Inflation Data Points to Gains in Gold
A commentary on recent events by National Gold Group’s Michael Carr – December 5, 2012
Inflation is low according to official government statistics in the world’s major economies. The Organization for Economic Cooperation and Development (OECD) recently released data that shows consumer prices around the world increased only 2.3 percent in the twelve months that ended with October. This was up only slightly from the 2.2 percent increase reported in September.
Inflation among the 34 countries that make up the OECD ranged from a high of 7.8 percent in Turkey to a deflationary drop of 0.4 percent for prices in Japan. Inflation was reported in 32 of the 34 countries that belong to the OECD.
Energy prices were a concern highlighted in the report, gaining 5.4 percent over the past year. Since consumers in all countries need to pay for energy, the price level of this commodity is widely followed. Investors should also follow energy prices, in particular oil. In the past, oil and gold prices have shown similar trends.
Official inflation measures are useful for economists but say little about the expenses an average family faces. Energy price hikes have a large impact on spending because in any developed economy the costs are unavoidable. Rising oil prices lead to higher prices for gasoline and anything that is transported, including food which is another large expense for a typical family in any country. These gains may not be fully reported in inflation gauges because economists make assumptions about consumer behavior to measure what they believe inflation means.
Inflation really means higher prices and in the past gold has offered protection against lost buying power. With inflation low but accelerating, gold should gain even more in the future.
The above commentary is for informational purposes only and is not a solicitation by National Gold Group or Michael Carr. It is the commentator’s opinion only and not intended for investment recommendations, and does not necessarily reflect the views of National Gold Group. Any references to outside sources are believed accurate. Past performance is not a guarantee of future results. All commodities involve risk. Investors should consult their financial advisor before making any investment decisions.