Inflation is already here, but prices could rise significantly higher in the next several years, creating a gold-buying panic, according to Rozencwajg Associates managing partner Leigh Goehring.
“We already have 5% inflation. And it’s safe to say this 5% inflation will stick for the next six to 12 months. And then we could have a black swan event, and prices go significantly higher. Just like what happened back in the 1970s,” Goehring told Kitco News.
Governments around the world can’t continue to print massive amounts of money with no consequences. And these harmful negative effects will start to come into view as soon as next year, Goehring pointed out.
One very important element that is currently missing from the risk of rising prices is inflationary psychology.
“In the 1970s, you had both inflation and severe inflationary psychology. What really tipped off that inflationary psychology was the 1973 Arab oil embargo, which saw oil prices surge,” Goehring noted.
Right now, there is just inflation but no inflation psychology. However, this could change in 2022.
“There’s likely going to be some event that will trigger inflationary psychology. Is it going to be a spike in oil prices to $200? Is it going to be a weather event that sends global grain prices soaring? Is it going to be a currency crisis?”
Either way, inflation is going to be one of the major problems of this new decade. “All the notions that years of money creation is not harmful will be disabused as we progress through this coming decade,” Goehring warned.
Higher oil prices could be one of the black swan events that trigger that inflationary psychology. “There have been several monumental events that have happened in the global oil industry that are going to have unintended consequences,” Goehring pointed out.
The two big things to watch for in the oil space are the OPEC members getting more pricing power while the non-OPEC oil supply continues to slow.
“The biggest competitor to OPEC oil is non-OPEC oil. And when the supply of non-OPEC oil slows, OPEC gains market share and pricing power,” Goehring said. “At the same time, non-OPEC oil supply has stopped growing. And now, with demand recovering, OPEC is going to get pricing power. Iran, for example, could very well lead the charge for OPEC to significantly exploit their newfound pricing power.”