If the endless printing of money, the small business lockdowns, and rising unemployment weren’t enough, more stimulus is almost enough to guarantee a rise in inflation.
In fact, we saw this in early January when the new president was sworn in. Inflation expectations jumped above 2%, mainly due to talks on additional stimulus package spending.
And these assumptions have so far been correct. President Biden’s $1.9 trillion stimulus package is set for a House vote later this week and is expected to pass.
Entire industries and their workforces have fallen apart since the pandemic hit, further threatening the increase of unemployment numbers.
Fed Chair Jerome Powell gave testimony today before the Senate Banking Committee and stated, “As with overall economic activity, the pace of improvement in the labor market has slowed. Over the three months ending in January, employment rose at an average monthly rate of only 29,000.”
He further added, “Although there has been much progress in the labor market since the spring, millions of Americans remain out of work.”
Even with millions of vaccines in distribution, which is some progress headed in the right direction, the Federal Reserve’s promise to keep short-term interest rates low could be another off-setting factor to our economic recovery.
These are just a few of the catalysts driving the further hike of expected inflation numbers which has had investors across many industries scrambling to find safe havens for their cash.
Daniel Ghali, TD Securities Commodity strategist, recently stated in an interview, “We are seeing investment flows into gold as market participants grow more anxious about rising real rates that can impact equity valuations.”
And, of course, gold hasn’t been the only alternative asset that has been on everyone’s radar lately.
Cryptocurrencies have had their share of publicity, but yet, one cannot deny gold’s long-standing history and track record.
“My vote would be for gold because it has thousands of years of a historical record as a store of value, has one-fifth the volatility of bitcoin, and doesn’t face the same competition risk,” said David Rosenberg of Rosenberg Research, former Chief Economist and Strategist for Merrill Lynch Canada and Merrill Lynch in New York.
Rosenberg followed with, “The day that Queen Elizabeth trades in the five pounds of gold in her crown for crypto is the day I’ll shift course.”
It’s clear. Inflation is on the rise and people are desperately searching for answers on how to protect their wealth.