Inflation Rates

The gold trade is beginning to recover over concerns about global inflation and political uncertainty in the United States and Europe.

Precious metals have a complicated relationship with inflation. With all factors held constant, inflation is the number one bullish catalyst for precious metals because gold and silver are traditionally used to protect purchasing power. The U.S Federal Reserve makes things a little more complicated through the manipulation of interest rates.

Rate hikes not only send the dollar up, but also increase the yield of America debt. This hurts gold because 10-year Treasuries are an alternative haven asset.



Right now, it is looking like inflation is picking up all around the world, and even U.S rate hikes will not be able to stifle demand for precious metals if things continue on this trajectory. The biggest example is the United Kingdom. But the Eurozone is also experiencing rising inflation.

European central banks seem to be in no hurry to increase interest rates in such a politically sensitive environment. Gold and precious metals have many strong fundament catalysts for upside for the rest of the year.