19 December 2024
This won’t come as a surprise to Americans who are still battling high prices for everyday goods— official inflation numbers are still above the Federal Reserve’s 2% target.
The latest November Consumer Price Index (CPI) report revealed the biggest monthly jump in seven months. Consumer prices climbed 0.3% in November to 2.7%, while the core rate—which excludes food and energy rose 0.3% to a 3.3% annual rate. Big price increases for eggs and beef helped pushed inflation higher.
Report card for the Fed? Progress toward the elusive 2% target has stalled, and gone in the opposite direction. Inflation is climbing again.
It’s true that inflation has come down from the generational high at 9.1% in June 2022, but the last mile back to the Fed’s 2% target has been a battle that the central bank is losing for now.
Food and Housing Still Pinching Americans
Everything just costs more. Americans know firsthand that since 2019 prices are higher on everything from bacon, ham, coffee, eggs, frozen orange juice, ground beef, rice, sugar and wheat bread. Shelter costs, more commonly known as rent or mortgages, climbed another 0.3% in November. For the year, shelter costs have climbed 4.7%
2025 Could Bring Fresh Headwinds for Even More Inflation
Meanwhile, the changing of the guard at the White House in January could open the door to another wave of inflation. Many economists view economic policies like widespread tariffs, tax cuts and the deportations of millions of illegal immigrants as inflationary. That means that the CPI could continue to inch higher in 2025 if these policies are enacted.
What this Means for Gold Investors
Despite a modest pullback in November, gold is still on track to deliver its best annual performance in more than a decade, with gains of over 25% since the start of the year. Looking into 2025, new record-breaking rallies in gold are forecast with gains above $3,000 an ounce. What’s keeping gold bulls in the driver’s seat? It’s not just elevated inflation that is boosting gold’s appeal, but the geopolitical uncertainties and the growing focus on our nation’s debt problems.
The universe of gold investors expanded rapidly in 2024 with physical gold purchases going mainstream. One of the more popular investment strategies has been to accumulate fractional gold on an on-going basis. Fractional gold includes coins like a 1/10 ounce American Gold Eagle coin which can be purchased at an attractive price point. We are seeing investors actively building a portfolio of these lower cost gold pieces.
The Fed still hasn’t gotten inflation under control, which means that your dollars are worth less each month. The recent price dip in gold means you can buy more gold with your dollars right now. If you are interested in learning if this strategy could be right for you, talk with a Blanchard portfolio manager today. We’re here to help.
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The post Heading into 2025: Inflation Still Hotter Than Fed’s Target appeared first on Blanchard and Company.