Emerging Signs of Inflationary Risks Driving Gold's Rally

In February’s issue, I highlighted that one of the big drivers for gold this year could be the fear of returning inflation in global economies which have been used to low inflation, low-interest-rate period of extended stability. Since then, signs of increasing inflationary pressures have emerged including in April’s reported increase in US non-farm payroll earnings and that the same month’s inflation measure reached 4.2% on an annualized basis.

- William Gray

Supply chain shortages, in microchips, for example, indicate that global supply chains are likely to be stressed as production and consumer spending ramp up with the opening of markets that have got some measure of control on the pandemic; all of which will apply further inflationary pressures to markets. This trend of increasing inflationary pressure is beginning to take a toll on the Dow Jones index and also drive increased yields on US 10-Year Treasury bonds. Joining a list of professionals warning of the arrival of inflation, the Oracle of Omaha, Warren Buffet, issued a warning on the risk of the return of substantial inflation at his annual shareholder's meeting on 1st May 2021.