Friday, July 26th 11:10 AM IST

Stagflation in US economy could be bullish for Gold: Jeff Nichols

# gold  # stagflation  # US unemployment  # oil prices  # inflation  

Jeff Nichols notes that not surprisingly, it was also a decade of skyrocketing gold prices, with the yellow metal rising from $35 an ounce in 1970 to $850 an ounce in January 1980. "It sounds awfully familiar today, with America at war in Iraq and Afghanistan, along with high Federal spending on entitlements, financed largely by the Fed’s aggressive program of quantitative easing

NEW JERSEY (Bullion Street): Stagflationary trends in US economy similar to what was seen in 1970's is now visible in the US economy and this could be bullish for gold, according to Jeff Nichols, precious metals economist and Managing Director of American Precious Metals Advisors.

Stagflation is a situation when the economy experiences stagnation with inflation. US economy now has an unemployment rate stuck at 7.6% while consumers are tightening their belts compared to previous years. The June consumper price index was up 0.5% on higher gasoline, clothging, food, drug prices and medical care costs.

"The 1970s was a decade of stagflation here in the United States and just about everywhere else. The combination of inflationary pressures and sluggish business conditions was the result of financing the Vietnam War and the Great Society via the printing press beginning a few years earlier . . . and then in 1973 the Arab-Israeli “Yom Kippur War” followed by the OPEC oil embargo and the subsequent explosion in global energy prices," Jeff Nichols said.

Jeff Nichols notes that not surprisingly, it was also a decade of skyrocketing gold prices, with the yellow metal rising from $35 an ounce in 1970 to $850 an ounce in January 1980. "It sounds awfully familiar today, with America at war in Iraq and Afghanistan, along with high Federal spending on entitlements, financed largely by the Fed’s aggressive program of quantitative easing."

Middle East tensions could affect Oil supplies and even without a Middle East oil crisis of one sort or another, recent U.S. consumer and producer price data may be early indicators of inflationary pressures in the economy, Jeff Nichols said.

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