Precious Metal Prices Up Amid Inflation and a Devalued US Dollar

As we navigate through the economic landscape of early 2025, one trend stands out with a shimmering allure: gold. Amidst the complexities of inflation, geopolitical tensions, and fluctuating market dynamics, gold has not only held its ground but has significantly appreciated, presenting a compelling case for investment.

Recent economic data paints a picture of inflation that’s both cooling and heating in different sectors. The U.S. Producer Price Index (PPI) for December 2024 came in below expectations at a year-over-year increase of 3.3%, suggesting a slowdown in inflation at the producer level. However, specific sectors like airfares have seen significant price hikes, indicating that inflation pressures persist in certain areas.

On the global stage, India’s retail inflation hit a four-month low, yet wholesale inflation rose, showcasing the divergent paths inflation can take based on local economic conditions. This mixed signal on inflation globally underscores the unpredictability of traditional investments, highlighting gold’s role as a hedge against such uncertainties.

Gold’s Unprecedented Performance

Gold has been breaking records and defying traditional market correlations. Despite strong U.S. dollar indicators and rising treasury yields, which typically would push gold prices down, gold has surged past $2700 per ounce. This resilience is not just a blip; it’s backed by significant buying from central banks and investors looking for stability amidst global uncertainties.

The metal’s performance in 2024, where it maintained a positive correlation with the S&P 500 for 91% of the time, marks a departure from its usual inverse relationship with stocks. This anomaly, coupled with gold’s significant outperformance against global government bonds since 2008, suggests that markets no longer trust all the “good” news, and in fact see past the headlines to the symptoms of froth in the markets.

Many institutional investors are not reassured by high stock prices but instead see a dangerous bubble and are divesting into cash.

Gold is a part of that strategy. Gold is no longer just a safe haven but a strategic asset in an investor’s portfolio.

It may seem counter-intuitive. It may seem impossible to imagine or hyperbolic. The dollar has been there your whole life and all that time, it has been solid – more or less, apart from a few stretches of deep inflation. It is the world’s reserve currency. The money on which international trade is based. The petrodollar makes the world go round, in many ways. You may have a sense deep in your bones that because the dollar has always been there, it will always be there.

But you know the rule of thumb in finance: past performance is no guarantee of future returns. That applies to all assets, no exceptions. Not even the US dollar.

SHOULD you have all your assets in dollar denominated investments? Or should you diversify just in case?

No hysterics here.

We are going to calmly and rationally walk you through 6 charts that demonstrate factually and logically why NOW is the time for gold precisely because the future is not guaranteed for the dollar, and in fact, using simple math you can clearly see there is not only trouble ahead; there is trouble right now.

We’ll start with the first 2 this week. Watch your inbox for the next 2 next week.

1. US Public debt

Exploding Debt Undermining Our Financial Foundation

What could possibly go wrong with debt to infinity?

At the root of all this is the public debt. It has only escalated and exploded since Ronald Reagan called attention to it in the 1980’s. Lately, the dollar has been severely abused by the emergence of Modern Monetary Theory, which states (in a nutshell) that if a country runs its own printing press, it can spend as much money as it wants to, issue all the debt it needs, paper over the debt with more currency, and then tax away the inflation. Academics and economists who seriously believe this have seized the levers of power.

What could possibly go wrong? (Everything…)

A graph of columns and a chart of debt

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2. Gold Price CAGR

Other Assets Limp Along. Gold Gallops!

Your gains are not as impressive as they could be…

Let’s compare gold to the broader economy by looking at compound annual growth rates (CAGR). Here you can see year to date commodities gaining just 6% to gold’s monster 31% growth! More than double the aggressive emerging markets’ gains of 13%!

Just to demonstrate that this is not a 1 year anomaly, look at the 10 year compound annual growth rate and you will still see gold beating every other category at 8.29%, while the US treasury index actually shrinks!

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To be continued…

Gold’s price is determined by the spot price, which represents its current market value for immediate delivery. This spot price is influenced by trading activity on major global exchanges like the London Bullion Market Association (LBMA) and COMEX in New York. The LBMA sets the gold price twice daily at 10:30 AM and 3:00 PM GMT, establishing benchmarks based on global supply and demand. Platinum and palladium prices are similarly set by the London Platinum and Palladium Market. Futures markets also play a critical role in determining spot prices, as these contracts, which commit to buying or selling precious metals at a future date, heavily influence daily market values.

Precious metal prices are dynamic, often changing multiple times per minute during active trading hours. They fluctuate based on a variety of factors, including geopolitical events, economic indicators like inflation rates, and the strength of the U.S. dollar, as these metals are priced in dollars globally. Additionally, market activity occurs nearly 24 hours a day due to the overlapping of trading in Asia, Europe, and North America. Markets typically pause late Friday and reopen Sunday evening U.S. time, providing a short break in the otherwise continuous trading cycle.

