Could Gold Be a Good Inflation Hedge?
The fall in crude oil
Gold futures for January expiration were 0.37% lower for the day and closed at $1,275.50 per ounce. Silver futures for February expiration were 0.1% lower and ended at $16.30 per ounce. Platinum and palladium fell 1.6% and 2.1%, respectively, that same day, ending at $926 and $996.20 per ounce, respectively.
The recent decline in oil prices could also mean subdued price pressure. Oil is a major component of the inflation calculation, and as we know, subdued inflation numbers have been a concern for quite some time. Gold is often used as a hedge against inflation. Lower sticky inflation figures are also negative for gold and other such haven precious metals.
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The above chart prices gold against inflation, which is calculated using the difference between the ten-year US government bond yield and TIPS (Treasury Inflation-Protected Securities). Precious metal prices mainly take cues from US inflation numbers rather than other countries’ data.
Another crucial element that has played on precious metal price changes is the Fed’s decision to raise interest rates. If the tax bill passes Congress, it could lead to added optimism, which could make a rate hike rather easy. This, again, is negative for precious metals.
Famous gold and silver funds, the iShares Silver Trust (SLV) and the SPDR Gold Shares (GLD), fell 0.24% and 0.34%, respectively, on Monday, December 4, 2017. Top miners Agnico-Eagle Mines (AEM), Barrick Gold (ABX), Silver Wheaton (SLW), and Franco-Nevada (FNV) fell 1.2%, 1.1%, 0.1%, and 2.5%, respectively, on Monday.