Increasing purchasing power due primarily to falling unemployment and fiscal stimulus policies are driving rising inflation in the United States. This environment makes for a favorable backdrop for gold because the precious metal tends to perform well in inflationary conditions. Hence, we think investors seeking to capitalize on the turnaround in gold prices could bet on mining stocks Kinross Gold (NYSE:KGC), Yamana Gold (NYSE:AUY), Alamos Gold (AGI), and Centamin (CELTF). They are all still trading at reasonable prices.Investors turned to safe haven gold last year to protect their wealth during the coronavirus-led economic slowdown and general uncertainty. However, the precious metal came under relentless selling pressure after hitting an all-time high last August on investor optimism over the potential for a robust global economic recovery with the mass vaccination drive. Since then, gold prices have slid from more than $2,000 and are currently trading a little above $1,850.
However, the yellow metal is expected to rebound on worries surrounding rising inflation. Fiscal stimulus spending and an improving job market have been boosting investors’ purchasing power, which is fueling inflation. According to Statista, the annual rate of inflation this year is expected to be 2.26%.
While the recovery witnessed by the economy so far has boosted investors’ risk appetite, uncertainties continue to loom over the pace of recovery. As a result, gold’s demand as a safe-haven asset is increasing. Economists believe that the yellow metal’s secular bull market is far from over. In addition, experts anticipate gold will break the crucial $2,000-level again in the near term.