fwiw... I know you are asking Diver but I have a view.
What I am reading is there is actually a fairly large overcapacity for production of goods, so inflation is not due to prices being bid up in a competitive environment. There are disruptions to the transport of goods and also China, up until just now, embarked on a massive hoarding of raw materials.... these are temporary but it does seem speculation about the prospect of inflation has an element of self reinforcement.
The more important variable is real interest rates which are currently effectively negative i.e. it costs to hold cash. This is the fundamental reason inflation is the hot topic... the supply disruptions have accentuated that.
The conversation has moved on to whether the Fed will 'taper' its QE and then later attempt to raise rates. Gold will initially react to the speculation (which could be right or wrong) and then to the reality.... how you trade it will depend entirely on what you anticipate will be the reality.
My opinion is I agree the Fed is trapped... they cannot allow rates to rise but that's what they should do. They can not reverse the asset purchases but that's what they should do.
One of the worst things they are doing is purchasing $40B a month of mortgage backed securities (MBS) which is directly supporting the US housing market (this allows lenders to immediately pass on the risks to the Fed... so poor quality lending is unchecked)... but if the Fed winds this back it risks a decline in real estate value.
Short term I can see the huge deficit spending by government requiring more issuance of debt, the need to price that debt below the true cost of capital and the constraints on the Fed will become greater. The argument we are seeing the debasement of currency seems correct to me in which case there is genuine systemic inflation beyond the Covid related effects.
Bottom line for me is gold will continue in a bull market.
