US Treasury Secretary Janet Yellen has predicted a substantial reduction in US inflation in 2023, barring an unexpected shock.
“I believe by the end of next year, you will see much lower inflation if there’s not … an unanticipated shock,” she told CBS’s 60 Minutes on Sunday.
Asked about the likelihood of a recession, the former Federal Reserve chairwoman said: “There’s a risk of a recession. But … it certainly isn’t, in my view, something that is necessary to bring inflation down.”
Ms Yellen’s comments came days before the Fed is expected to slow the aggressive pace of interest rate increases it has pursued this year.
Fed Chairman Jerome Powell has telegraphed a smaller, half-of-a-percentage point increase in the policy rate, to a range of 4.25 per cent to 4.5 per cent, after four 75-basis point increases this year.
Ms Yellen told CBS that economic growth was slowing substantially, inflation was easing and she remained hopeful that the labour market would remain healthy.
She said she hoped the spike in inflation seen this year would be short lived, and said the US government had learnt “a lot of lessons” about the need to curtail inflation after high prices seen in the 1970s.
Shipping costs have come down and long delivery lags have eased, while petrol prices are “way down”.
“I think we’ll see a substantial reduction in inflation in the year ahead,” she said.
How to invest in gold
Investors can tap into the gold price by purchasing physical jewellery, coins and even gold bars, but these need to be stored safely and possibly insured.
A cheaper and more straightforward way to benefit from gold price growth is to buy an exchange-traded fund (ETF).
Most advisers suggest sticking to “physical” ETFs. These hold actual gold bullion, bars and coins in a vault on investors’ behalf. Others do not hold gold but use derivatives to track the price instead, adding an extra layer of risk. The two biggest physical gold ETFs are SPDR Gold Trust and iShares Gold Trust.
Another way to invest in gold’s success is to buy gold mining stocks, but Mr Gravier says this brings added risks and can be more volatile. “They have a serious downside potential should the price consolidate.”
Mr Kyprianou says gold and gold miners are two different asset classes. “One is a commodity and the other is a company stock, which means they behave differently.”
Mining companies are a business, susceptible to other market forces, such as worker availability, health and safety, strikes, debt levels, and so on. “These have nothing to do with gold at all. It means that some companies will survive, others won’t.”
By contrast, when gold is mined, it just sits in a vault. “It doesn’t even rust, which means it retains its value,” Mr Kyprianou says.
You may already have exposure to gold miners in your portfolio, say, through an international ETF or actively managed mutual fund.
You could spread this risk with an actively managed fund that invests in a spread of gold miners, with the best known being BlackRock Gold & General. It is up an incredible 55 per cent over the past year, and 240 per cent over five years. As always, past performance is no guide to the future.
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