By Nathalie Voit

Gold futures reached a five-month record high of $1,868.50 on Nov. 12 after data released by the Labor Department revealed the highest rate of consumer inflation in over 30 years. Last week’s economic news release prompted many investors to buy precious metals as a possible hedge against rising prices.

The stable asset, which is still down from its record high of $2,050 in August 2020, is rapidly gaining ground amid concerns over long-term inflation. Shares of U.S.-listed gold mining stocks like Barrick Gold Corp, Newmont Corp., and VanEck Gold Miners ETF came ahead of the S&P 500 last week, gaining 5.9 percent, 4.2 percent, and 6.2 percent, respectively. 

Gold’s strong gains point to investor uncertainty in the stock market. 

“We’re really seeing investors say, ‘Well, this inflation could be a little more sticky, so we do need to add precious metals,'” said president of world markets at TIAA Bank, Chris Gaffney.

According to analysts, gold prices above $1,850 an ounce indicate strong investor confidence in the asset. As of Nov. 15, prices continued to trade above the $1,850 range, closing at $1,864.7 on Monday.  

Silver prices, similarly, have surged to a 3-month high of $25 per troy ounce following October’s CPI report that detailed the fastest year-on-year inflation since 1990. 

Investment in precious metals is likely to continue as Fed officials continue to downplay concerns about inflation. 

According to Minneapolis Fed Chair Neel Kashkari, inflation is likely to increase in the upcoming months before tapering off.

“We’re seeing both a surge of demand because Congress has given a lot of money to families and businesses to get through the pandemic, but we’re also seeing supply disruptions at the same time because of the COVID virus. The good news is both of those should be temporary,” said Kashkari on Sunday, just days after the Labor Department report.

US Fed Chair Jerome Powell also seemed to share Kashkari’s view about the transitory nature of inflation in the November 2-3 Federal Open Market Committee meeting

“We don’t think it’s time yet to raise interest rates. There is still ground to cover to reach maximum employment both in terms of employment and in terms of participation,” Powell said when asked about whether he would raise rates by a reporter from The Wall Street Journal.

“Our baseline expectation is that supply bottlenecks and shortages will persist well into next year, and elevated inflation as well and that as the pandemic subsides, supply chain bottlenecks will abate, and job growth will move back up. And as that happens, inflation will decline from today’s elevated levels.”