Consumer Price Inflation hit its highest levels since June of 1982 last month at 6.8%. Economists expect that inflation will continue to grow. “We expect this to continue until early in 2022 where we expect pricing to reach at or near 7.3% before costs start their long descent back towards 2%,” said Joe Brusuelas, chief economist at RSM, in a note to clients.
Gold’s year has been disappointing, but the latest inflation news is bound to put the wind back in the yellow metal’s sails. In an interview with Kitco News, principal and mining strategist at Hallgarten & Co. Christopher Ecclestone said, “The inflation beast has gotten out, and it’s going to take a lot of effort to get it back into its cage." Ecclestone emphasized, “This will ultimately impact property markets. It’s going to impact companies that are highly leveraged. We are already seeing big property crashes in China that are linked to overextended property developers.”
Ecclestone went on to note that when property prices crash, investors will be looking for another inflation hedge, and this could be good news for gold bugs. “Traditionally, gold has been a hedge against inflation. There is a mistaken view that higher interest rates would impact the price of gold because supposedly people are borrowing money to buy gold which is totally a bogus construct,” Ecclestone said. “Most people are using gold as a savings method.” He went on to express his belief that gold could reach $2000 an ounce shortly, and then steadily climb to $3000 over the next four years. Ecclestone also thinks that silver can hit $30 next year.
How to Beat the Gold Rush
Gold bears have had an easy go of it throughout the year, but the persistence of inflation means that the bulls are about to dominate. Investors can act quickly to get in on gold while the price is still deflated, and there are a number of viable approaches.
Physical gold is always an option, and the Sprott Physical Gold Trust PHYS gives investors direct exposure to the precious metal. PHYS is fully allocated to gold that is safely stored, easy to buy or sell, and redeemable. The Sprott Physical Silver Trust (PSLV ) does the same thing for silver.
Another option is to invest in equities and look at the Sprott mining suite, which features two funds.
The Sprott Gold Miners ETF (SGDM ) offers exposure to gold miners, while the Sprott Junior Gold Miners ETF (SGDJ ) tracks junior gold and silver miners. SGDM will offer investors exposure to some of the biggest mining firms out there. These companies are highly liquid and tend to perform incredibly well when gold is booming. Junior miners, meanwhile, tend to have enormous upside potential as they become acquisition targets for larger firms and are particularly sensitive to the price of gold.
For more news, information, and strategy, visit the Gold & Silver Investing Channel.