U.S Inflation Reaches 7% What does this mean for Gold?


The U.S inflation rate has gone up even more reaching record highs. It broke a record of reaching a 40 year all time high of 7%. Moreover, economists predicted this figure and they were correct. This drastic high rate is alarming as there are still no signs of the inflation rate slowing down anytime soon. 

The main contributors to this high rate were the high prices for homes as well as the automobile market. Statistics and reports showed that the price of used vehicles have gone up 37% in the last year. A big factor contributing to this was the global microchip shortage in new vehicles which slowed down production. 

The high inflation rates are causing the market to go haywire as the executives at the Federal Reserve want to keep interest rates low. This is mainly due to the economic crisis caused by the COVID-19 pandemic. However, economists are predicting that an interest rate spike may soon be on the horizon with the way the inflation rates are rising. 

Higher inflation rates tend to be good for precious metals as it causes them to increase in price. This is mainly due to the fact that investors hedge their wealth against inflating economies by putting their money into assets like Gold, Silver and Platinum. However, the conundrum in this situation is the potential rise in interest rates. Historically, whenever interest rates rose, Gold prices tended to drop. This is because  investors would move their money into bonds as they would aim to capitalize on the higher interest rate. 

So what can we expect for Gold prices?

While there is a possibility for prices decreasing, that would only take a short term effect. In the long run, inflation would still be the silent killer of the Dollar, making precious metals the superior investment for those looking to safeguard their wealth. 

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