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15-20% inflation can happen next; This asset can protect you from the 'inflation monster' - Randy Smallwood

Kitco News

(Kitco News) - U.S. inflation is now 8.6 percent. Randy Smallwood, President and CEO of Wheaton Precious Metals, said that "we're just seeing the start of this inflation monster," and suggested that we could see "15-20% inflation rates." Smallwood highlighted the Federal Reserve's loose monetary policy and supply chain shortages as contributing to higher prices.

He also said that gold, especially in the form of gold streaming companies, can protect investors against inflation.

Smallwood spoke with Michelle Makori, Editor-in-Chief and Lead Anchor at Kitco News, at the PDAC 2022 Convention in Toronto.

The Inflation Monster and Gold

The Federal Reserve recently raised its key policy rate by 75 bps. Although Smallwood thinks this will help, he said it will not be enough to tame inflation.

"I don't think we're finished seeing the highs of inflation yet," he said. "… There's going to be a lot of support from the Fed at the US Dollar level, but I don't know how much farther they can go before it gets dangerous… I think what you're going to see is a deep recession, a pullback on growth, because the cost of money is going to get expensive relative to inflation."

The World Gold Council, an industry group which Smallwood chairs, recently released its survey of central banks. The survey found that 25 percent of central banks are buying more gold as a hedge against inflation and geopolitical uncertainty.

"Central bank purchases of gold are a really good indication of what some leading economists around the world believe about what might be required to maintain a sense of stability," he explained. "… Maybe [the central banks] know something. Gold should be a part of everyone's portfolio in times of conflict."

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The US Dollar's Future as a Reserve Asset

As inflation erodes purchasing power, Smallwood predicts that the US Dollar will lose much of its value.

"I mean, all you have to do is look at central bank purchases," he explained. "Instead of backing up with the US Dollar, they're actually loading up on gold…"

He added that the he "strongly agrees" with the claim that the US Dollar's status as a global reserve currency is becoming more precarious.

"I would describe [The US Dollar] as the best of a bad bunch of apples," said Smallwood. "It just doesn't have long-term sustainability."

To find out Smallwood's predictions for the gold and silver markets, watch the above video.

Follow Michelle Makori on Twitter: @MichelleMakori

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