Pros: Is This the Safest Inflation Trade?
It can be difficult to trade inflation without getting hurt by inevitable rate hikes, but the "Fast Money" traders on Friday explored a few strategies.
The conversation followed news that China on Friday increased the reserve requirement ratio for banksby another 50 basis points. The reserve hike comes after the People's Republic increased the benchmark lending and deposit rates by 25 basis points earlier this month. China's inflation rate hit 4.9% in January, up from December’s 4.6% rise.
Tim Seymour, founder of EmergingMoney.com, said he's looking at how the rate hike would impact global equities. Europe is also battling with rapidly increasing prices. Wholesale prices in Germany rose a greater-than-expected 5.7 percent in January compared to the prior year, according to data released today from the German Federal Statistical Office. U.K. officials announced this week that inflation hit 4 percent in January.
Many traders are playing inflation by betting on the currencies in countries most likely to raise rates. Sterling hit two-week highs against the dollar this week as traders bet that the Bank of England will raise rates to cool down prices.
But Drakon Capital’s Guy Adami was watching silver . It hit a 31-year high on Friday morning as traders bet industrial demand would continue to strengthen and that countries would look to the metal as a currency inflation hedge. Silver futures are up more than 100 percent in the past year. The silver exchange-traded fund hit a 52-week high in trading Friday.
“To me silver is far more interesting than gold ,” said Adami, referring to the traditional metal inflation hedge. “It is setting up for one of those six or seven dollar type moves.”
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CNBC.com with wires.