Now, gold seems to be moving. Why did the market take so long to catch up with inflation? You are asking the wrong questions. The current inflation has been priced into the market, and it did so a year ago.
What we see is the hive mind calculating what “Covid Delta” will do.
Now, the market is looking towards 2022. It does not see tightening. Instead, it sees central bank liquidity operations moving off into 2023 and beyond. It sees the inflation picture for 2022 as vital.
The question is: What will the state of play be in 2022?
Covid Delta is only one variant of many, so new mutations will keep coming. It is likely that, just like the common cold and coronavirus, Covid Delta will continue to mutate around vaccines and can’t be snuffed. So the war against Covid will go on. The Covid environment will be here for a long while, and although the situation may change, governments can print money. This is what they do in times of emergency and crisis.
Post-Covid deflation is less likely than ever, but the likelihood of a 50%-100% inflation outcome is also decreasing because the ultimate hole in the finances of countries has gone from potentially finite to currently uncalculable. But it is not impossible because you can look at the gold prices and predict how bad they will go. As the one-year time horizon shrinks, we will track the 12 months that it touches the economy.
It is important to remember, however, that fools do not run modern central banks. What lies ahead is unlikely to be hyperinflation. Instead, it will be just enough to make the most of devaluing debts while keeping nominal GDP within a range of rising debt levels.
Inflation is the actual sport of kings.