We all know what gold is, but to truly understand how it often serves as a hedge against inflation we need to explain the why.
A recent Bloomberg article outlines specific reasons how the government and the central banks’ decision-making is the major cause behind the surge of gold.
The Federal Reserve has a job to perform and they could be doing better.
Inflation just happens to be the by-product of the primary issue gold protects us from- a government making decisions that decrease our dollar’s value.
In the last century, gold has exceptionally outperformed the stock market, gaining about 555% compared to 146% in the S&P 500.
The economy is in a much worse position now than it was 20 years ago, without any sign of it improving. This could be a result of the government’s significantly loose financial conditions and low-interest rates with no constraints on monetary and fiscal policy.
During the thick of the pandemic, when talk of extreme quantitative easing began to surface, gold began its run upwards, which some believe was the start of its bull run.
What that means is the central bank essentially created more money and injected it directly into the economy by buying government bonds and other securities. Which in turn, lowers interest rates.
Fast-forward to today, where the Fed has lowered interest rates to near 0% and also “dumped” a near $3 trillion into junk bonds and other risky assets. Oddly enough, our budget deficit is the largest ever, sitting at $3.1 trillion. And to clarify, the Fed dumping $3 trillion into our financial economy came before the new “record” budget deficit of $3.1 trillion that we achieved.
Do you believe that our government will ever have the will to reduce or eliminate the US deficit?
With more economic stimulus packages in the works and a weak US dollar, it becomes obvious to understand why financial experts anticipate more deficit spending and inflation headed our way.
That’s why more and more Americans are purchasing gold, to hedge against the declining dollar.
Interested in learning more about gold to protect your savings American Hartford Gold at 800-462-0071.