Inflation Hits New Record High
It’s no surprise to hear that inflation has hit yet another record high. We feel it at the pump, at the grocery store, in restaurants, and much more. It is a scary economic time, but luckily there are ways to hedge against inflation with the help of gold. Keep reading to learn more about what is happening with the inflation rate and how to hedge against inflation and protect your savings by investing in gold.
What Is Happening With The Inflation Rate?
According to an article by CBS News, inflation hit a fresh 40-year record in June, with consumer prices increasing 9.1% over the last 12 months, the Labor Department said Wednesday.
It’s the fastest increase in prices since November 1981, and above what economists had expected. The increases were broad-based: Rent, new and used vehicles, car insurance and medical care all rose in June, the government report said. Core inflation, which strips out volatile food and energy prices, rose 5.9% over the last 12 months, slowing its pace from May.
“Price pressures have broadened to virtually every major line item within the inflation categories,” Gargi Chaudhuri, Head of iShares Investment Strategy Americas at BlackRock, said in a research note. “Core inflation is still high, but the drastic difference between headline and core shows how much the recent move in prices has been driven by food and energy price volatility resulting from supply shortages,” Chaudhuri added.
Airfares and hotel costs were among the few categories to drop in price in June.
It’s likely inflation cooled in July, as the price of gas has declined from an eye-watering $5 a gallon average in mid-June to an average of $4.66 nationwide as of Tuesday. Nonetheless, rising prices have caused a sharp drop in confidence in consumers. Forty percent of U.S. adults said tackling inflation should be a top government priority this year in a June AP-NORC poll, up from just 14% in December.
Inflation has become the most pressing economic concern for Americans — as well as a political albatross for the Biden Administration. The Federal Reserve has been hiking interest rates at the fastest pace in more than two decades as it tries to tame surging prices.
How to Hedge Against Inflation with Gold
You have likely heard that you can hedge against inflation with gold. This is because gold increases in value as the dollar’s purchasing power declines. According to Investopedia, gold has fared better than silver, platinum, and palladium recently, as well as most other precious metals. In 2020, the price of gold jumped 28%. Through 2021 and into 2022, gold prices have stayed fairly consistent. Gold’s price has always fluctuated, like any other investment. However, in light of this trajectory, many believe gold’s future performance is uncertain and favor a shift to Treasuries.
Current price actions, according to MarketWatch, include:
- Gold futures GC00, +0.14% GCQ22, +0.14% for August delivery rose $10.70, or 0.6%, to settle at $1,735.50 an ounce, after dropping to as low as $1,704.50. Before the turn higher, prices based on the most-active contract were on track for the lowest finish since March 31, 2021, FactSet data show.
- Silver futures SIU22, +0.25% for September delivery added 24 cents, or 1.2%, to $19.194 an ounce after settling Tuesday at the lowest since July 2020.
- Platinum futures PLV22, +2.13% for October delivery rose $9.70, or 1.2%, to $837.80 per ounce.
- Palladium futures PAU22, +0.85% for September delivery fell $44.20, or 2.2%, to $1,971.40 an ounce.
- Copper futures HGU22, +2.29% for September delivery climbed 3 cents, or nearly 1.1%, to $3.3225 per pound.
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