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Jeffrey Nichols - Senior Economic Advisor For Rosland Capital - Explains How Accelerating Global Inflation Spells Higher Gold Prices Ahead

Published 5/10/2011

NEW YORK (May 10, 2011) — Jeffrey Nichols, Senior Economic Advisor to Rosland Capital (www.roslandcapital.com), had the following commentary based on recent market activity:

Accelerating global inflation is, to be sure, a monetary phenomenon, the result of unprecedented monetary creation by America's central bank, the Federal Reserve, and most central banks around the world. Simply put, we have had too much money chasing too few goods and services. But there's more to the story than just too much money. Commodity prices are rising because millions, if not trillions, of people living in China, India and other emerging economy nations are enjoying unprecedented growth in national wealth and personal incomes.

Even if economic growth decelerates somewhat this year and next in these populous nations, as some economists now anticipate, they will nevertheless continue to pursue commodity-intensive infrastructure development (think steel, copper, aluminum, cement, etc.).

And, similarly, slower growth or not, millions of households in these countries will have the means to buy more commodity-intensive consumer goods than ever before.

As a result, rising food and agriculture prices are under pressure from a healthy rise in personal consumption in these nations. People with a few more yuan or rupees in their pockets are now eating better and eating more grain-intensive “meaty” western-style diets.

So, high and rising global food prices are, in part, a monetary phenomenon... and, in part, they are demand driven as millions of consumers eat better — but, in recent years, there is still more to the rise in food prices.

Agricultural inflation is also a consequence of weather-related problems in some of the planet's most important grain-, corn-, and rice-producing regions: Too much rain, or too little, combined with record heat waves in some places, has taken a big bite out of food production. Now, dryness and weather-related planting delays are threatening poor harvests again in the 2011-2012 crop year.

Many climatologists claim agricultural supply problems, as we have seen repeatedly in recent years, are a symptom of global warming — and are likely to continue, if not worsen, in the future. High food prices also have had a profound indirect effect on world inflation: Indeed, the high cost of food has been politically destabilizing in some of the countries where food accounts for a big share of household budgets. Remember, earlier this year, high food prices were credited with triggering rioting, unrest, and revolution — first in Tunisia, then in Egypt.

In turn, conflict and political uncertainty has affected world oil markets — and, as we all know, pushed the price of oil (and other energy products) much higher with immediate consequences for inflation everywhere.

Many oil analysts had been warning that oil prices would be heading much higher even before the outbreak of political unrest and revolution in North Africa and the Mideast, due to the growth in demand for oil from both the emerging economies, namely China and India again, and from some of the oil-producing nations themselves.

So, it looks like households around the world — in the United States, Europe, India, China, Latin America and Africa — will have to endure rising prices for food, energy, and other commodities for a host of complicated reasons beginning with, but not limited to, excessive monetary growth from one country to the next. Whatever its cause, accelerating global inflation spells higher gold prices ahead.

To arrange an interview with Jeffrey Nichols, please contact Carrie Simons of Triple 7 Public Relations, LLC at (615) 254-9389 or carrie@triple7pr.com.

About Rosland Capital
Rosland Capital LLC is a leading precious metal asset firm based in Santa Monica, California that buys, sells, and trades all the popular forms of gold, silver, platinum, palladium and other precious metals. Founded in 2008, Rosland Capital strives to educate the public on the benefits of investing in gold bullion, numismatic gold coins, silver, platinum, palladium, and other precious metals. For more information please visit www.roslandcapital.com.

About Jeffrey Nichols
Jeffrey Nichols, Managing Director of American Precious Metals Advisors and Senior Economic Advisor to Rosland Capital, has been a leading precious metals economist for over 25 years. His clients have included central banks, mining companies, national mints, investment funds, trading firms, jewelry manufacturers and others with an interest in precious metals markets.