Will Inflation Get Better Before It Gets Worse?

News & Tips

Published: February 22, 2022

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Many of our clients are now well aware of inflation’s significance when planning their retirement and reconfiguring their portfolios. Several of them annually revisit their investment portfolio, meet with their financial advisors, and call us to buy more gold and other precious metals. 

Our clients are up to date and understand that the financial system’s structure is to inflate our money. The ever-rising inflation is proof.

Remember that the government already redesigned how they compute inflation to keep the number down. And yet, the numbers are still climbing. 

Last year in October of 2021, investors went wild when the Consumer Price Index (CPI), the primary measure used to compute inflation, went up 6.2%. By November, the CPI hit 6.8%. Then in December, inflation increased to 7%. Since then, the economy has not gotten better. 

Earlier this year, inflation hit 8.5% in March, the fastest 12-month pace since 1981.

And this may be only the beginning. Real inflation could rise to 15% in 2022. 

As investors, we should prepare for any scenario that may occur. Inflation devalues the value of your money and your investments. But if you own a hedge, a shield that could store the value of your wealth, then you are in safe hands. 

Key Takeaways 

  1. U.S. inflation reached its highest in forty years. 
  2. The Consumer Price Index is heading higher. Real inflation could rise to 15% in 2022. 
  3. Rising inflation devalues the value of your investments, but not if you own gold or other precious metals. 

Inflation’s ATH

Just as the U.S. economy was beginning to recover at the end of 2021, we experienced the biggest inflation surge since March 1981. The annual rate of inflation in the United States hit 8.2%. That is the highest computation in more than five decades, measured by the Consumer Price Index or CPI. Other inflation metrics have shown significant increases in recent months, though not to the same extent as the CPI.

The Labor Department said the consumer-price index rose at its fastest annual pace since December 1981, up from the 7.9% annual rate in February. 

Prices of everything are going up, from cars to grocery items. Last week, one of our employees wanted to buy a car. The best offer was $15,000 for a 10-year-old Prius. Prices for used vehicles increased too by 7.3% from the previous month. 

This increase in prices has been going on for months now, despite or despite widespread Covid-19 vaccinations, relaxed business restrictions, trillions of dollars in federal pandemic relief programs, and ample household savings.

Many speculate that people’s willingness to spend could be driving the prices high. Higher demand equals higher prices. It’s basic economics. 

Some think that the price increase concentrates on parts of the economy that are whipsaw by the pandemic, such as cars, airfares, and hotel stays.

That suggests inflation is temporary. But that is only half of the picture. 

Prices are increasing because things and people necessary to manufacture products are in shortage. 

New vehicles have soared because of a computer-chip shortage that has made car production difficult. 

That created a domino effect. It increased the prices of used cars and rental cars. 

People are going back to their lives, but a huge chunk isn’t. Unfortunately, many of these people choose to move farther from the city or manufacturing areas and work remotely. 

People are not working to produce things. People are demanding something. Hence, prices are going up. 

The Fed expects the inflation rate to rise temporarily this year, but inflation has continued since fiat currency was created. The government keeps on changing how inflation is made to keep inflation down. 

The lesson is this: inflation is here to stay and will only worsen. Until we alter our financial system, it will be up to us to make sure we protect ourselves and our investments.

Inflation Will Hit 15% In 2022

Analysts at Saxo Bank said inflation could go up to 15%. Let me make it clear. The current inflation rate computation is manipulated to make inflation seem manageable. Even with that, Saxo Bank still says it will go up to 15%. 

That means real inflation will probably be closer to 30%. 

Reuters interviewed Steen Jakobsen, Chief Economist and CIO at Saxo Bank. Jakobsen said it is a forecast of what’s to come but rather a deep dive into ‘known unknowns.

However, Jakobsen emphasized that the prediction is not outrageous at all. He pointed out a possible energy crisis this winter combined with supply chain issues, rising rents, and, crucially, wages going through the roof.

The 15% figure is based on the assumption that every inflation cycle tends to go above its past historic peak so in this case, 15% would be just above that of the early 80s.

For Jakobsen, the swift shift in the Fed’s stance on inflation reflects the realization that the main street in America is about to feel the pain of rising prices biting into their purchasing power with all the political consequences it might entail.

And what would 15% inflation mean for investors? Stagflation. Stagflation is a term used to describe slow economic growth during high inflation.

Ole Hansen, head of the commodity strategy at Saxo Bank, added that a 15% inflation would be good for gold. The Federal Reserve’s possibility of losing control over inflation will continue to support gold prices through 2022. 

He added that If the Fed tried to get in front of the curve, it would create a new recession.

Currently, the gold market is still below $2000. There are many reasons for this, including a lack of investor interest as the Federal Reserve looks to start tightening monetary policy next year. There are growing market expectations for the U.S. central bank to begin raising interest rates in June, with four hikes next year.

However, rising inflation, volatile crypto market, and threatening omicron infection rate will force people to refocus on more stable assets. This could push gold to cross its all-time high. 

It Will Get Worse Before It Gets Better

Believe it or not, we don’t like scaring you. We constantly talk about real inflation and how the government manipulated the computation to reflect a much lower inflation rate to give you a chance to prepare for it. 

Your portfolio should be in a position where you are as confident as possible your yield will beat inflation. 

That’s Noble Gold’s goal. We are not saying it is easy; we are not saying we know everything. What we are presenting is information you can use to plan your portfolio. You still need to talk to a financial adviser and do more research. 

In that research, understand two important concepts: The Consumer Price Index CPI and Producer Price Index or PPI. 

The CPI measures the price of a basket of goods between two-time points. This is the primary stat used to determine our inflation rate.

This recent inflation spike has caused concern in the financial markets, more specifically the stock market, as it prompts the Fed to abandon its easy monetary policy and begin to tighten. In fact, the Fed has already announced it will withdraw its economic stimulus faster than expected. This has made investors nervous, sending stock prices lower. 

The PPI measures the rate of inflation for producers. Usually, PPI is below CPI. In fact, over the past ten years, CPI has been higher than PPI 60% of the time. Even when PPI rose faster than CPI, the difference was minimal. This is not the case today, as PPI is much higher than CPI. In short, production costs are rising at a much faster rate than consumer prices.

How Long Will Inflation Remain Elevated? It’s a complicated question. 

There’s COVID and its mutations. As long as it is out there, things cannot operate as usual, at least not everything. That’s pushing people away from the city, forcing people not to work, forcing companies to shut down, and forcing businesses to close. 

And there’s the Fed policy. As the Fed withdraws its monetary stimulus and sets its sights on raising interest rates, the economy will weaken. Too much Fed tightening, historically, has been a catalyst for recessions. Demand falls during a recession, which would help bring the supply/demand curve back into balance.

In summary, inflation will be with us for a while and possibly worsen before it gets better. Too little supply, too much demand, and a global pandemic causing supply chain disruptions are the relevant factors. 

That’s the situation. You have two options: allow it to victimize you or plan your finances to enable you to move faster than inflation. The only way to beat inflation is by investing in a hedge to keep your portfolio safe and secure. 

Stocks, crypto, and real estate are good investments, but neither battle inflation the way gold and other precious metals do.

So if you want to go safe, invest in precious metals today. Noble Gold’s FREE Investment Guide will show you how to get started in gold and silver step by step. Click the “Download the Guide” button in the navigation bar to get started now. 

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