Gold touted as inflation hedge amid persistent high costs and savings decline

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Gold touted as inflation hedge amid persistent high costs and savings decline

WASHINGTON - The U.S. economy is grappling with persistent inflation and a declining personal savings rate, sparking criticism from financial experts and prompting discussions on effective hedging strategies. Peter Schiff, CEO of Euro Pacific Capital, has been vocal about the challenges posed by inflation and the government's role in exacerbating the situation.

Schiff, during his podcast "The Peter Schiff Show," pointed out that despite the Federal Reserve's commitment to lower inflation to their 2% target, the policies implemented by the government and the Fed are contributing to the hardship. He expressed skepticism about achieving the 2% inflation goal set by Jerome Powell, the Federal Reserve Chair, on November 1. Schiff's stance is that inflation acts as a tax imposed by the government that diminishes people's income.

The consumer price index in September displayed an annual increase of 3.7%, showing a decrease from June 2022's peak of 9.1%. Yet, the cost for essentials such as food and shelter continues to weigh heavily on consumers. In this environment, Schiff advocates for gold as a strategic investment against inflation. His reasoning is that gold cannot be created like fiat currency, making it a more stable store of value.

Powell highlighted a robust GDP growth rate of 4.9% for the third quarter, largely fueled by consumer spending. However, Schiff counters this perspective, arguing that prosperity should be built on production and savings rather than spending.

Adding to these concerns is data from the Bureau of Economic Analysis which indicated a personal savings rate of only 3.4% in September 2023, marking a consistent decline each month since May. This trend suggests that Americans are finding it increasingly difficult to save money as prices for goods and services rise.

Investors are taking note of these economic signals and considering how best to protect their finances against the backdrop of high inflation and reduced savings capacity. Schiff's endorsement of gold reflects a broader search for assets that can serve as reliable hedges in uncertain economic times.

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