Want more evidence that investors are worried about inflation? Check out the price of gold and the value of the US dollar.
Gold is back above $1,900 an ounce for the first time since early January. Meanwhile, the US Dollar Index has given up all its gains for the year and has fallen nearly 4% from its 2021 peak in late March and is now hovering near a 52-week low.
This is significant because gold tends to spike when investors are nervous about an overheating economy that is leading consumer prices and commodities to spike.
Gold is up because of "concerns that recent inflationary trends may persist beyond the 'transitory' forecasts from the Fed," said John Lynch, chief investment officer with Comerica Wealth Management, in a report Tuesday.
And that's bad news for the dollar, which tends to slide when gold is rallying. Still, there is a bright side to the gold surge and dollar doldrums. This is only happening because the US economy is rebounding from the depths of the Covid-19 recession.
"We are anticipating the highest rates of growth in gross domestic product since the 1980s," said Joseph Brusuelas, chief economist at RSM US, in a report, adding that US Treasury yields are likely to rise too, further pressuring the dollar.
"For these reasons, we expect that the value of the greenback will experience notable volatility with modest downward pressure, causing the dollar to decline in value against major trading currencies," he added.
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May 27, 2021 at 03:19AM
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