Inflation is Expected to do What?! Implications for Gold. / Commodities / Gold & Silver 2023

The markets just assumed a dovish U-turnin interest rates, thinking that the inflation problem is handled. The below chart features the inflation that’s expected inone year.

Yes, you see it correctly.

The market expects the inflation to moveto about 1.31% in one year.

A bit over 1% in one year… Really?!

Here’s the recent CPI (YoY) reading:

Long RoadAhead for Inflation Reduction

So, the CPI declined from above 6% toa bit above 5%, given all those rate hikes…

Not below 2%, not below 3%, not below 4%.And not even below 5%.

If the trend persists, then it would take years for the CPI to move below 2%.And let’s keep in mind that the Fed kept hiking interest rates in order totrigger this trend…

And now, at the same time, the market isexpecting the rates not to be raised significantly and the inflation to somehowmove to 1.31% in a single year. It doesn’t take a PhD in economics to see fromjust those two charts that this is not just impossible. This expectation isplain ridiculous.

To show you the extent of the currentdelusion, I marked a somewhat similar situation from the past.

The last time the market’s expectations regarding inflation declined from over 3% to more or less, those levels were inOctober 2008.

But that was when inflation was just2.5%! It made sense to expect a ~1% decrease in CPI in a year.

But now? The market expects the Fed topush inflation lower several times more and… without many more rate hikes.

Implications andWarning Signs

The war against inflation is far frombeing over, and the market’s dovish expectations and overall bullishness areout of touch with reality.

Oh, and by the way, since the analogy isto October 2008, do you remember what happened to the gold price then?

Here’s a reminder:



That was when gold’s rebound andconsolidation ended and when the biggest part of the slide started.

That was also the time when stocksdeclined, and the USD Index rallied.

Why did stocks rally so high, then?Because the investment public entered the market, and it’s the “return tonormal” stage of the bear market in stocks, while most investors (primarily theinvestment public) assume that it’s the return of the bull market.

The wake-up call will not be pleasant formany – but you have been warned.

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Toolsfor Effective Gold & Silver Investments - SunshineProfits.com

Tools für EffektivesGold- und Silber-Investment - SunshineProfits.DE

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