article recommending godl as hedge to inflatio

The 4 genuine speedhumps

In our view the 4 genuine potential speedbumps on the horizon are; The Oil price, The Australian Dollar, global inflationary pressures, and the Federal Election.

The $83.00 oil price is clearly an issue the markets are currently choosing to ignore. Oil prices are a regressive tax on the consumer. They hit low income earners proportionately harder than high income earners. $80+ oil is clearly a tax on growth.

The reason the markets are currently turning a blind eye to oil prices is because the broking community is being very slow to upgrade its oil price forecasts. The world is using $60 to $65 consensus oil price forecasts, yet the WTI Oil spot price is $83.00 and looks like it wants to head higher. Equity markets, particularly industrial equities (transport), could easily get spooked when the broking community upgrades their currently unrealistic low oil price forecasts and starts putting out "$100 what if?" scenario analysis. Higher oil price forecasts filter through into higher consumer and producer price inflation forecasts, and before you know it the dreaded "I" word will be being considered by the equity market.

The Fed is pumping liquidity and it's also pumping inflationary pressure. Look at the response of both hard and soft commodities to the Fed decision last week. Commodities exploded on the upside, and with China now exporting less and less deflation, the risk of inflation readings surprising on the upside in 6 to 12 months time is increasing by the day. We genuinely think inflation is a sleeper issue and a clear potential speedbump in the medium-term. We recommend investors consider taking out genuine inflation hedges. The most obvious inflation hedge after buying a diary farm is Gold.

The Gold price is trying to tell you two things. 1. As we have written for 5 years the USD is in structural decline, and 2. That inflationary pressures are increasing.

As much as we all enjoy the Australian Dollar buying more USD's (book the trip to Aspen) there is clearly a point where the strong A$ starts affecting export competitiveness and affecting broader profit margins. It also leads to imported inflation. There is every chance the Aussie Dollar is headed into the 90's verus the USD. While commodity equities will rally with the Aussie Dollar, the broader ramifications will be seen by economists and commentators as negative.

While the A$ putting on another 10% versus the USD is not really a big deal, the corporate and consumer world will have to adjust to the higher currency. The 90c+ Aussie Dollar is a potential speedhump on the horizon, but it does give Australian's greater global purchasing power and that is a positive.