{"id":1414,"date":"2024-07-19T06:29:25","date_gmt":"2024-07-19T06:29:25","guid":{"rendered":"https:\/\/www.advantagegold.com\/?p=1414"},"modified":"2024-08-23T01:09:54","modified_gmt":"2024-08-23T01:09:54","slug":"gold-price-versus-inflation-has-gold-kept-up","status":"publish","type":"post","link":"https:\/\/www.advantagegold.com\/blog\/gold-price-versus-inflation-has-gold-kept-up\/","title":{"rendered":"Gold Price Versus Inflation: Has Gold Kept Up?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">For a good reason, inflation remains at the top of many consumers&#8217; minds. The Consumer Price Index\u2014a measure of the cost of living\u2014recently estimated increases of 3.3% across the board for all items, which means the price of living is more expensive than ever.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Even as<\/span><a href=\"https:\/\/www.washingtonpost.com\/business\/2024\/06\/11\/prices-retail-inflation-consumers\/\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">companies make a show of reducing their prices<\/span><\/a><span style=\"font-weight: 400;\">, inflation remains a sticking point for many Americans.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, rising inflation offers a real opportunity for investors to preserve their assets by turning to precious metals. Let\u2019s explore how to hedge against inflation using precious metal investments, including a Gold IRA that can diversify your retirement portfolio.\u00a0\u00a0<\/span><\/p>\n<h2>What Is Inflation, and Why Is It Important?<\/h2>\n<p><span style=\"font-weight: 400;\">Inflation is the rise in the price of goods and services over a specific period, usually about a year. Its primary impact is to cut into the purchasing power of money. One way economists measure inflation is with the<\/span><a href=\"https:\/\/www.bls.gov\/cpi\/\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">CPI<\/span><\/a><span style=\"font-weight: 400;\">, which tracks the average change over time in prices paid by urban consumers for a market basket of consumer goods and services.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">You may also have heard of the closely related term<\/span><a href=\"https:\/\/www.advantagegold.com\/blog\/gold-and-stagflation\/\"> <span style=\"font-weight: 400;\">stagflation<\/span><\/a><span style=\"font-weight: 400;\">, which occurs in periods of<\/span> <span style=\"font-weight: 400;\">high inflation, rampant unemployment, and slow economic growth.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Inflation can refer to general conditions like the cost of living, but it can also specify products or sectors like housing and food. Factors that lead to inflation can include:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Demand-pull <\/b><span style=\"font-weight: 400;\">is one of<\/span><a href=\"https:\/\/www.investopedia.com\/terms\/d\/demandpullinflation.asp\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">the most common causes of inflation<\/span><\/a><span style=\"font-weight: 400;\">. It happens when full employment and wage increases lead to more consumer spending. More spending leads to high demand and short product supply. The resulting competition for items drives up prices.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Money supply imbalances <\/b><span style=\"font-weight: 400;\">can<\/span><a href=\"https:\/\/www.stlouisfed.org\/education\/feducation-video-series\/episode-1-money-and-inflation#:~:text=So%20what%20causes%20inflation%3F,round%20one%20to%20round%20two.\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">speed up inflation<\/span><\/a><span style=\"font-weight: 400;\">. An increase in the money supply usually coincides with lower interest rates. Low interest rates encourage spending and investing. Businesses may struggle to keep supplies on par with the increased demand caused by more money in circulation. Product shortages lead to higher prices.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Cost-push factor<\/b><span style=\"font-weight: 400;\"> inflation refers to rising prices due to<\/span><a href=\"https:\/\/www.investopedia.com\/terms\/c\/costpushinflation.asp#:~:text=Cost%2Dpush%20inflation%2C%20also%20known,total%20production%2C%20in%20an%20economy.\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">increased production costs<\/span><\/a><span style=\"font-weight: 400;\">. Manufacturers must make a profit to stay in business. When the costs of wages, raw materials, and utilities increase, so does the price of products.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Consumers are worse off when nominal incomes (real wages) don\u2019t increase as much or as steadily as prices. They can\u2019t afford today what they could buy yesterday. As purchasing power falls, real, inflation-adjusted incomes lower, too. The standard of living drops.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">At its worst, inflation can destabilize nations as interest rates soar, making it more expensive to borrow money. It can also severely devalue a nation\u2019s currency. In the most severe cases, nations like Zimbabwe and Argentina had to take extreme measures to hedge against inflation and abandon their currency altogether in a process called<\/span><a href=\"https:\/\/www.washingtonpost.com\/business\/2023\/10\/24\/argentina-considers-dollarization-here-s-what-that-means\/aea25328-728a-11ee-936d-7a16ee667359_story.html\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">dollarization<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<h2>How Does Inflation Affect the Price of Gold?<\/h2>\n<p><span style=\"font-weight: 400;\">Inflation\u2019s typical impact on commodity prices (including gold) is indirect. As other assets or goods\u2019 prices increase, investors might look to gold and other precious metals<\/span><a href=\"https:\/\/www.advantagegold.com\/blog\/gold-vs-dollar\/\"> <span style=\"font-weight: 400;\">to preserve their dollars\u2019 purchasing power<\/span><\/a><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Savvy investors do this for a handful of reasons. As currency values fall, some assets (especially gold) increase in price. The perception of gold as an inflation hedge helps create a self-fulfilling cycle. Because inflation expectations grow, more investors buy gold. As people buy gold, the price goes up.