Market insights and analysis

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

3rd Quarter | 2021

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 retraced to find support at $1,750 per ounce last week. The metal closed the week at $1,751.40 per ounce.

The current burst of inflation is running ahead of producers’ ability to raise prices in response.

Barron’s reports, “Speaking at a Morgan Stanley conference on Monday, 3M CFO Monish Patolawala upped the cost impact on earnings from a range of 50 to 100 basis points to a range of 100 to 150 basis points, citing the rising price of raw materials, labor, and logistics. ‘[Despite] taking price up, getting the positive, we are seeing inflation outstrip price,’ Patolawala said.”

This is the danger of “runaway inflation.” Once it gets out ahead, it is very hard for companies to catch up and maintain profits if it continues at a rapid pace.

Where will things end up if and when inflation does slow down enough for companies to stay ahead? The current inflation rate of 5.2% is way above the Federal Reserve’s target of 2% annually. Inflation rates of less than 1% will be needed over the next few years to bring the net average near the Fed’s target. That’s not likely to happen.

Now may be a good time for investors to consider fortifying their investment portfolios with gold as a hedge against inflation’s run.

Rick Andrews is president of Avant Capital Management.



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