Loading ...BlackRock: Inflation Is Surging, So Buy Some Gold
January 26, 2017 6:44am NYSE:GLD
From BlackRock: Russ Koesterich discusses the signs that inflation is rising faster than many expect, and what that means for your portfolio
Like the proverbial frog that does not notice the rise in water temperature until it’s too late, investors seem to be experiencing a similarly stealthy rise in inflation. Changes in headline inflation measures suggest a gentle firming in prices. However, underneath the surface there is evidence that inflation may continue to rise past the steady 2% nirvana that central banks prefer. Consider the following:
Housing costs are now rising at the fastest pace in nearly a decade.
Housing is a major component of core inflation, i.e. inflation without volatile food and energy prices. The main housing component in the Consumer Price Index (CPI) is Owners’ Equivalents Rent (OER). As overall housing costs make up over 40% of core inflation, this is a key metric to watch. Last December OER rose over 3.5% from the previous year, the quickest pace in nearly 10 years (see the accompanying chart).