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition to consumer and investor behavior, the<\/span><a href=\"https:\/\/www.investopedia.com\/articles\/investing\/100915\/effect-fed-fund-rate-hikes-gold.asp\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">actions of the Federal Reserve can help influence gold prices<\/span><\/a><span style=\"font-weight: 400;\">. When the Fed raises interest rates to combat inflation, gold prices can temporarily decrease. Higher interest rates can make non-yielding assets like gold less attractive.\u00a0<\/span><\/p>\n<h2>How Has Gold Historically Performed as a Hedge Against Inflation?<\/h2>\n<p><span style=\"font-weight: 400;\">Historically, gold\u2019s performance against inflation has been fairly strong. The last significant bout of high inflation in the 1970s renewed enthusiasm for the precious metal, which generated an almost 35% annual return. While there was some mixed performance in the 1980s and 1990s, gold saw a renewal as of last year.<\/span><a href=\"https:\/\/www.gold.org\/goldhub\/data\/gold-prices\" target=\"_blank\" rel=\"noopener\"> <span style=\"font-weight: 400;\">Gold\u2019s price<\/span><\/a><span style=\"font-weight: 400;\"> rebounded by 14% between November 2022 and 2023.\u00a0\u00a0\u00a0<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p><a href=\"https:\/\/www.advantagegold.com\/blog\/risks-of-investing-in-gold\/\"><span style=\"font-weight: 400;\">Short-term unpredictability aside<\/span><\/a><span style=\"font-weight: 400;\">, gold offers a unique opportunity to diversify your investment portfolio and reduce your reliance on traditional assets that may underperform during high inflationary periods.\u00a0<\/span><\/p>\n<h2>Investing in Gold as a Hedge Against Inflation<\/h2>\n<p><span style=\"font-weight: 400;\">Now that you know gold can be a useful tool to hedge against inflation, how do you actually invest in gold? Potential gold buyers have a handful of options to choose from, including the following:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Gold coins: <\/b><span style=\"font-weight: 400;\">Investors can buy gold coins, which are easy to collect, store, and trade. They offer high liquidity. Unless purchased as part of a self-directed IRA, you may keep your gold in your home, a safety deposit box, or other secure locations.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Gold bars: <\/b><span style=\"font-weight: 400;\">Like coins, gold bars are tangible assets that can be purchased and stored securely.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Gold ETFs (exchange-traded funds): <\/b><span style=\"font-weight: 400;\">Gold ETFs expose investors to gold prices without physically storing the metals. In addition, they offer conveniences that are similar to traditional funds.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Gold mining stocks: <\/b><span style=\"font-weight: 400;\">Investing in gold mining company stocks offers leveraged exposure to gold prices that can provide dividends and capital appreciation.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Gold futures: <\/b><span style=\"font-weight: 400;\">For more sophisticated investors, gold futures and options can allow for speculation on the future price of gold. This can offer higher leverage but also significant risk.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Of course, our preferred method of gold investment is to use your existing retirement assets to fund a Gold IRA. Gold IRAs allow you to invest in<\/span><a href=\"https:\/\/www.advantagegold.com\/approved-precious-metals\/\"> <span style=\"font-weight: 400;\">IRA-approved gold<\/span><\/a><span style=\"font-weight: 400;\"> within tax-advantaged retirement accounts. In addition to incorporating gold into your long-term investment strategy, it also offers the ability to purchase physical assets that aren\u2019t subject to market downturns, like traditional stocks or funds.\u00a0<\/span><\/p>\n<h2>Start Investing in Gold with a Gold IRA<\/h2>\n<p><span style=\"font-weight: 400;\">To learn more about how a Gold IRA can balance your current investments and add to the resiliency of your portfolio,<\/span><a href=\"https:\/\/www.advantagegold.com\/contact\/\"> <span style=\"font-weight: 400;\">request a consultation<\/span><\/a> <span style=\"font-weight: 400;\">from one of our self-directed IRA strategists or download your<\/span><a href=\"https:\/\/secure.advantagegold.com\/401k-into-gold-ira\/\"> <span style=\"font-weight: 400;\">free Gold IRA guide<\/span><\/a><span style=\"font-weight: 400;\"> today.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For a good reason, inflation remains at the top of many consumers&#8217; minds. The Consumer Price Index\u2014a measure of the cost of living\u2014recently estimated increases of 3.3% across the board for all items, which means the price of living is more expensive than ever.\u00a0\u00a0 Even as companies make a show of reducing their prices, inflation [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1415,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1414","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-gold"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/posts\/1414"}],"collection":[{"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/comments?post=1414"}],"version-history":[{"count":0,"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/posts\/1414\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/media\/1415"}],"wp:attachment":[{"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/media?parent=1414"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/categories?post=1414"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.advantagegold.com\/wp-json\/wp\/v2\/tags?post=1414"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}