Market insights and analysis

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

2nd 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.

Gold prices held the breakout of their 50-day average last week. The metal closed the week at $1,805 per ounce. 

The consumer price index (CPI) reading for July was unchanged from June’s, coming in at 8.5%. This was due to an easing of energy prices.

But high food and energy prices are about to be joined by longer-term rises in labor costs. This can be seen by looking at productivity. The following chart shows U.S. nonfarm business productivity is at its lowest in 17 years. 

Low productivity causes higher inflation rates. This is because a reduction in productivity growth is likely to increase unit labor costs rather than reduce wage increases (at least in the short term). That then puts upward pressure on prices.

Gold remains a hedge for all kinds of inflation, including long-term inflation in labor costs.

Rick Andrews is president of Avant Capital Management.



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