Inflation has always been present in the United States, but in recent years inflation has increased drastically. 2020 saw the pandemic enter globally which affected the economy greatly, but even two years after the onset inflation continues to rise.
In 2022 alone, inflation rose 9.1%, the fastest pace since 1981. All consumer prices are on the rise, with the food index increasing 11%, the energy index increasing 33%, and all other items increasing 6%. With economic struggle and the pandemic still raging on, these inflation rates are not expected to slow down anytime soon.
In 2021, the US dollar depreciated greatly. In fact, the dollar depreciated 16% compared to the Mexican peso, 12% compared to the Canadian dollar, and 9% compared to the Euro. With mass printing continuing to lessen the value of paper money, and the cost of all goods continuing to rise, the US dollar is expected to only depreciate further. It is estimated that due to runaway inflation rates, $1 in 2022 will only equal about $.65 in 2030. So what can be done to combat these inflation rates?
Investors in the past and present have turned to gold in times of inflation. Gold is one of the very few investments that has a 0% counterparty risk. Counterparty risk is the probability that other parties will default on their obligations. Since gold is a physical investment, this risk disappears. Gold being a physical resource also takes the risk away from losing value due to overprinting like paper money does.
In the 2008-2012 recession, investors saw paper money losing its value and so they turned to gold. During this time gold saw a 101.1% surge in interest! Investors poured their money into gold which only increased its value over the years. History has a tendency to repeat itself, and investment advisors are expecting similar trends to occur during this period of runaway inflation.
To learn more about how gold has held its value over the years and how the impacts of inflation affect the value of money, take a look at the infographic below: