Market roundup - Oil price fuelling inflation
12 Oct 2021
Inflation is hurting countries all over the world, but arguably the US most of all. Fuel and energy are core factors, and the S&P, Dow, and Nasdaq were all down yesterday as the West Texas Intermediate - the American benchmark for crude oil - peaked at just over $82 per barrel; the highest price since 2014.
The gold price is still volatile at present, flitting between the mid to high $1,700s per ounce. Continued stimulus from the Federal Reserve, has kept bullion subdued, but experts like J.P Morgan are calling for an end to quantitative easing over fears the Fed has done too much to stimulate demand in the face of a supply deficit with its money-printing exercise during the tail end of this pandemic.
J.P. Morgan's latest "Global Data Watch" report points to a back-and-forth pattern of inflation/deflation where energy and tech take turns dominating the markets. It did state the obvious by saying that "High inflation is a threat to global growth" but the overall point made by the firm was this: growth has been decelerating in the 2nd half of 2021. Price rises, and the increased wages necessary to support the sharply increased living costs, are causing inflation. Whether or not the desire to pursue QE came from a good place or not, ordinary people are bearing the burden of a potentially substantial failing of economic management - even if on paper more money for the people sounds great.
Should the Fed decide to taper this stimulus then there's a good chance of a boost to the gold price, seeing as the stock markets will have reduced access to cheap loans to speculate with. If further turbulence arises from mismanagement of inflation then logically safe haven assets like gold and silver will surely see demand rise as a hedge against risk, if history is anything to go by.