Prices also respond to specific triggers. Limited mining production can drive prices higher, while abundant supply may reduce them. Economic uncertainty, such as during periods of inflation or geopolitical instability, often increases demand for precious metals as they are sought out as safe havens. A weaker U.S. dollar tends to raise prices, as more dollars are required to purchase the same amount of metal. Conversely, higher interest rates may reduce the appeal of metals, as they do not generate income or dividends.
For consumers considering physical bullion, it’s important to note the difference between spot prices and retail prices. When purchasing coins or bars, buyers typically pay a premium over the spot price. These premiums cover costs like manufacturing, distribution, dealer markups, shipping, and insurance. Additionally, owning physical bullion requires secure storage. Options range from home safes and bank safety deposit boxes to professional vaults offered by many dealers. Gold and silver are the most liquid precious metals, making them easier to sell quickly, whereas platinum and palladium are more closely tied to industrial demand and can be less predictable in value.
Tax implications should also be considered, as profits from selling precious metals may be subject to capital gains taxes. It’s wise to consult with a financial advisor to understand tax obligations and plan accordingly. Buying physical gold for retirement security offers significant benefits, particularly as a hedge against inflation and currency fluctuations. Gold has been a stable store of value for centuries, and its ability to diversify investment portfolios makes it an attractive option during periods of economic uncertainty. Silver, platinum, and palladium can complement gold investments, though their value is often more volatile due to industrial uses.
Understanding how gold and other precious metals are priced, when markets operate, and the factors influencing value can empower you to make more informed decisions. The price of gold, silver, platinum, and palladium is controlled by global markets, influenced by supply and demand, and subject to constant fluctuations. If you’re considering physical gold bullion for retirement security, focus on understanding the spot price, premiums, and storage options. Diversifying with gold can provide a hedge against inflation and economic instability, offering peace of mind for your financial future.

With this knowledge, you’re better equipped to navigate the precious metals market and make confident investment decisions. With proper planning and knowledge, investing in physical bullion can provide peace of mind and stability for those seeking to secure their financial future during retirement.

If you’re new to the gold and silver markets, you may be a little bewildered at how precious metals are priced and who determines pricing. The price of precious metals like gold, silver, platinum, and palladium is determined by global markets and influenced by supply and demand dynamics. For those considering acquiring physical gold bullion for retirement security, it is essential to understand how these prices are set and what factors contribute to their fluctuation. Let’s break it down.

Gold’s price is determined by the spot price, which represents its current market value for immediate delivery. This spot price is influenced by trading activity on major global exchanges like the London Bullion Market Association (LBMA) and COMEX in New York. The LBMA sets the gold price twice daily at 10:30 AM and 3:00 PM GMT, establishing benchmarks based on global supply and demand. Platinum and palladium prices are similarly set by the London Platinum and Palladium Market. Futures markets also play a critical role in determining spot prices, as these contracts, which commit to buying or selling precious metals at a future date, heavily influence daily market values.

Precious metal prices are dynamic, often changing multiple times per minute during active trading hours. They fluctuate based on a variety of factors, including geopolitical events, economic indicators like inflation rates, and the strength of the U.S. dollar, as these metals are priced in dollars globally. Additionally, market activity occurs nearly 24 hours a day due to the overlapping of trading in Asia, Europe, and North America. Markets typically pause late Friday and reopen Sunday evening U.S. time, providing a short break in the otherwise continuous trading cycle.

Prices also respond to specific triggers. Limited mining production can drive prices higher, while abundant supply may reduce them. Economic uncertainty, such as during periods of inflation or geopolitical instability, often increases demand for precious metals as they are sought out as safe havens. A weaker U.S. dollar tends to raise prices, as more dollars are required to purchase the same amount of metal. Conversely, higher interest rates may reduce the appeal of metals, as they do not generate income or dividends.
For consumers considering physical bullion, it’s important to note the difference between spot prices and retail prices. When purchasing coins or bars, buyers typically pay a premium over the spot price. These premiums cover costs like manufacturing, distribution, dealer markups, shipping, and insurance. Additionally, owning physical bullion requires secure storage. Options range from home safes and bank safety deposit boxes to professional vaults offered by many dealers. Gold and silver are the most liquid precious metals, making them easier to sell quickly, whereas platinum and palladium are more closely tied to industrial demand and can be less predictable in value.
Tax implications should also be considered, as profits from selling precious metals may be subject to capital gains taxes. It’s wise to consult with a financial advisor to understand tax obligations and plan accordingly. Buying physical gold for retirement security offers significant benefits, particularly as a hedge against inflation and currency fluctuations. Gold has been a stable store of value for centuries, and its ability to diversify investment portfolios makes it an attractive option during periods of economic uncertainty. Silver, platinum, and palladium can complement gold investments, though their value is often more volatile due to industrial uses.
Understanding how gold and other precious metals are priced, when markets operate, and the factors influencing value can empower you to make more informed decisions. The price of gold, silver, platinum, and palladium is controlled by global markets, influenced by supply and demand, and subject to constant fluctuations. If you’re considering physical gold bullion for retirement security, focus on understanding the spot price, premiums, and storage options. Diversifying with gold can provide a hedge against inflation and economic instability, offering peace of mind for your financial future.

With this knowledge, you’re better equipped to navigate the precious metals market and make confident investment decisions. With proper planning and knowledge, investing in physical bullion can provide peace of mind and stability for those seeking to secure their financial future during retirement.