The Consumer Price Index in the U.S. this morning showed a month-over-month change of -.1% and a year-over-year reading of .2%. The core reading showed a month-over-month reading of .1% and a year-over-year reading of 1.8%. These figures show little to no price pressures and may suggest that recent worry over deflation is a real and significant threat.
To understand the Consumer Price Index, you have to understand what you are looking at.
Headline CPI: The headline CPI figures factors in changes in a basket of goods and services that are purchased by households.
Core CPI: The core CPI data factors in changes in a basket of goods and services MINUS the more volatile food and energy prices.
The figures are calculated by the United States Department of Labor Statistics and are designed to give an overview of the current state of inflation. If CPI is rising steadily, prices are rising and hence inflationary pressures are increasing.
If CPI data is steadily falling or is stagnant, price pressures are decreasing and a lack of inflation or even deflation may be present.
A certain amount of inflation is good for the economy. The Federal Reserve, for example, has a targeted inflation rate of 2%. Too much inflation, however, can lead to severe economic problems as wages may not keep up with costs.
On the other hand, too little inflation may be a sign of a struggling economy. Deflation is when consumer prices are decreasing and this too can lead to a host of economic problems.
Are we seeing signs of deflation?
Recent worries over the health of the Chinese economy are deflationary in nature. Today’s U.S. CPI data only serves to underscore the current threat of deflation.
Despite its best efforts, the Federal Reserve has thus far not been able to spur inflation to desired levels. If this has not yet been achieved with all of the QE in recent years and a zero interest rate environment for several years, one has to wonder what piece of the puzzle may be missing…
Today’s CPI data certainly will not pressure the FOMC doves at all…
Deflation seems to be a much more significant threat in the current state of global economic affairs. While not talked about as much as the threat of inflation, deflation can be every bit as devastating-perhaps even more so.
A deflationary spiral can lead to years-even decades-of little to no economic growth, falling stock and real estate prices, job layoffs and more.
To attempt to gain some protection from the threat of deflation, one may have to look outside the box for alternative asset classes that could potentially increase in value or remain stable during such periods.
One such asset class is physical gold.
While gold has long been touted for its ability to potentially hedge against rising prices, the yellow metal may potentially offer similar protection from falling prices.
Consider this: In an environment of falling prices, assets may lose value. Home prices may fall, stock markets may drop and overall net worths may potentially see a significant decline.
Wouldn’t it make sense to put some capital to work in assets that may hold their value or even increase?
Now is the time to consider an allocation in physical gold.
Our account executives are here to guide you every step of the way. Don’t wait until asset prices begin a precipitous decline that potentially last for years to come.
Explore your options NOW.
Please reach out to our experienced precious metals executives with any questions that you might have about investing in gold or silver and the process of setting up a Precious Metals IRA. Call us today at 1-800-341-8584 FREE to get started.