In this week's market report:

• Inflation: Gold could see increases over next 12 months

• Unemployment at 48-year low

• Gold as a hedge against inflation and low real wage growth

Dear Investor,

Spot Gold Price AUD [XAUAUD]

Source: Trading View
(Click to enlarge)

Golds steady decline: Following a stagnant week, gold has fallen 1.92% this week to $2,537.09 AUD an ounce.
 
Silver back in the fight: Following suit, silver has fallen 4.14% this week, its price slumping to $28.10 AUD.
  
Platinum up: Platinum has seen a sharp fall of 5.18% this week to $1,349.50 AUD.
 
Palladium corrects itself: Palladium price has corrected itself after a quick influx over the past month, falling 6.37% this week to $3,103.79 AUD an ounce.

Inflation: Gold could see increase over next 12 months

As inflation continues to increase, the Federal Reserve officials have reached a consensus on incrementally slowing the pace of their interest rate hikes – however, wish to continue to understand the holistic impact of the hikes on the inflation data, and raised interest rates by 75 basis points in that same July FOMC meeting.

As the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation,” according to minutes of the Federal Open Market Committee’s July 26-27 meeting released Wednesday in Washington.
“Many participants remarked that, in view of the constantly changing nature of the economic environment and the existence of long and variable lags in monetary policy’s effect on the economy, there was also a risk that the committee could tighten the stance of policy by more than necessary to restore price stability.

Read on here.

Although the Fed continues to give insight into their movements as they toe the line between successfully containing inflation and unnecessarily over-tightening monetary policies, a clearer picture of their decisions will be given after the 2022 Economic Policy Symposium, held on August 25-27.

Australian unemployment at lowest since mid-1974

The unemployment rate for Australia has fallen to a 48-year low of 3.4 per cent, dropping 0.1 percentage points in July.

Source: ABS; Sydney Morning Herald

While a low unemployment rate is often celebrated, it is essential that national economic infrastructure, such as our industrial relations system, be sufficiently supportive to the increasing number of workers through real wage growth. Confounded with persistent inflation and the soaring cost-of-living for Australians, there is considerable and growing financial pressure on the average Australian.

Tony Burke, Employment Minister, identified that there were “leaks” in Australia’s IR system preventing the deliverance of sufficient wage increases in the light of low employment for the Sydney Morning Herald yesterday; the Australian Bureau of Statistics reported that wage growth is consistently falling compared to rising inflation rates. Average adult full-time ordinary time earnings increased just 1.9 per cent in the 12 months to the end of May to $1770 a week.

According to Burke, this data suggests the job market’s holistic failure to support low unemployment with adequate pay rises for workers:

The hydraulic pressure of unemployment being low, putting upward pressure on wages – the pressure is still there but it’s coming through in pipes that have all sorts of leaks coming out of them.

Source: ABS; Sydney Morning Herald

However, Chief Economist from KPMG, Brendan Rynne, offers an alternative perspective

• With momentum in the economy now easing and global inflationary pressures falling, particularly in commodity markets, the outlook is suggesting that the economy may require less of an interest rate handbrake from the RBA in coming months than financial markets are currently assuming.

With Australians’ earnings not matching rising inflation, it is more important than ever to consider investment options that can hedge existing wealth against volatile economic climates.
This is especially true considering Finder’s Savings account statistics 2022, released in early July, which reports that “the average Aussie puts away $702 per month in savings, with men ($803) saving 32% more per month than women ($608). Generation Z are saving the most each month ($888), followed by millennials ($836) and generation X ($706). Baby boomers, who are mostly beyond retirement age, are understandably saving the least ($413).”

Currently, the average interest rates individuals will receive on their savings vary between 1.8-3.25%, typically the higher ones being met with age pre-requisites and different criteria. When comparing this to Gold, the average return for the past 15 years is 14.04%, outweighing the highest possible current savings interest rate by 10.79%.

The best solution for consumers to slowly accumulate gold and realise these returns is by utilising ABC Bullion’s Gold Saver Program. This platform allows clients to set up a regular direct debit from their bank accounts, with the ability to amend their desired frequency and amount at any time. This is a perfect solution for clients that want to slowly build their savings accounts in physical precious metals, without having to dedicate a substantial portion of wealth at once.

Warm regards,

The ABC Bullion Team