Fed Policies Continue to Drive Gold and Silver Higher

Sometimes it can be tough to be critical of the Federal Reserve. On the one hand, the Fed’s conduct of monetary policy has been incredibly damaging in so many ways. It has helped spur inflation, it has been responsible for causing a series of recessions and financial crises, and it has monetized government debt, allowing the federal government to engage in reckless and out of control spending.

On the other hand, the Fed’s policies have helped drive up the prices of gold and silver too, making them one of the most popular investments today for those looking to protect their wealth. So if you hold gold or silver in a precious metals IRA and you’ve been enjoying the gains you’ve made in the past few years, the Fed’s monetary policy is at least partially responsible.

Going forward, the Fed doesn’t look like it’s going to change its tune anytime soon. Easy money is here to stay, with the Fed committed to pumping at least $1.5 trillion dollars into the financial system every year through its asset purchases. As long as that continues, the price of gold and silver should continue to climb.

What Fed Officials Are Saying

While ordinary Americans are wondering whether they’ll be able to fill up their cars, and are looking nervously at food prices that continue to rise, Fed officials seem to think that nothing is going wrong. They’re seemingly oblivious to rising prices throughout the economy that are pinching Americans’ pocketbooks. After all, when you’re making ten times as much money as the average person, the average American’s worrisome price increase is just a rounding error to you.

The Fed’s singular focus today seems to be on the job market and improving employment figures. And Fed officials think the key to success there is to continue to pump money into the system to spur hiring. Fed Vice Chairman Richard Clarida just recently stated that the continuing weakness in the job market means that the Fed needs to continue ramping up the stimulus.

The problem there is that the Fed is working at cross purposes to the administration, and even to itself. The Biden administration continues to push for greater federal unemployment benefits, which have incentivized many unemployed Americans to stay out of the workforce. After all, if you can make $45,000 a year on unemployment insurance, why take a job that might pay you $50,000? Is it worth a year’s worth of waking up early and taking orders from someone else to make what ends up being maybe $3,000 extra a year after taxes?

The worst part of it is that the federal government can’t afford to pay that unemployment insurance. The only way it can do so is to issue new Treasury debt. And who is buying that debt? The Federal Reserve. So at the same time the Fed is funding the government’s payments that keep people from returning to work, the Fed is also claiming that the continued weakness in the labor market requires more monetary stimulus. Only in Washington could somebody say something like this with a straight face and be taken seriously.

Atlanta Fed President Raphael Bostic has even stated that he thinks inflation is healthy for the economy today, seeing rising inflation as a positive sign. And like many other Fed officials today, he thinks that the price increases we’re seeing today are just transitory, and that they’ll disappear by the end of the year.

With continued price rises, millions of Americans still out of the workforce, and shortages of computer chips and other raw materials necessary for production, it’s hard to imagine the US economy improving anytime soon. And even if things “improve,” it’s hard to believe that prices will come back down to pre-pandemic levels.

Fed Unperturbed, Consumers Sweating Bullets

Even those who might otherwise support President Biden are starting to get nervous, such as former Treasury Secretary Larry Summers. Summers expected inflation, but not nearly to the extent that we’ve seen so far. In his mind, the Fed’s actions seem to anticipate a benign situation such as a gentle and gradual recovery, rather than a stagnation or worsening.

It does seem hard to believe that the Fed thought that trying to boost inflation was a good idea, particularly at a time when tens of millions of Americans had just lost their jobs and the economy was in a shambles. If consumer spending is the supposed engine that drives the economy, how is making things more expensive going to help boost spending?

It’s almost laughably nonsensical, but it’s gotten many Americans to sit up and take notice. And now inflation expectations are rising in the US, after years of remaining steady. Both Wall Street and Main Street have seen the price increases that have afflicted us, and they’re starting to prepare for the worst.

While the Fed may think that inflation and rising prices will be only transitory, many consumers and investors may not be of the same opinion. And if they expect inflation to continue rising, they’ll start taking measures to protect themselves.

Protecting Your Wealth

One of the popular ways some investors protect their wealth is by investing in precious metals such as gold and silver. Gold and silver have proven their ability to continue gaining value even during times of economic weakness, such as during the 1970s stagflation or in the aftermath of the 2008 financial crisis.

You can even invest in physical gold and silver through a gold IRA or silver IRA, giving you the same tax advantages as a conventional IRA. And you can use existing funds in your current retirement accounts to fund your precious metals IRA by rolling over or transferring assets from a 401(k), TSP, IRA or similar account.

So what are you waiting for? With the Fed continuing to pump money into the financial system, the risk of accelerating inflation continues to rise all the time. Don’t wait until inflation is out of control before starting to protect your investments. Call the experts at Goldco today to learn more about how gold and silver can protect your retirement savings against rising inflation.