Even with rising interest rates and the dollar at multi-year highs, gold has held its ground. Nevertheless, we have yet to see a big spike in gold prices despite persistent inflation. Why not?
The perception is that rising interest rates are always bad for gold. But does perception match up with reality?
If history is any indication, the answer is no.
The Federal Reserve recently delivered the largest interest rate hike since 1994 in an effort to combat inflation that turned out to be not so transitory.
Economists and policy wonks continue to debate the effectiveness of these rate hikes in the face of historically high inflation, but what do they mean for you? Should you care about rising interest rates?
Here are three ways Fed rate hikes will impact your wallet.
As Americans labor under the burden of inflation, the Biden administration keeps telling us the economy is just fine. White House press secretary Karine Jean-Pierre recently said we are “transitioning” to “steady and stable growth.” As a result, she claims the American people are in a place where they can “take on inflation.”
Americans aren’t buying it. In fact, they’re buying less of everything as rising prices squeeze their wallets. Consumer confidence has plunged to historically low levels. But as bad as things are, the worst could still be yet to come because the proposed solutions are worse than the problem.
These people never learn. Or they just don’t care.
The Biden administration is reportedly still considering sending out gas rebate cards to help Americans cope with rising gasoline prices. But this kind of government handout is one of the primary reasons we’re suffering through this inflation firestorm to begin with.
There is a meme floating around social media that seems to prove greedy corporations – specifically oil companies – are the root cause of inflation.
How does this meme stack up to reality?
Short answer — it doesn’t.
Inflation wasn’t transitory.
And inflation hasn’t peaked.
It’s more like peak inflation was transitory.
Everybody was thrilled to get stimulus checks in the mail during the COVID-19 pandemic. “It’s free money!” many exclaimed. But nothing in life is free. This includes “free” things handed out by the government.
So today, you’re paying for those stimmy checks and the government pandemic spending spree.
There are a number of signals that the US economy is getting weaker even as inflation gets stronger.
In other words, we are hurtling toward stagflation.
Average people are worried about the economy. Consumer confidence has been falling. People undoubtedly feel the squeeze of inflation. But despite their general discontent, most people don’t seem to think a severe economic downturn is imminent — despite many warning signs.