As I am known to make point of, inflation may be running at numbers much higher than the reported data indicates. Said data mostly ignores the cost of food and energy as though none of us needs to eat, heat our homes or drive our cars.
The questions are, how long can rising inflation go unnoticed? What are the consequences of widespread realization?
In an FT.com article yesterday, we see evidence the inflation secret is leaking out. The article is titled, World Moves Closer to Food Price Shock. The title says it all - and the consequences?
The effects of higher food prices trickle down through the economy, affecting virtually every aspect. Even the Fed acknowledges, we all need to spend more money to bring about a true recovery. If we have to spend more on Food, that means there is less disposable income to spend on other things. Unless wages rise along with prices, we cannot fulfill the Fed's ambition.
You see where all this is heading. More stimulus, more printed money, higher debt, weaker dollar. . . all conditions favorable to the gold price. Inflation and gold have walked hand in hand through all of time. With gold demand rising, it's becoming evident that individuals, governments and central banks are responding to the forecast of higher inflation.
Running neck and neck with food inflation is the cost of energy. Oil, currently above $91 a barrel, is predicted by some to reach $100 per barrel soon and perhaps higher. Eric Bolen of Fox News and Fox Business Networks, says we could soon see gasoline at $7 per gallon.
Can you even imagine a more volatile formula for skyrocketing inflation? As fuel costs rise, that drives the cost of virtually every product we buy, higher. Shipping costs rise, trucking costs rise, the very trip to the grocery store rises as nothing moves in this country without consuming fuel.
Now ask yourself this question. If fuel costs double and food follows, what is the true value of your savings and retirement accounts? Not everyone needs to drive a Cadillac in retirement but everyone does need transportation and food. Every day it becomes more critical to offset lost purchasing power of your dollar and your savings and retirement accounts with an asset that has a history of preserving purchasing power - Gold!
With inflation awareness only now coming to light, one can easily make the case that the real gold bull market is yet to begin. Sure, gold's move 400% in the last decade, is definitely deemed bullish. But, if this occurred when inflation was mostly non-existent, what heights could the gold price attain once inflation really takes hold?
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