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Illustration: Aïda Amer/Axios

The specter of rising inflation is helping power assets like gold, silver and Treasury Inflation-Protected Securities (TIPS) to strong returns with record demand this year.

The big picture: Investors continue to pack in even as inflation metrics like the consumer price index (CPI) and personal consumption expenditure (PCE) index have remained anchored.

What's happening: The Fed has added close to $3 trillion to its balance sheet since March and Congress passed the $2.2 trillion CARES Act, leading to an unprecedented increase in U.S. money supply.

  • The stimulus efforts have helped push stock and bond markets higher, but in recent months the gains of precious metals have far outpaced them.
  • In July, the value of gold and silver rose by 11% and 33%, respectively, with silver up 62% over the last three months.
  • The dollar suffered its worst month in a decade in July, which boosts the value of commodities priced in dollars.

By the numbers: In the first six months of the year, total investment demand for gold reached a record value of more than $60 billion even as demand for jewelry, bars and coins fell, the World Gold Council announced Thursday.

  • Global net inflows to gold ETFs reached $39.5 billion in the first half of the year, "significantly above the highest level of annual inflows," WGC noted, both in tonnage terms (646 trillion in 2009) and dollar value ($23 billion in 2016).
  • "To put this strength of demand into context, H1 inflows are also significantly higher than the multi-decade record level of central bank net purchases seen in 2018 and 2019."
  • Global holdings of silver rose 10% in the first half of the year and silver ETF holdings surpassed the previous record for a full year, according to the Silver Institute.

TIPS have been so well bid that yields, which move inversely to prices, have fallen to historic lows on some maturities. The 10-year TIPS yield has recently dropped to almost -1%, Reuters reported last week.

  • TIPS funds have seen net positive inflows for six straight weeks, including the two best weekly net inflows on record (the weeks ending June 24 and July 1), according to Refinitiv Lipper.

What to watch: Fed chair Jerome Powell has said the U.S. central bank is not even "thinking about thinking about thinking about" raising U.S. interest rates, and WSJ reported Sunday that the Fed is considering an overhaul of its long-term strategy of raising rates early to head off rising inflation.

  • That could mean the central bank pulls back on its commitment to keeping rates in check right as inflation returns.

Go deeper

Dion Rabouin, author of Markets
Nov 9, 2020 - Economy & Business

Turkish finance minister resigns on Instagram

A screenshot of Turkish finance and treasury minister's Instagram page.

Turkey's minister of finance and treasury, who is also President Erdoğan's son-in-law, announced in an Instagram post that he is stepping down from both roles to spend more time with his family.

Why it matters: Read that sentence again.

Off the Rails

Episode 2: Barbarians at the Oval

Photo illustration: Sarah Grillo/Axios. Photo: Jim Watson/AFP/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. This Axios series takes you inside the collapse of a president.

Episode 2: Trump stops buying what his professional staff are telling him, and increasingly turns to radical voices telling him what he wants to hear.

President Trump plunked down in an armchair in the White House residence, still dressed from his golf game — navy fleece, black pants, white MAGA cap. It was Saturday, Nov. 7. The networks had just called the election for Joe Biden.

Fringe right plots new attacks out of sight

Illustration: Aïda Amer/Axios

Domestic extremists are using obscure and private corners of the internet to plot new attacks ahead of Inauguration Day. Their plans are also hidden in plain sight, buried in podcasts and online video platforms.

Why it matters: Because law enforcement was caught flat-footed during last week's Capitol siege, researchers and intelligence agencies are paying more attention to online threats that could turn into real-world violence.