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Will Stagflation Lead To Higher Gold Prices In 2022?

By:
Phil Carr
Published: Jan 19, 2022, 08:39 UTC

There's no denying it: Global inflation is now spiralling out of control with consumer prices surging at their fastest annual pace in 40-years.

Will Stagflation Lead To Higher Gold Prices In 2022?

In this article:

That is starting to raise fears of “Stagflation” – a period of high inflation accompanied by a slowdown in economic growth.

Early signs of Stagflation are beginning to emerge.

On Tuesday, the New Yorker Federal Reserve reported a negative turn in its manufacturing activity for first time in 20 months.

The New York Empire State Manufacturing Index nosedived to -0.7 points in January from a reading of 31.9 in December. The data indicates that growth is beginning to stall after a period of significant expansion.

Stagflation presents a major problem for policymakers at the Fed and around the rest of the world. There are few tools to combat both inflation and a slowdown at the same time. The strongest fix for an economic slump is to lower interest rates, but those have been at near zero for almost two years.

The other option is to raise interest rates as the Fed and other central banks have signalled they may soon do. However, tightens too much too quickly makes the risk of a recession almost unavoidable.

For traders, all of this means one thing: Gold prices this year will be driven by inflation and the risk that policymakers will call the post-COVID recovery wrong.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Phil Carrcontributor

Phil Carr is co-founder and the Head of Trading at The Gold & Silver Club, an international Commodities Trading, Research and Data-Intelligence firm.

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