Inflation goes up…PM prices go..down?

I’ve always thought that historically when inflation skyrockets the price of precious metals goes up to correspond to the loss of value in the currency experiencing high inflation.

Put simply:

If an ounce of gold is worth $100 and the dollar loses 3% of its value it should require $103 dollars to buy that same ounce of gold.

It’s happening with basically everything else. Anyone who has been to any store of any kind likely has noticed by now almost everything costs a lot more than it did a few years ago.

Why are PMs crashing in price? If anything logic says people would be using this period of high inflation to actually buy things like PMs so you’d expect the demand would be higher.


It seems the opposite is happening now with precious metals..Is that unusual?

Could this be caused by big time bankers like Chase using their massive positions to affect prices and not set off alarm bells?

 

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Inflation is more like an average of prices. Any individual sector, like metals, can have huge swings based on other factors which swamp out the relatively modest (so far) effect of inflation. But if you look at economies which have had prolonged high inflation, such as Brazil in the 20th century, I imagine precious metals in the local currency will track the inflation of the monetary unit pretty closely. Metals in particular often go up in anticipation of inflation a little ahead of the actual event.

 

Really?

 

I think that the issue here is that gold is priced in dollars. With rising interest rates, the dollar itself becomes more attractive to hold. All other things being equal, a stronger dollar equates to a lower gold price.

Honestly, I would focus more on the price of gold in non-dollar currencies; that is where you can see the jump in its price most clearly.

 

I view it that PM spiked in low inflation for protection and too much assets being around. Now, interest rates are higher, (attractive alternative to non-interest bearing PM), and assets being destroyed by higher gas prices and inflation. The US government throwing around money really distorted everything and drove this inflation.

Long term versus inflation PM will holds its value, its just a weird period where lots of different things were happening.

 

4.7 Trillion U.S. Dollars disappeared with the drop.

 

Nah, I buried them in my back yard

 

10 year treasury yields are spiking again which raises the opportunity cost of holding metals. And on a relative basis the dollar is not losing, it's on a rip against world currencies. As long as people want USD for whatever reason it plays against metals.

 

Scarry thought that the U.S. dollar is stronger than most other world currencies with the Congress handing out free money like a sailor on shore leave.

 

A friend who travels on business extensively said that people in some high inflation countries use pre-1965 U.S. coinage for conducting day-to-day business. He wondered if this might be the reason for the high premium of junk silver. As to why the prices of PMs are falling, my memory is that very time we have had financial mayhem they fall initially before recuperating.

 

I am baffled by the disconnect of inflation to precious metals prices. I'm using the dip as a buying opportunity. If the dollar is strong, so be it. I'll use it to buy precious metals at lower prices.

 

The price of US Treasuries was being artificially inflated by the Fed. Now the Fed is a net seller instead of a net buyer of US debt.

 

I know plain old dollars (including the despised small dollar coins) are treasured as "hard money" in countries with weak currencies or weak economies, but this is the first I've heard of such countries holding out for silver coinage.

 

Did they really exist in the first place?

 

When the stock market goes down, people have to pay the margin calls. They do this by selling their most liquid assets, which are usually precious metals. When everyone has to sell at the same time, that creates a temporary glut, so the price goes down until things equilibrate.
Once people get flush with a little cash, the prices will adjust up when everyone wants to buy. Supply and demand.

 

Does your 401-k really exist? We contribute for 30 to 40 years watching it grow with the anticipation it'll be there when we retire. Millions of retirees have successfully played out that scenario to happily retire. So yes it's really there, just as much as POOF, overnight, proverbially speaking, it's gone....just as many others experienced in 2008-2009, and now currently suffering this financial armageddon.

Unfortunately, this current market disaster is not going to correct itself nearly as quickly as '08-'09 did. This is a really serious special kind of nuclear meltdown.

 

Everything is way down ! - Edited -

 

Can we not flush another thread down the politics pot, please?

 

Agreed!

 

I don't understand why members have to keep trying to post political thoughts on CT. What part of the rules about political posts don't you understand, or do you feel that your comment is so important, that everybody must hear it and that they are riveted on your every word.

If you haven't figured it out yet, it's a coin forum. Your political comment just annoyed approx half the members.

When people come her to talk about their hobby, they want to leave the pressures of the outside world behind. Leave the politics there.

BTW: I've called out and reported political posts from both sides, so don't get butt hurt because you think I'm picking on you. POLITICS OF ANY KIND HAS NO PLACE ON CT.

Sorry for the rant, it's been a tough day