The Gold Digger – Transitory Inflation
Anyone who has ventured from their Covid sanctuary to buy groceries, peruse a big box retailer, filled a fuel tank or update the closet, surely was not surprised by the announcement this morning that inflation has once again ticked up. How the Consumer Price Index managed only a fraction of a percent increase from last month is yet to be explained, but I am sure the explanation will be creative and colorful. The same agency reported last month that in 2020 wage increases fell short of inflation by 2.5%. So clearly the American consumer is losing ground in their budgets to the hidden tax which is inflation.
When the Federal Reserve Chairman labeled the current round of inflation “transitory” a year ago, he was not wrong. Inflationary periods always end. Since World War II, there have been 7 inflationary periods defined by a CPI reported at more than 5%. Most of these are 1 – 3 years with the single exception being the whopping 9-year period from 1973 – 1982.
Precious Metals play an extremely important role during inflationary periods. Not only because gold is priced in U. S. Dollars worldwide which gives it an inverse relationship with the greenback, but also what higher prices do to other markets. Higher manufacturing costs accompanied by higher labor costs in a competitive environment puts stress on unprepared companies and affect stock prices. Typically, inflation is a negative influence on equities markets making the gold and silver universe an attractive alternative investment. Considering that the precious metals arena is an extremely small cap, it does not take huge movement of capital to cause a substantial increase. In fact, if 1% of Global Investments decided to move into gold, it is a trade that cannot happen.
Gold entered the 9-year inflationary period at $100 per ounce and reached a high of $600 before closing out the longest period of wage and price increases with a 400% gain at $400 per ounce. Numismatic gold coins over the same period outperformed bullion increases by as much as 300%. Without question the period of runaway inflation was a trying time for American households. With mortgage interest rates in the double digits, while inflation was also over 10% percent per year, savvy investors who protected their savings with precious metals faired considerably better than those who just went along for the ride. It is anyone’s guess the extent that this current round of price increases will yield. While a mostly Teflon Dow Jones Industrial Average and the new kid on the block, crypto currency which is making millionaires out of millennials sitting in basements across America are attractive, there is not a portfolio that would not benefit from a component of the only true monies, gold and silver.
GMRgold is committed to designing a unique program for you that will assist you in weathering the storm that has moved from the horizon to overhead. It is never too late to take advantage of the insuring qualities of gold and silver coins. Sometimes are better than others, and we are definitely in one of those better times now. Now is not about greed or profits. We believe the primary focus at this time is the return of your money, rather than the return on your money. Gold and Silver have proven their ability to do just that over time. Especially in times of economic upheaval as we see today. We look forward to helping you with your precious metals purchases. You have insurance on your home, your auto, your health and your life. Isn’t it time you had some insurance on your money?