By Swann Collins, investor, writer and consultant in international affairs. Eurasia Business News – April 10, 2022

Picture : View on houses in California. Photo credits : Pexels.

U.S. inflation again reached a record, surging to 8.5% in March on annual terms, after 7.9% in February. This is the highest level of inflation never seen in the United States since December 1981 and the dynamic has been here for months. U.S. inflation already reached 7.5% in January after hitting 7% in December 2021, 6.8% in November and 6.2% in October.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.2 percent in March on a seasonally adjusted basis after rising 0.8 percent in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.5 percent before seasonal adjustment.

Increases in the indexes for gasoline, shelter, and food were the largest contributors to the seasonally adjusted all items increase. The gasoline index rose 18.3 percent in March and accounted for over half of the all items monthly increase; other energy component indexes also increased. The food index rose 1.0 percent and the food at home index rose 1.5 percent.

Food prices increased by 8.8% in March on annual terms, while energy prices increased by 32%, new vehicles prices by 12.5%, used cars and trucks by 35.3%, apparel by 6.8% and services by 4.7%.

The shelter index was by far the biggest factor in the increase (+5%), with a broad set of other indexes also contributing, including those for airline fares, household furnishings and operations, medical care, and motor vehicle insurance.

These figures will leave no choice to U.S. Federal Reserve officials but to accelerate the increases of key interest rates and the cut in the assets purchase programs in coming weeks.

Gold prices hit records

Facing enduring high inflation, investors and families are seeking hedge to protect their wealth and purchasing power. Gold prices hit today a high $ 1,979 per troy ounce and were stable at $ 1,974 at 12:51 NY Time, gaining 1% in a day. Silver prices surged to $ 25.71 per ounce, gaining 2.01%.

Gold prices had reached on March 10 a record $ 2,010.80 per troy ounce. From February 10 to March, the price of the gold troy ounce had grown by 9.43%.

Gold prices hit $ 1,827 per troy ounce on February 10, gaining 1.05% in one day, while silver prices reached  $ 23.19 per ounce, gaining 2.98%.

At closure on February 24, gold fix prices at London hit $ 1,936.30 per troy ounce.

Since September 2021, each time the U.S. Bureau of Labor Statistics has released the last consumer price index, gold prices jumped. In addition, geopolitical tensions and war in Europe have strengthened the fears of investors and the risk aversion.

Read also : How to invest in gold

In Asia, China and India, traditional big buyers of gold, are very demanding of the yellow metal, while Beijing boosts its economy and India benefits from the ebb of the health crisis.

The yellow metal has always been a great hedge against inflation because it rises in price when the cost of living standards rises. Gold can store value efficiently, when paper currency loses purchasing power because of inflation.

Read also : Gold, Build Your Wealth and Freedom

The U.S. Fed is accountable

How much time will the U.S. Federal Reserve use the covid pandemics as the main explanation for high inflation ? Since the start of the coronavirus crisis in February-March 2020, the Fed has injected the markets with 120 billion US dollars in liquidity each month, through the purchase of 80 billion treasury bills and 40 billion MBS. To briefly say it, the Fed has printed 120 billion of US dollars each month for more than 18 months. High inflation is a logical consequence.

On March 16, 2022, amid annual inflation in February hitting 7.9%, never seen since January 1982, the Federal Reserve started to admit its mistakes and approved a 0.25 percentage point rate hike, the first increase since December 2018. This brings the federal funds rate now into a range of 0.25%-0.5%.[1] The move will correspond with a hike in the prime rate and immediately send financing costs higher for many forms of consumer borrowing and credit.

By raising its rates, the Fed forces the banks to increase the rates they offer to their customers for the financing of a house, a car or any consumer good.

Fed officials indicated the rate increases will come with slower economic growth this year. The Federal Open Market Committee also projected roughly six more rate hikes in 2022, along with slower growth and higher inflation.

It seems that the massive quantitative easing and the asset purchase program carried out by the Federal Reserve since 2008 have caused out-of-control inflation and that U.S. central bankers now fear the burst of the real estate and stocks bubbles they have created.

To protect their wealth and purchasing power, investors and workers should now buy gold, silver and defensive stock. If not, politicians and central bankers will not save them and they will lose a lot in the coming financial crisis.

The Consumer Price Index for April 2022 is scheduled to be released on Wednesday, May 11, 2022 at 8:30 a.m. (ET).

The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers.

Read more about gold and inflation with Gold : Build Your Wealth and Freedom

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© Copyright 2022 – Swann Collins, investor and consultant in international affairs.