In March, the US consumer prices jumped 0.6%.
It is the biggest monthly increase in almost 10 years.
The year-over-year gain of 2.6% is the highest since August 2018.
This means inflation is already rising more than expected, and yet the Fed is still sticking to its guns, saying that this inflation spike is temporary and should be tolerated.
So it seems that the Fed has been stuck between two bad choices: letting inflation rise to fuel the economic growth OR fighting inflation and risking to put a lid on the budding economic recovery.
Needless to say that gold has always been viewed as a hedge against inflation and economic turmoil.
As such, gold is a portfolio diversifier that could come in handy if any of those two situations were to happen.
It’ll be interesting to follow this rise in inflation. If in reaction to the US inflation data gold prices start going up, it could mark the beginning of a new bullish momentum for the precious metal.
Photo credit: Tim Evanson