflations in a series of book reviews.
Ah wait – that was me! I did that, last week.
You can find part I here.
This matters immensely, because for all the price rises in commodities, school fees and medical costs, the stat that really matters to markets is the headline inflation data released by the government.
It’s odd because inflation can mean many things to many people, but anyway, that’s that.
As they say in football, there’s only one stat that matters: CPI.
ZeroHedge reported immediately, “US Core Consumer Prices Explode Higher At Fastest Pace Since 1981”.
Here are the key stats to back that up: year-on-year (YoY) headline inflation up from 2.6% to 4.2% (expectation 3.6%).
YoY core inflation rose from 1.6% to 3.0% (exp 2.3%). This measure excludes food and energy, on the basis that they fluctuate more wildly and confuse the data.
Month-on-month (MoM) headline inflation (which includes food and energy) came in at 0.9% compared to expectations of 0.3%.
That is the biggest YoY jump since September 2008.
Core CPI was expected to rise by the most this millennia… but in fact, it was even more extreme than that.
The index for all items (less food and energy) rose 3.0% over the past 12 months. This was its largest 12-month increase since January 1996… and the MoM jump of 0.92% is the biggest since 1981.
US bond yields spiked higher instantly, threatening to breach the levels seen a month or two ago which saw real panic in the stock market.
The balance for investors here is deciding whether this is purely caused by the effects of the reopening, and the supply shock from lockdowns leaving everyone short, hence inflation as we reopen and re-start our economies. This is what the Federal Reserve believes – that inflation in 2021 will be “transitory” and subside.
The alternative is that there is sustained inflation coming. Wednesday’s data surprised on the upside.
I’m no super-forecaster, but steady, unchanging low inflation is unlikely. We are going to see some funky readings – and that volatility will spread into financial markets for sure, as we’re already seeing.
So what do we do on Monday?
The above sub-heading is a quote from the book Paper Money, by the pseudonymous Adam Smith.
It refers to the idea that we can talk about data and politics and global trends – but what does an investor do in the morning? Buy this, sell that, what next?
Well I leave the specific recommendations to our senior editors and investment directors. But they’re all talking about one thing right now.
We talk about it a lot here at Southbank Investment Research, and with good reason.
The opportunity for gold investors is equal in proportion to the threat of inflation.
The tax that keeps on taking is fought with gold – the gift that keeps on giving.
But the reason we keep beating this golden drum is because so many investors, private and institutional, do not understand, appreciate, or own it.
That gives us a huge advantage, as I see a decade or more of gold gaining support as a key investment in every portfolio going forwards.
All the best,
Editor, UK Uncensored
PS Inflation isn’t the only thing going on by the way. For crypto, tech, and energy transition opportunities, why not try Exponential Investor, our free sister publication on which I am also a regular contributor.