Sunday mull.23 May 2021 08:20
The dreaded 'inflation' word is foremost on investors menus just as some parts of the world are coming out of prolonged lockdowns. Yet parts of Asia are seeing increased Covid-19 rates, a 3rd wave of infections (Taiwan, South Korea and Thailand) and a State of Emergency in parts of Japan.
Prices of base commodities are rising fast, Copper, Iron Ore and soft commodity prices are on a tear up and freight & shipping costs have been climbing for months even while Ports were log jammed. Singapore had over 200 ships moored in the Straits of Malacca not that long ago.
An article I read said the World economy is running short of everything which wont be good for prices. The UK CPI doubled to 1•5% in April and 2•6% in the US. Job vacancies in the UK stand at c.750,000 as many foreign workers returned home pre the pandemic and may not return. Across America c.44% of vacancies cannot be filled. In the UK the Hospitality sector are desperate for staff (my local has had 2 vacancies for bar staff for over 6 months, no takers). Two restaurants in my High St have yet to reopen due to staff shortages. Goodness knows how bad the staffing situation is in the NHS and the massive backlog of operations?
With Govt expenditure rising hugely during 'lockdown' a day of reckoning will be upon us, How are we to pay the huge Helicopter bill? Corporate taxation will rise to c.25% but that's never going to be enough so Sunak will be looking at Nat Ins, Vat and possibly a 'wealth' tax. Growing the economy longterm may be more difficult despite an initial 'back to normal' bounce.
All this should be good for Gold which to date stubbornly lags other commodity gains. So with inflation on the rise, rising rates, increases in taxation, heating, food, shrinkflation & cost of living sooner or later Gold will regain its 'safe haven' status. I'm 'John Holmes' on Gold for better or worse.
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