Market insights and analysis

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

1st Quarter | 2022

Market insights and analysis

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

Has inflation peaked?

Last week, gold prices broke above their 50-day and 200-day moving averages. The metal closed the week at $1,804.90 per ounce.

“Allianz SE’s Mohamed El-Erian said the Federal Reserve needs to move fast to regain control of the inflation narrative, denouncing Chairman Jerome Powell’s prior assurance that price increases are short-term,” reports Bloomberg.

El-Erian notes, “The Fed must quickly … regain control of the inflation narrative and regain its own credibility. Otherwise, it will become a driver of higher inflation expectations that feed off themselves.”

Bloomberg adds, “El-Erian said he doesn’t believe that the U.S. has passed peak inflation, and that the pace of consumer price increases will remain near current levels for a few months.”

The reason consumer inflation (CPI), which increased 6.8 % year over year last month (the fastest pace in nearly 40 years), has not yet peaked is that wholesale price inflation (PPI) increased 9.6% over the same period.

This means that companies that put off raising prices on their goods and services (maybe because they believed the Fed’s assessment that inflation would be “transitory”) will now need to offset their losses by raising their prices going forward.

Now may be an opportune time to fortify an investment portfolio against the continuing inflation problem with gold, as prices are starting to break above their recent price consolidation.

Rick Andrews is president of Avant Capital Management.



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