Tuesday , 16 April 2024

What the Progression of Inflation Means For the Price of Gold (+3K Views)

Many countries have suffered through the destruction brought on by huge surges of inflation andbth_hyperinflation many people have lost their wealth, their savings, and even their perspectives in the wake of inflationary episodes. Indeed, inflationary periods are highly unjust. They undermine the ethics of hard work and thrift. They destroy solidarity, lead to widespread hardship and often to social unrest.

The Progression of Inflation
Inflationary periods progress through 3 major points:
1. They have taken place under fiat money. This point was fulfilled on a global basis with the end of Bretton Woods.
2. They are caused by huge public deficits, which are largely financed by money creation. This point is increasingly becoming the political answer to the burst housing bubble.
3. They are man-made, always the result of deliberate political decisions. This point has arrived with the International Monetary Fund (IMF) recently recommending that the world central banks double their official inflation target from 2 percent to 4 percent…

Does this mean inflation is no longer a bad thing? No, definitely not. Inflationary policies are as bad and devastating as they’ve always been but now they seem presentable! The big problem is, however, that neither…[the Fed] nor the IMF bureaucrats seem to remember how difficult and painful it is to get the inflation genie back into the bottle once it has been let out.

When Inflation Threatens, Investors Flock to Gold to Protect Their Wealth
Economic growth is one of the main, long-term drivers of stock and real estate prices and when inflation hits there is generally little or even negative growth. Consequently, stocks and real estate do not hold up well while gold, in contrast, has been the best hedge as investors seek to protect themselves against the large purchasing power losses of inflated currencies…

What Does the Shorter-term Hold for the Price of Gold?
…Fundamentals are bullish and policy makers are recommending and implementing inflationary policies…

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The comments above are edited ([ ]) and abridged (…) excerpts from the original article by Claus Vogt (moneyandmarkets.com/)
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