Another Explanation for the Rise in Gold

The recent rise in gold has been widely discussed in financial media. There have been numerous issues attributed to gold’s rise including the U.S./China trade war, an increasingly-dovish Fed, a slowing economy and a rising risk of recession.

One issue-albeit one you probably have not heard about yet-is the increasing risk of stagflation. The phrase stagflation was first used in Great Britain and today is understood to mean a period in which prices rise without a corresponding increase in demand. During a period of stagflation, unemployment may rise significantly as the economy contracts or remains flat.

The U.S. saw a significant period of stagflation in the 1970s. During that time, the economy saw massive inflation, reaching 12.4 percent on an annualized basis by 1980. In late 1979, the price of crude oil shot up to $117.71 per barrel, a level the market would not rise to again for almost three decades. Unemployment during this time was also high, and the economy was in recession in 1970 as well as from 1974-1975.

A simple explanation for the stagflation seen during the 70s would be to pin rising prices on sharply higher oil and gasoline, the effects of which trickled into other areas. Some economists, however, put the blame on excessive liquidity in the money supply.

Whatever the cause, the global threat of stagflation appears to be on the rise. In the UK, for example, prices have begun to rise due to higher tax rates. The price increases are not, however, seeing a corresponding rise in demand. U.S./China tariffs have also fueled higher prices without an increase in overall demand.

The bottom line may be that growth rates have already peaked while inflation has yet to catch up – but it will.

Given the potential outlook for higher inflation, lower GDP, and rising unemployment, now is the ideal time to consider portfolio allocations. With the threat of sharply higher prices and a global slowdown or even recession, there may be no better asset class to turn to than physical gold.

Gold has been considered an effective hedge against inflation for centuries and is considered a reliable store of wealth and value all over the globe. This key asset class may not only provide a hedge against higher prices and a weaker dollar, but it may also see a sharp increase in value as the next major asset reallocation gains steam.

Adding physical gold to your portfolio has never been easier, and perhaps never more important. Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and to learn more about the role this asset class may play in the years and decades ahead. Our associates are here to answer any questions you may have and can even show you how to build a significant allocation in gold using an IRA account.

Don’t wait for a protracted period of stagflation to set in or for the next major collapse in equity markets before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.