Gold and inflation: Why traders should prepare for Inflageddon?

7.14.22 - Average American has lost $3,400 in annual wages

Gold last traded at $1,712 an ounce. Silver at $18.49 an ounce.

News Summary: Precious metal prices were lower Thursday amid a rise in the U.S. dollar. Stock saw sharp losses on rate-hike fears as traders digest latest inflation data.

Gold and inflation: Why traders should prepare for Inflageddon?-

CapitalL--"Buckle up, there is a certain threshold of inflation that causes gold prices to skyrocket.

The global economy is presently on the verge of a new 'Inflaggedon', or point of no return, in which inflation expectations become unanchored and people desperately try to put their money into anything that preserves buying value while everything else crumbles like a house of cards.

In June 2022, the US Consumer Price Index (CPI) grew at an annual rate of 9.1%, the highest since November 1981 and surprsing [sic] once again market expectations (8.8%). It's been 25 months in a row that inflation has gone up each month. The last time such a run happened was during the Great Inflation in the mid-1970s...

Gold is often considered to be an effective inflation hedge, or an asset that may protect the purchasing power of investors from the harmful effects of inflation....

Historically, gold has competed with government-issued paper currency.

Unlike dollars, gold cannot be printed by a central bank because there is a fixed amount of it in nature. On the other hand, we need to use paper dollars, not gold, to buy and sell things every day in the real economy.

However, when people lose confidence in the central bank's ability to control consumer price increases and see their currency's real purchasing power dwindling, then they rush to buy gold....

Federal Reserve policymakers are now struggling to control inflation despite aggressive rate hikes. Perhaps the Fed woke up too late or the rise in inflation is due to factors outside the scope of monetary policy, such as a global energy crisis.

The point is that when there is a worry that inflation may spiral out of control for political reasons, the demand for gold as a hedge against inflation skyrockets, resulting in a huge increase in the price of the bullion.

The 1970s served as evidence. Will history repeat itself in 2022?"