Higher inflation means higher prices for everyone.
Over the last three years, we’ve witnessed inflation that is no longer graded against the Fed’s target of 2% but rather on how much better it is compared to the previous bad results. This is how a monstrous 4% inflation is spun as positive news by today’s corporate media.
Unfortunately, the latest data suggests a substantial increase in inflation.
This is especially worrying as the Federal Reserve has implemented rate increases during their battle with inflation for all but one cycle.
The combined effect of higher rates and rising inflation indicates that a worst-case situation may be on the horizon. However, those with physical precious metals may benefit from this turn of events as both gold and silver have managed to maintain their value despite the increasing dollar strength and rate hikes.
Historically, inflationary pressures have often been linked to an increase in value for precious metals.
“Our customers are savvy even if they’re new to the precious metals market,” said Jonathan Rose, co-founder of Genesis Gold Group. “They’re smart enough to realize higher inflation means they need to protect their wealth and they’re definitely smart enough to not have fallen for the tactics being employed by other companies today.”
Recent higher demand has been attributed to the desire for greater financial stability.
Kinesis Money asserts that precious metals represent a reliable “hedge” against inflation:
Why does gold hedge against inflation? That’s a question for which there is no scientifically proven explanation beyond statistical observations, like the chart above, which confirms that the gold price and inflation are highly positively correlated over long periods of time.
The principles of economics can be used to explain the correlation between gold and inflation. Over extremely long periods of time – as in centuries – the increase in the supply of gold annually roughly is equal to the long-term growth in global economic output.
Over a time period of many centuries, both the supply of gold and the rate of economic output increased at approximately 3% annually. Issuing currency in varying units of denomination enables the use of gold as a reserve asset against the issuance of that currency by creating “fungibility” of the central bank gold that backs the currency issued by that bank.
Constraining the growth in the supply of currency to the amount of gold that is produced and…
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