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Is Inflation Transitory and The Impact on Gold

Sean Brazney & Jeffery Christian
September 27, 2021
Video Transcript

Sean Brazney: Getting into inflation, I know sometimes this could be a topic that kind of just goes over people’s heads, they just kind of turn the other way, but when it comes to inflation, I’m feeling it. I got an oil change recently. I think it was 13% higher and that was with a coupon. My gas tank is 33% higher to fill-up now. Inflation is… it’s starting to feel it. I know a lot of other people are starting to feel it. One of the big questions that comes up is they’re feeling inflation, they’re seeing some inflationary indicators come into line, with this inflation flashing in front of us, why are we not seeing gold going a lot higher?

Jeffrey Christian: Yeah, a lot of things… are a lot more expensive right now. We at CPM Group have been in line with the Feds thinking that a lot of the inflationary pressures we’re seeing are transitory, some of them are also numerical. So, if you look at the August CPI Data, the most recent data that’s available, headline inflation was up 5.3% year-over-year and the core inflation, excluding energy, was up 4%. That’s pretty high, it’s like double what we’ve seen or more than double of what we’ve been seeing for much of the last 10-20 years. So, it looks bad, but if you look at August relative to July there was a lot of indication that these are in fact transitory issues and also mathematic issues and I’ll get to the math in a second. But on a transitory basis, if you look on the August relative to July CPI, the components of the Consumer Price Index, the only thing that was up more than 2% was petroleum-based energy. Everything else was up less than 2%, that’s radically lower than we’ve seen over the last several months, really May, June, July had much higher figures. If you look at used car sales, which is one of the outliers over that last several months, that was up 40-45% per month, month-to-month for the last several months. It was actually down 1.5% in August. So, some of that inflationary pressure is off. The other big factor that was… has been very strong in the previous three months was petroleum-based energy and yes, it’s up 2%, but it had been rising at like a 40% rate in June and July. So, you’re seeing some of those inflationary pressures dissipate, that helps reinforce the idea that a lot of it is transitory. The other aspect is math and I think that’s very important to pay attention to when you start thinking about where gold and silver prices will be and demand will be in 2022. Right now, we’re measuring on a year-over-year basis, we’re measuring August 2021 to August 2020, and August 2020 was the height of the lockdown and the height of the pandemic. You had 2,000 people dying a day, as you do now. It was a very bad time. So, people were not buying anything. So, you’re looking at inflation year-over-year and it’s problematic. Go forward and next year they’re going to be measuring inflation year-over-year from 2021, when prices are high and there are shortages pushing prices higher, to 2022, when we’ll be a year further… we will probably be a year further into the economic expansion. So, what you’re going to see in 2022, are much lower CPI and PPI numbers, because you’re measuring it year-over-year from a high period in 2021 to what probably will be a lower period of upward price pressures in 2022.

Sean Brazney: We talked about a little bit about modest growth and the GDP, which still keeps that growth story going and you think that will help to build some consolidation in gold. Give people a chance to accumulate again, maybe down here within this $1,700 range?

Jeffrey Christian: I do think so. I think $1,700 is probably at the low end. I mean we’re looking for gold to move sideways. It’s been in a sideways range really since last September and that sideways trades you hear a couple spikes down to $1,680, but it’s really been like $1,760 -$1,780 on the low end, and $1,900 on the high end. We think that range probably persists for the next several quarters as you see economic growth moderate, but positive, inflationary pressures dissipating, Interest rates staying low, and the stock market probably continuing to move sideways slightly higher. It’s shown signs over the last three months of plateauing, but I do think that the stock market doesn’t crash. That’s a really good environment actually for investment demand, because it’s in that kind of environment when the stock markets strong, interest rates are low, things are okay economically, but they’re not great, that’s the kind of environment that causes a lot of investors to say, “The drums have gone silent.” This is a good time to migrate from stocks and bonds into gold and silver. So, I think that you’re going to see investors continuing to accumulate, not because the world is in dire shape, but because the world is in relatively good shape and people are worrying about what comes next—what happens in 2023, then 2024, which will be a U.S. election year? I think everyone is well aware of all of the long-term major issues the world is facing and they’re not going to exhale just because they’re in a brief period of relative economic calm.

Sean Brazney: All ties together for me to look at all of this, you know, spending, government spending, Fed balance sheet, and see how we can double that in just a 2-year period, and if before all of this happened, you thought you needed precious metals in your portfolio for sure looking out into the future. Sure looks like you’ll have a better future if you consider precious metals for that portfolio.

Jeffrey, I really appreciate all your time today. I wanted to add a little bit of an ending to this in regards to our platinum report, another little teaser that you’re going to be bringing out for us. I’ll plug that now today. For investors, on the last video we did, we talked about trying to buy platinum under $1,000, especially if it can get under that $960 level and give you an opportunity. We look to be about $100 bounce off of right around $900. Your advice and opinion has been spot on again and I want to remind our viewers and listeners to still be thinking about that platinum.

Thank you again for your time today, Jeffrey. For our viewers, give Monex a call today, talk to an account representative, and ask for your, Better Future with Precious Metals report.

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