What inflation level should investors expect by year-end?

The Reserve Bank of Australia (RBA’s) predicted inflation rate to 7% by year-end may be wishful thinking, according to Rush Gold’s director, Mark Pey, who explains why the gold is “the last man standing” in the face of rising interest rates, inflation and slowing economic growth.

Pey said that why inflation in Australia could be “much higher” than the RBA’s current predictions, given that it had already reached 11% in the UK and was sitting at a massive 20% (annualised) in some of the Baltic countries, gold was up 5% at the end of the June quarter against markets’ downfalls and 11% up on a year-on-year basis.

“Gold bullion has the advantage in volatile times of not only being a hedge but also a currency,” Pey said.

“These rises playing out globally reinstate Rush Gold’s opinion that investing is always a forward-looking exercise and gold fits the criteria of a top performing inflation hedge.”

Pey pointed to the fact that traditionally gold performed well in times of a crisis and although the traditional asset class in volatile and/or bear markets had been bonds, especially government bonds, the 30-year bull market in bonds ended as central banks globally pushed up interest rates to curb inflation.

“It means bonds are currently destroying capital, not protecting it,” he noted.

“With inflation at 7% and maybe much higher, cash and terms deposits are no answer either. Although rates are rising, the return on capital is still well below the rate of inflation.”