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Get Ready for Higher Prices; Inflation Wave Approaching

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Get ready for higher prices.

According to a recent report by the Wall Street Journal, US consumers are about to be hit by a wave of inflation. ZeroHedge summed up the report.

Many US consumer staple and industry-leading companies are either already in the process of raising prices, or have set concrete plans to do so in the very near future.”

The report highlights a number of price increases already implemented or in the works. For instance, Coca-Cola reported higher prices in Q3 and airlines have already raised fares and fees to offset rising fuel expenses. Trucking costs were up 7% annually in September.

Food giant Mondelez International said it plans to raise prices in North America next year. Mondelez subsidiaries include Nabisco, Kraft and Nestle. CEO Dirk Van de Put said the company plans to pass on rising ingredient and transportation costs on to consumers.

We believe that it’s the right move for us, seeing the overall environment and the way our categories are behaving at the moment. It will allow us to make the right investments in our brands and in our categories. So at this stage, we think that is probably the best way to do it.”

You’ll also feel the squeeze if you go out to eat. According to ZeroHedge, “McDonalds’ 2.4% SSS comps in Q3 were a result of higher burger prices. Chili’s Restaurants raised the price of its two entrees and an appetizer deal from $22 to $25 in the quarter. Habit Restaurants saw its prices rise by 3.9% in May of this year, even while traffic declined 3.4%.”

It’s not just the price of food that is going up.

Apple recently jacked up the price of its new MacBook Air and iPad Pro by between 20 and 25%. Clorox plans to raise the price of everyday products such as cat litter. The price of countertops and cabinets has increased by about 10% thanks to tariffs. And Sherwin-Williams raised its paint prices by as much as 6% in October. Sherwin-Williams CEO John Morikis said that “raw material inflation has been unrelenting and accelerating.”

Obviously, rising prices aren’t good for your pocketbook. And they could cause problems in the broader economy as ZeroHege notes.

It’s obvious that higher prices will ‘work’ alongside the Fed’s rate hikes to help dampen the United States economy further. Not only that, but higher prices could cause even more damage if the Fed sees raising rates as the main solution to inflation exceeding its expectations.”

Of course, as we’ve said over and over again, rising interest rates in an economy built on debt is not a good scenario.

Some people will see the pop of inflation as negative for gold because of the prospect for further interest rate hikes. But in fact, inflation is good for gold. Peter Schiff pointed this out earlier this year. An interest rate is nothing but a price. It’s the price of money. When there is inflation, interest rates go up just like any other price. Contrary to popular belief, this is not bad for gold. Quite the opposite.

 But of course, this is all bullish for gold. Duh! Gold is an inflation hedge. That’s what it’s for! … Higher inflation is bullish for gold, especially since the Fed can’t contain it with higher rates, as the rate required is higher than what Americas can afford to pay.”

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