Inflation with a twist is the major reason why gold has risen by 12.6% in three trading days, reaching almost $1900. The addition of a twist exaggerates current inflation and speeds up the timetable for achieving it. Inflation has been steadily increasing for months, long before Russia launched its military operation in Ukraine. This year, inflation has been considerably higher than those seen throughout the previous 40 years.
The facts speak for themselves; inflation was anywhere from 1.5% to 2.3% in 2019. In 2020, it fluctuated between 2.5% and 1%. However, 2021 was the start of a chain reaction in which there were several inflationary spikes throughout the year. While the avg. inflation rate in 2021 was 4.7 percent, it included five months when prices rose faster than 5% and two months when they increased by more than 6%. This year, we only have two months to worry about high inflation pressures, but they are especially and surprisingly significant.The CPI for January was 7.5 percent year over year. The inflation index for February set previous highs for the last 40 years, coming in at 7.9%. The government’s report on March inflation numbers will not be published or released until April 12.
The Twist – how Ukraine’s invasion by Russia has affected European Union imports
Analysts, including myself, have written extensively on the sources of inflationary pressures and what distinguishes inflation based on black swan events such as a pandemic for the first time since we have seen inflation rise steadily higher there is a new additional force that might speed up the rate at which price pressures are increasing. I’m referring to Russia’s invasion of Ukraine as an added source of inflationary pressure.
Grain is still the most valuable food export in the world. Russia exported $388.4 billion in grains during the first ten months of 2021, which was a 42.8% year-over-year increase. China, Germany, and the Netherlands were the primary recipients. Russia and Ukraine account for 12% of all food calories traded in the world as of March 11, 2022 according to the International Food Policy Research Institute (IFPRI). Ukraine is Europe’s second-largest grain supplier. Barley and wheat are their major exports to the EU. More worrisome, Russia is a world leader in exporting wheat and one of the main exporters of refined petroleum oils, crude oil and coal in the world.
These are the facts as they have emerged up to the present day. However, in Nov. 2021, satellite imaging revealed that Russian troops had begun amassing on Ukraine’s board. Russia denied any intention of invading Ukraine and most political and military analysts predicted that Russia would be unlikely to start a full-scale war. It all changed one month ago, when Russia formally invaded Ukraine. This produced a new black swan event that will have an enormous influence on the price of goods and services worldwide, pushing current inflation rates far higher.
Aside from the geopolitical tensions that this war has exacerbated, the reduction in necessary commodities and services exports by Ukraine and Russia will make the last supply chain obstacle seem like a cake walk. The consequences are serious, and there are no answers as long as Russia invades Ukraine and the conflict escalates. As a result, gold has started to move dynamically higher, reacting strongly. In August 2020, gold traded at $1,300 an ounce. I’m one of many experts who believe that gold will break its all-time high again. In yesterday’s post, I provided figures for where I think gold could go based on technical analysis.
Despite this, the studies are based on extremely solid fundamental occurrences that will almost certainly have an impact on inflation, but most likely may lead to epic heights not seen since the inflation rate of 23.70 percent in June 1920. When prices rose to 14.6 percent during March and April 1980, it was the year 1980 that journalists and analysts compared present inflation levels to. We could easily reach and exceed inflation at 15% if left unchecked, with inflation presently at 7.9%, which is a 40-year high based on the underlying pressures pushing up prices.
As of 6:30 p.m. EDT, gold futures that are based on the April contract are currently sitting at $1958.60, while the basis for the June contract is presently set at $1963.90.
Gold should continue to rise in value as long as inflation rises. That is why we concentrated on the current inflation level, and that all things considered because the war rages on and Ukraine remains a near impossibility that we will see a decline in inflationary pressures worldwide, it is practically impossible that gold won’t trade to all-time highs.