If you haven’t noticed, the price of gold is on the rise again and some investors have already taken notice. The main reason for this is the threat of inflation is back, after being dormant for many years.
Inflation in a Nutshell
Inflation occurs when the dollar (or any other currency) decreases in value, making goods and services more costly. It can be unleashed when central banks such as the US Federal Reserve stimulate the economy excessively on print too much money. It is considered by many pundits to be a great wealth destroyer.
Inflation last reared its head in a significant way in the United States back in the mid-1970s. From 1974 to 1980, the country went through a period of “great inflation”, which peaked out at 14% in early 1980. Unfortunately, conditions are in place suggesting we may be back on that fateful track today.
Some Factors Contributing to Gold’s Rise
Gold has always been considered a safe store of value when inflation rears its ugly head. In addition to its anti-inflationary characteristics, it is also a hedge against geopolitical mayhem and uncertain economic times. Many people consider gold to be “real money”.
Here are a few more items in the news that contribute to gold’s price rise:
• Geopolitical tensions between the United States and China and with Russia are soaring
• The global economy has fallen into a COVID-induced slowdown
• The Federal Reserve is doing everything they can to keep the US economy afloat
• Many major American cities are experiencing mass protests and rioting
• The country is politically polarized and very few people trust the federal or state governments
Look What Washington is Doing with Money
The current focus of the United States government and its monetary policy via the Fed gives real cause for concern, say many knowledgable people. We are awash in money. Debt is on the rise.
Federal debt as a percentage of the gross national product (GDP) is skyrocketing. Federal debt is now at its highest level relative to GDP since the year after World War II! Indeed, some predict it will soar to double that level by 2050. None of this presages a tame inflationary outlook.