“Anxiety over rising inflation has been ever-present in markets this year. But with oil topping $80 a barrel, global food prices a third more expensive than they were a year ago and other commodities at decade highs, investors say a longer-than-expected inflationary surge is coinciding with a slowdown in growth — and making it worse.”
USAGOLD note: The signs of a slowdown are starting to show up in the data. As is the case in this article, the combination of inflation and slowing economic activity invokes a return to the 1970s. “Central banks will be torn between reacting to the ‘stag’ and the ‘flation’,” says economist Mohamed El-Erian, “That’s a world where investors’ confidence in policymakers is shaken, and the backstop they’ve had over the past decade isn’t there any more.” A number of analysts have said that one of the prerequisites for sending gold higher is eroding faith in central banks.