Where Are Inflation and Gold Heading Next?

Under the Biden Administration, with Janet Yellen at the Treasury, record-high deficit spending has been a key driver for our gold allocation to hit all-time highs. But will cutting the deficit keep gold bullish?

No. 
Gold thrives on uncertainty, inflation fears, and negative real interest rates—not fiscal discipline. With inflation re-accelerating, gold’s appeal remains strong.

Stagflation also brought winners in the equity market last week:

- Utilities (XLU): +2.8%, with a 3-month trend of +8.3%.

- Energy (XLE): +2.7%, with a 3-month trend of +9.2%.

These sectors have proven to be reliable hedges in inflationary, slow-growth environments.

On inflation, many ask if Trump’s proposed tariffs will make things worse. That’s not the real question. The real focus is: When will inflation come down? 

The data says not anytime soon.

- After peaking at +9.1% in Q2 2022, inflation slowed to +2.44% in September 2024.

- But it’s now re-accelerating: +2.60% in October, +2.83% projected for November, and heading toward +3.14% by Q2 2025.

This persistence challenges the Fed’s narrative that inflation is easing. Even though Federal Reserve officials like Neel Kashkari suggest rate cuts are on the table, climbing inflation makes that unlikely.

For now, the winners are clear: gold and stagflation-friendly sectors like Utilities and Energy. If your portfolio isn’t positioned for re-accelerating inflation, it’s time to adapt.