All inflation is not the same in different markets. Demand-side inflation is believed to be a surfeit of money, which makes money cheaper and everything else more expensive. When money is cheaper, even gold becomes more expensive.
What is currently being experienced in the global markets is supply-side inflation. Supply-Side Inflation Hits Home post by Alan Cole made some analysts become inflation cranks. In the publication, Cole referred to the soon-to-be-retired Boston Fed President Eric Rosengren, while referring to a previous bout of supply-side inflation in 2011:
“Because my analysis suggests that recent food and oil price increases have their roots in concerns about wheat harvests in Russia and oil production in Libya and the like, I do not believe that monetary policy is the appropriate tool to respond to these disruptions. While many observers see food and energy prices rising and assume the Fed should tighten policy – raise the cost of money and credit – to head off inflation, I would suggest taking a step back and recognizing that tighter U.S. monetary policy will do nothing to stabilize Libyan oil production, reduce uncertainty about political stability in the rest of the Middle East, or increase the wheat harvest in Russia.”
According to Cole, the pandemic has created a similar outcome, but with some different supply-side bottlenecks.
Gold Versus Natural Gas And Oil
A major difference between oil, natural gas, and gold is when oil and natural gas get consumed, they are gone forever. On the other hand, all the gold that has ever been mined on earth is still around. Hence, supply-side bottlenecks that were caused by the pandemic had a much bigger effect on oil supplies than gold.
For some time, this phenomenon was partially masked by dropping demand for oil as a result of lockdowns with fewer workers commuting. However, the supply bottlenecks were quite considerable. For instance, on September 29, the Baker Hughes rig count showed up to 521 active drilling rigs in the United States. That is a major improvement from 261 active rigs in September 2021. Before the pandemic-related lockdowns in March 2021, the US rig count was 790.