Gold and Silver Lagging Inflation, But for How Long?

While the prices of food, housing, and staple goods continue to rise, other assets aren’t seeing nearly the same price increases. Two of those whose price movements are confounding are gold and silver.

Gold and silver have a reputation for gaining value during times of high inflation. During the 1970s stagflation, for instance, gold and silver’s average annualized gains were over 30% over the course of the decade. So everyone is naturally expecting gold and silver to take off today in the face of high inflation, yet they haven’t yet. What gives?

In that respect, gold and silver aren’t completely unique. Stock markets are in much the same boat, trading in a relatively narrow range for weeks. Nothing seems to be moving outside of these narrow ranges, as if to see which way the wind is going to blow.

With the Fed in the middle of its tapering program and talking more and more about how it intends to raise interest rates this year, the pressure on markets will intensify. It’s highly unlikely that the Fed will raise rates at its January meeting, but far more likely that it might decide on a first rate hike at its March meeting.

By that time tapering should have been completed, and the Fed might very well decide to start decreasing the size of its balance sheet too. That means that March is the most likely time we’ll start seeing some real movement in both precious metals markets and financial markets.

That isn’t to say, however, that everything is going to remain the same in the meantime. Gold has seen some trading days with big gains recently, as fears of inflation and rate hikes combine to help drive the price up. And many soon-to-be-retirees are looking nervously at their 401(k) accounts as stock markets continue to slide this year.

It always takes some time for trends to emerge, and rarely do investors realize that they’re at the front end of either a bull market or a bear market until that market is well underway. So while we could very well be at a turning point right now, it may take a few months for us to realize that that’s definitely the case.

Gold and Silver Will Catch Up

The most important thing to remember is that gold and silver prices respond well to higher inflation over the long term. The longer inflation lasts and the worse it gets, the more growth gold and silver should experience. But that’s over a period of years, not weeks.

It can be frustrating for people who understand that economic conditions are ripe for gold and silver to start gaining in price to wait patiently. But investing in precious metals isn’t a get rich quick scheme. It’s a long-term investment that is intended not only to help make gains during times of economic hardship and financial weakness, but also to act as a hedge against inflation, asset loss, dollar devaluation, etc.

Gold and silver can also play an important role in diversifying an investment portfolio, a role that many people are discovering today in an era in which many funds and portfolios are heavily invested in the same handful of stocks or index funds.

Yes, it can be frustrating to know that gold and silver could make great gains over the long run but that nothing is moving right now. But rest assured that once gold and silver start to make gains, they could richly reward those who had the foresight to buy them and those who had the patience to hold them for the long term.

The current range-bound trading we’re seeing today could very well just be a temporary response to remaining regime uncertainty in markets. With Build Back Better stalled, and the Fed talking a good game but not yet making any concrete decisions, we’re likely on the cusp of a period of time in which big decisions could lead to major market moves.

Since we’re headed into the midterm elections this fall, the Fed will be under a lot of pressure from the White House to get inflation under control. Expect to start seeing rate hikes sooner rather than later, as the Fed will scramble to get inflation under control before November.

That might not be possible, however, given the sheer size of the Fed’s balance sheet expansion over the past two years. If the Fed then decides to accelerate its rate hikes, or engage in aggressive balance sheet reduction, that could provide the impetus to burst the stock market bubble, usher in a major stock market correction, and start pushing gold and silver back towards new highs.

Don’t Delay

One mistake that many people make is thinking that they have all the time in the world to get their affairs in order. It happens more often than we realize, whether it’s someone not putting together a will before they die, not taking care of their health until a major illness or cancer pops up, or not protecting investment assets against loss.

With gold and silver often moving upward both during times of high inflation and of stock market weakness, there are two big motivating factors that could push silver and gold prices higher in the near future. Many people have already begun to position themselves to take advantage of that, protecting their wealth by purchasing gold and silver.

But many others probably think that they still have plenty of time to buy gold and silver, that they can wait until they’re 100% certain of the “right” time to buy. The risk is that by the time they realize that gold and silver are a good buy, prices may already have accelerated upward, while the value of the investments they wanted to protect has dropped.

Are your savings and investments safe and secure? Have you put together a plan to protect your wealth? Have you taken concrete steps to safeguard your retirement assets?

Those are questions that you’ll need to answer. And if the answer to those questions is no, maybe it’s time to start rethinking your strategy.

An investment in gold and silver can help you protect your assets against rising inflation, dollar devaluation, and the risk of a stock market collapse. And with modern investment vehicles such as a gold IRA or silver IRA, gold and silver are easier to invest in than ever.

A precious metals IRA allows you to invest in physical gold or silver coins or bars while still enjoying the same tax advantages as your current 401(k) or IRA accounts. And you can fund a precious metals IRA by rolling over or transferring assets from your existing 401(k), 403(b), TSP, IRA, or similar accounts into your gold IRA or silver IRA tax-free.

If you have cash or cash equivalent investments like money market accounts that you want to protect, you can also buy gold and silver coins directly. These coins can then be stored at home or at a depository or storage location of your choice.

There’s no reason not to start protecting your hard-earned money. Rising inflation is going to continue to take a bite out of your wealth for the foreseeable future, and gold and silver can help protect you against that. It’s just a matter of time before they start to gain even more value to outpace inflation. And when they do, you’ll likely be glad that you decided to buy gold and silver.

Don’t let your protection against inflation lag. Take the first step towards safeguarding your financial future by calling the precious metals experts at Goldco today to learn more about how gold and silver can protect your precious savings.