On the flip side, however, quintessential hedges such as gold and hard asset producers have been some of the best performers over the last 2 months. Not only is SPDR Gold (GLD) up more than 10% off of the June lows, but Market Vectors Hard Asset Producers (HAP) is suddenly “happening.”
One thing that may give the Fed greater ammunition to slow its bond purchases is the year-over-year Consumer Price Index (CPI) data. To the surprise of many, it hit the Fed’s target of 2.0%. That higher-than-anticipated data point may be one of the biggest reasons that investors are revisiting miners, metals and hard assets.
Nevertheless, ETFs that one might employ to hedge against inflation have been sending mixed signals about inflation expectations. From my vantage point, there are scores of reasons why gold and other hard assets might be gaining ground, from better economic data in Europe to bottom fishing to Asia’s currency woes. I am not convinced that deflation has been beaten in the United States… at least not until wage stagnation shifts to wage growth.
Gary Gordon is president of Pacific Park Financial, Inc.