The price of gold continues to soar. At the time of this writing, it is up a staggering 14.9% from its price on July 16, to $2,069.
The extraordinary increase from just three weeks ago seems to be happening thanks, in part, to the recent debasement of the U.S. dollar.
According to a Newsmax piece, negative yields are also playing a role:
The impact of the pandemic has driven real yields deeper into negative territory, which has boosted interest in the haven of gold. The dip below -1% on the 10-year is “a pretty big level,” according to TD Securities analyst Ryan McKay.
You can see the incredible jump in the price of gold on the 6-month chart.
Not to be outdone, silver’s price has increased more than 45% since July 16.
That even sharper increase in value, likely due to similar reasons as gold, is reflected here.
And with the dollar in a slow and steady decline since March 20, and yields getting worse, the Fed hasn’t been able to help to drive both gold and silver prices even higher.
In fact, the market is betting on it.
Fed’s Commitment to Higher Inflation Could Send Metals Prices Higher
According to a CNBC piece, “Markets have been betting on higher inflation, with surging gold prices, a falling dollar and a rush to inflation-indexed bonds.”
And it appears as though the Fed is going to deliver exactly what the markets are betting on. From the same article:
Recent statements from Fed officials and analysis from market veterans and economists point to a move to “average inflation” targeting in which inflation above the central bank’s usual 2% target would be tolerated and even desired.
There are even hints that inflation up to 4% could be a possibility, and without much resistance. Morgan Stanley thinks Americans should “brace for it”:
The most powerful leading indicator for inflation has already shown its hand – money supply, or M2. As Milton Friedman famously said 50 years ago, “inflation is always and everywhere a monetary phenomenon.” […] If Mr. Friedman was correct, then isn’t the risk of higher inflation greater than it’s ever been, too? Indeed, the sharp moves higher in breakevens and precious metals suggest that markets are considering the possibility.
And as the above note alludes to, both gold and silver could benefit from the Fed’s insistence that inflation be allowed to “run hot.” In fact, it could be “‘wildly bullish’ for alternative asset classes and in particular growth stocks and precious metals like gold and silver.”
A recent article from the American Institute for Economic Research shines a light on the possibility that, “If inflation were to really get out of hand, the dollar could lose its status as the international reserve currency.”
Out of control inflation, coupled with dollar debasement, could provide rocket fuel for the price of precious metals. (And if the Fed would report “real inflation,” that boost could come a lot faster than you think).
It sure looks like both gold’s and silver’s time has come. Let’s just hope we don’t add hyperinflation to the mix.
Time to Add Gold and Silver While the Opportunity is Still ‘Ripe’
With gold and silver continuing to rise, now is a good time to serious think about adding precious metals to your savings.
It’s one of many things you can start doing to make your nest egg more resilient in case inflation gets out of control.
Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver. Discover more by clicking here now.
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